KNOW ABOUT

BUSINESS

Entrepreneurship Education
in Schools and Technical Vocational Training Institutions
and Higher Education

MODULE 5
How Do I Find a Good Business Idea?

Authors:

George Manu
Robert Nelson
John Thiongo
Klaus Haftendorn

Editors:

Peter Tomlinson and Klaus Haftendorn

International Labour Office, Geneva

International Training Centre of the ILO, Turin
Copyright © International Training Centre of the ILO 2008

This publication enjoys copyright under Protocol 2 of the Universal Copyright Convention. Applications for
authorization to reproduce, translate or adapt part or all of its contents should be addressed to the
International Training Centre of the ILO. The Centre welcomes such applications. Nevertheless, short
excerpts may be reproduced without authorization, on condition that the source is indicated.

Know About Business

ISBN 92-9049-396-8

First published 1996

Second edition 2000
Third edition 2002
Fourth edition 2004
Revised edition 2005
Revised edition 2007
Revised edition 2008

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5

How Do I Find a Good

Business Idea?
Module objectives:
Ä To provide techniques for generating business ideas
as well as for identifying and assessing business
opportunities.

Module coverage:
Page
1. Creativity and Innovation.......................................... 4
2. Generating Ideas ................................................... 18
3. Identifying and Assessing Business Opportunities ....... 31

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Know About Business Module 5: How Do I Find a Good Business Idea?

I TOPIC 1: Creativity and Innovation

II SUGGESTED DURATION:
• 1 hour/session

III OBJECTIVE:
• By being involved in a variety of class activities, learners will have the
opportunity to become aware of their own creative potential.
• By thinking of ways to change an existing situation or object, learners will
learn to apply techniques for developing their creative ability.

IV RATIONALE:
• To develop their creative ability, learners need an opportunity to assess
their own creative behaviour. They can then begin to practice creative
thinking. Creativity is another area where entrepreneurs have various
opportunities to use their creative talents. Although employees are often
not required to think creatively, they can be excellent sources of new ideas.
• Because the entrepreneur has such a broad range of responsibilities,
creativity by both entrepreneur and employees can be extremely useful to
develop ideas to solve a wide variety of business-related problems.
Entrepreneurs have a great deal of freedom to implement creative ideas.
• One way to help learners develop their creative ability is to begin with
existing ideas. These ideas may be changed in various ways to produce new
and original ideas. The technique of changing existing ideas has many
useful applications in work situations.

V ACTIVITIES:
1. Have learners complete WORKSHEET 1. Explain to learners that the
worksheet is designed to help them assess their creative potential.

2. Distribute WORKSHEET 2: Three Descriptions. Have learners read the

three descriptions and decide which one best describes them.

3. The following Scoring Key will help learners score their worksheets. Read
the scores for each response to each question. Instruct learners to write
the number of points they scored for their responses beside each
statement on the worksheet. For example, if a learner checked “Uncertain”
for statement A, the learner should write “1” beside the statement; if a
learner checked “yes” for statement A, the learner should write “2” beside
the statement.

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Know About Business Module 5: How Do I Find a Good Business Idea?

TRUE FALSE UNCERTAIN

A 2 0 1

B 2 0 1

C 0 3 1

D 0 2 1

E 0 3 1

F 3 0 1

G 0 3 1

H 0 3 1

I 2 0 1

J 3 0 1

K 2 0 1

L 3 0 1

M 2 0 1

N 3 2 1

O 2 0 1

After all statements have been scored, have learners add up the points for
all statements. Have learners refer to Worksheet 1. Tell them that they
may interpret their scores as follows:
• Description I applies to persons who scored 23 points or more.
• Description II applies to persons who scored between 11 and 22 points.
• Description III applies to persons who scored 10 points or less.
4. Use the following questions to discuss the results of the scoring. Were you
surprised at the results of the scoring? Why or why not? What do you like
about the description from scoring the worksheet? What about the
description would you like to change or improve? In what ways are the
descriptions similar/different? What advantages might a person of each
description have as a self-employed person? Disadvantages?

5. Have learners read and discuss Handout 1 on “Creativity.

6. Discuss the technique of changing existing ideas in order to develop new

and original ideas. Existing ideas give us a starting point. By changing

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Know About Business Module 5: How Do I Find a Good Business Idea?

one or more parts of an idea, we can develop useful new ideas. Discuss
the following ways of changing an idea. Have learners give examples of
each.
• Make it bigger or add new parts. Two examples are “giant economy
sizes” of products and increasing the size of a business to include more
products or to serve a larger area.
• Make it smaller or eliminate parts. Examples are transistor radios,
pocket calculators, digital cameras etc.
• Modify parts or ideas. Examples are changing colors, tastes, odors and
styles. Soaps are often changed in their color and odor. Automobile
styles are changed yearly.
• Rearrange parts. Some examples of rearranging parts are in designing
buildings, parks, and machines.
• Reverse parts. One example of reversing parts is in automobiles in
which the trunk and the engine are reversed in location. Another
example is reversing roles of persons, such as a husband assuming
homemaking responsibilities while a wife assumes the role of
breadwinner.
• Substitute different materials, parts, or methods. A common example
is the substitution of plastic for wood and metal. Another example is
the substitution of an electric motor for an internal combustion engine
in a car.
• Combine parts or ideas. One example is the “home entertainment
unit,” which combines a television, radio, tape player, and record
player. Another example is the motor home, which combines a home
with a vehicle.
7. Have Learners complete WORKSHEET 3.
• Ask all learners to share their ideas. Have them explain how their ideas
can be useful in work situations.
• Ask the class to consider combining two or more ideas of individual
learners.
• Emphasize that the technique used in this activity can be used to
develop new ideas and processes as well as new objects.
• Have learners apply the same technique to a service instead of an
object.
• Have learners imagine that the class has decided to form a company to
offer a service (for example, lawn mowing or dog walking). Working as
a group, have the learners use the same technique they used on the
worksheet to develop a creative marketing approach which would
attract customers.
8. Have learners complete WORKSHEET 4. Have the class discuss innovative
entrepreneurial responses to the changes in business.

9. Show TRANSPARENCY 1 and have the class discuss ways they can become
more creative.

10. Using TRANSPARENCY 2, introduce the concept of creativity and explain its
importance in generating a good business idea. Then do the nine dot
exercise. Draw nine dots on the black board like shown on the top of
TRANSPARENCY 2 and ask the learners to connect the 9 dots by means of
4 straight, continuous lines. The pencil should not be lifted off the paper.

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Know About Business Module 5: How Do I Find a Good Business Idea?

Ask each individual to write down their solution. Ask those who managed
to do it to explain how before revealing the answer on the bottom half of
TRANSPARENCY 2. Explain that the solution requires going outside the
square of dots, and that we needed to stretch our imagination and mind
beyond the apparent problem in order to solve the problem.

11. Do the creative squares exercise to provide another example of creativity

in action. Show TRANSPARENCY 3 and ask each individual to count the
total number of squares in the figure. Emphasize that a square is a
rectangle with sides of equal length. Discuss the answers and the process
used in solving the puzzle. Highlight the need for creativity. After the
exercise, in order to illustrate how to come up with all the squares there
are, you may: a) number each square or box in the main diagram; (b)
combine various boxes to form squares, i.e. four equal-sided boxes; (c)
add up the possible combinations to arrive at a total of 30. As a follow-up
activity, ask how many rectangles (different lengths of the two sides) can
be identified in the same overall square (52).

12. Divide the class into small groups and have them count the number of
triangles portrayed in TRANSPARENCY 4. The correct number is 47: ACE;
BFD; AEB; AED, AEH, AFC, AFH; AFD, AFB, ACH; ACD, AGF, AGB, ABH,
ABD, CEB, CEF, CEH, CDH, CDF, CDB, CID, CIB, CBH, CFB, EDH; EBD,
EDF, EJF; EJD, EFH; EFB; HBG; HBI; HFG; HFJ; HDI; HDJ; HFB, HDB;
HFD; FIB; FID; DGB; DGF; BJD; BJF
• Ask learners if working in a group helped them to “see” things from
different angles?
• Did any of the groups count the triangles originating on a single side,
then multiply that by two and then add one for the overall triangle?

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

WORKSHEET 1

Your Creative Potential

Respond to each of the following statements by checking one of the boxes to the left of the
statement. This is not a test. Think carefully about each statement before responding.

TRUE FALSE UNCERTAIN

A My ideas are not always easy to explain to
others.
B I would rather work at discovering new facts
than teaching others.
C I don’t like to waste time and energy on
ideas that may not work out.
D I find it easier to express ideas than to think
of new ideas.
E I prefer quick solutions to problems rather
than dealing with uncertainty.
F My way of thinking is often considered
different or unusual.
G I find it easy to interrupt a project when
friends call or visit.
H I feel more comfortable with facts than with
theories.
I I would rather be good at making up stories
than good at telling them.
J I have difficulty giving up my ideas just to
please others.
K I would rather design clothes than model
clothes.
L I prefer to work on ideas by myself rather
than with others.
M Unusual things appeal to me more than
ordinary things.
N When I get an idea, I work on it, even when
others think it is “far out” and impractical.
O I would follow up on my ideas even if it
means being alone a lot.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

WORKSHEET 2

Three Descriptions

Below are descriptions of three different types of people. Read all three descriptions
carefully. Mark an “X” beside the description you believe most closely describes you.

Description I

You are not bound by ordinary ways of thinking. You can develop and recognize ways
to combine ideas in new ways. You are willing to experiment even when you are not
sure your work will be rewarded. Because you seldom depend on others, you can
provide yourself with the time, energy and isolation that are necessary for creative
activities. You are not likely to be distracted or discouraged by others once you
become interested in a challenging task.

Description II

You can recognize and appreciate a creative idea, although you usually do not produce
these ideas by yourself. You probably engage in creative activities which involve using
your hands or which involve objects you can see and touch. You start creative projects
sometimes, but you may lose patience and interest when a project requires you to
work for a long time by yourself.

Description III

You are usually more interested in practical down-to-earth matters than in chasing
dreams. Since you tend to be very realistic in your thinking, you may not be aware of
unusual ideas that are necessary for creative problem solving. Because you prefer to
work with other people, you rarely set aside time to work by yourself on your ideas.
You are more likely to engage in activities which give you immediate results and
which may be shared with others.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

HANDOUT 1

Creativity
Most people can think of several occupations which require creativity - artist,
musician, dancer, designer and scientist. However the need for creativity is not limited
to these occupations. Creative ideas are needed anywhere there are problems with
unknown solutions. In the business world, entrepreneurs use creativity to solve
everyday problems, promote products and services, update products and services,
and make use of limited resources.

Some people believe that they are not creative. They may overlook situations in which
they have good ideas, or they may avoid sharing their ideas with others. By
recognizing and sharing their ideas, people can begin to develop their creative ability.

Because people become accustomed to thinking in certain ways, they may have
difficulty thinking of original ideas. People can develop their creative potential through
learning and practice. Several techniques can be used to develop more creative
thinking habits. Some of these techniques are: increasing awareness of one’s
environment, brainstorming and changing existing ideas.

Increasing awareness of one’s environment means learning to pay attention to

sights and sounds we ordinarily ignore. Most people are in the habit of blocking out
certain sights and sounds in order to concentrate on one thing at a time. By paying
attention to what we usually ignore, we can open our minds to new ways of thinking.

Brainstorming is a technique in which persons generate a large number of ideas.

Unusual ideas are encouraged. Ideas are never judged or criticized during
brainstorming. Participants may combine and improve ideas during brainstorming.

New and original ideas can be developed by using existing ideas as a starting point.
Parts of existing ideas can be changed in many ways. They can be: made bigger,
made smaller, modified in color, taste or style, rearranged, reversed, substituted or
combined. Products and services are often changed to make them more attractive by
using this simple technique. This method could also be used to help entrepreneurs
make their working situations more pleasant and efficient.

By developing and using their creativity, entrepreneurs can increase their potential for
success.

The appreciation of creativity has been more important for entrepreneurs in the past
several years. It is increasingly accepted that intellect and credentials take a back
seat to the ability to respond creatively to challenging situations.

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Know About Business Module 5: How Do I Find a Good Business Idea?

Here are seven steps to expanding your creative potential:

1. Examine how you perceive creativity and creative people. Our results-oriented
culture has tended to look at those whose creativity produces a product — a book,
painting or cake — as officially creative. We have been less able to recognize
people who identify new ways of thinking and behaving, especially in everyday
and business life, as just as creative.
2. Spend time with creative people. Observe how they act, think, relax and respond.
Ask them to talk about what events in their lives influenced their creativity.
3. Learn your own warm-up process. This warm-up process increases your ability to
ready yourself to develop a creative idea and take positive risks in making
changes, even small ones. What events and settings seem to encourage your
creative actions?
4. Move, dance, exercise, bicycle, walk and stretch. Try yoga or tai chi. These
physical activities get us out of our thinking brain and allow us to truly inhabit all
of our body. As the body moves, the right and left parts of the brain; both the
imaginative side and the cognitive side are able to work together more efficiently.
5. Listen to music and experiment with improvisational exercises. Notice how
different types of music promote various levels of energy within you. Theater and
drama exercises will help you practice different ways of responding, apart from
your habitual roles.
6. Keep a notebook of interesting or creative ideas and observations. Paste a few
pictures from magazines that interest or intrigue you, even if you don’t know why.
Scribble and doodle. Whatever you do, don’t censor yourself. See what happens.
7. Find a mentor or coach who can help you develop your creativity to a higher level.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

WORKSHEET 3

New Ideas from Old

Make it bigger or add new parts. Two examples are “giant economy sizes” of
products and increasing the size of a business to include more products or to serve a
larger area.

Make it smaller or eliminate parts. Examples are transistor radios, pocket calculators.

Modify parts or ideas. Examples are changing colors, tastes, odors and styles. Soaps
are often changed in their color and odor. Automobile styles are changed yearly.

Rearrange parts. Examples: rearranging parts for designing buildings, parks, and
machines.

Reverse parts. One example of reversing parts is in automobiles in which the trunk
and the engine are reversed in location. Another example is reversing roles of
persons, such as a husband assuming homemaking responsibilities while a wife
assumes the role of breadwinner.

Substitute different materials, parts, or methods. A common example is the

substitution of plastic for wood and metal. Another example is the substitution of an
electric motor for an internal combustion engine in a car.

Combine parts or ideas. One example is the “home entertainment unit,” which
combines a television, radio, tape player, and record player. Another example is the
motor home, which combines a home with a vehicle.

Practical Application

1. Think of an object used or produced in a work situation. Write the name of the
object;
2. Name the basic parts of the object.
3. How could the object or part of the object: be made bigger, be made smaller, be
modified?
4. How could the parts of the object: be rearranged, be reversed, be substituted or
made of a different material?
5. How could your ideas be combined and be useful in making a new product?

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

WORKSHEET 4

Taking Innovative Action

Entrepreneurship is about taking innovative actions whenever one finds oneself in

different situations of change

Fill in an innovative action an entrepreneur could take to respond to

the identified change.

POSSIBLE
CHANGE ENTREPRENEURIAL
RESPONSE
Structure of population changes

Values and lifestyles change

Incomes and purchasing power decrease

Government policies on gender reviewed

Natural resources getting exhausted

Ownership of factors of production changing hands

Banks advertise availability of loans

Use of computers increases

Use of mobile phones increases

Use of computers and internet facilities in homes

increase
New advanced equipment bought by business
competitor
New strategies for accommodating people living
with HIV

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

TRANSPARENCY 1

Meaning of Creativity

ƒ Creativity is the ability to design, form, make or

do something in a new or different way.
ƒ Creativity is the ability to come up with
innovative solutions to needs/problems and to
market them. An entrepreneur’s creativity is
often the difference between success and failure
in business.
ƒ Creativity often distinguishes high-growth or
dynamic businesses from ordinary, average
firms.
ƒ To be creative, entrepreneurs need to keep their
mind and eyes open to their environment.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

TRANSPARENCY 2

The Nine Dots

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

TRANSPARENCY 3

Creative Squares

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 1

TRANSPARENCY 4

How Many Triangles In A Triangle?

A B C

G I
H

F J D

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Know About Business Module 5: How Do I Find a Good Business Idea?

I TOPIC 2: Generating Ideas

II SUGGESTED TIME:
• 4 hours/sessions

III OBJECTIVE:
• To enable learners to:
(a) appreciate the importance of having a good business idea as a prerequisite
for successful business start-up and for an existing business.

(b) know how to generate business ideas.

IV RATIONALE:
• A good business idea is essential for starting a successful venture and for
staying competitive afterwards. Good business ideas, however, do not
usually just occur to an entrepreneur. Rather, they are the result of hard
work, effort and often creativity on the part of the entrepreneur.

V ACTIVITIES:
1. Ask the learners to define a “business idea.” Jot down their answers on
the board or flipchart. Show TRANSPARENCY 1 and discuss any aspects
not covered to arrive at a common understanding of the term.

2. Ask the learners to indicate why it is important to generate ideas. List

responses on a board or flipchart. Show TRANSPARENCY 2 and compare
the learners’ list with the points suggested on TRANSPARENCY 2. Discuss
key issues including the fact that the development of business ideas is
necessary both before and after a business has been set up. Have learners
read HANDOUT 1.

3. Have learners give examples of people or firms in their community or

elsewhere that have come up with good business ideas, and explain their
reasons for considering these ideas as being good.

4. Ask learners to suggest ways in which business ideas can be generated.

List these on a board or flipchart. Show TRANSPARENCY 3 and compare it
with the learners’ responses. Lead a discussion on the main points, giving
examples and illustrations. Have learners read HANDOUT 2 and use it for
the class discussion.

5. Use TRANSPARENCY 2 to remind learners of the concept and principles of

brainstorming. To give some practical experience of using the technique,

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Know About Business Module 5: How Do I Find a Good Business Idea?

tell learners that they have just 5 minutes to come up with at least a
dozen uses for one of the following (choose one item only): old
newspapers, bricks, old clothes, boxes (made of cardboard or wood),
poles/sticks, any other object of your choosing.

6. Divide learners into small groups of 4 or 5 and tell them that they are
going to do an exercise to give them practice in using the concepts and
techniques discussed so far. Use WORKSHEET 1. You may hold a
competition to determine the best business idea.

7. Bring sufficient newspapers by different publishers (outdated recent

newspapers) to the class. Let learners use the newspapers as they work in
groups of three to four on the WORKSHEET 2.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 2

TRANSPARENCY 1

What is a Business Idea?

ƒ A business idea is the response of a person or

persons, or an organization to solving an
identified problem or to meeting perceived needs
in the environment (markets, community, etc.).
ƒ Finding a good idea is the first step in
transforming the entrepreneur’s desire and
creativity into a business opportunity.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 2

TRANSPARENCY 2

Why Generate Business Ideas?

ƒ You need a great idea to start a new business

ƒ Business ideas need to respond to market needs

ƒ Business ideas need to respond to changing

consumer wants and needs

ƒ Business ideas help entrepreneurs to stay ahead

of the competition

ƒ Business ideas use technology to do things better

ƒ Business ideas are needed because the life cycles

of products are limited

ƒ Business ideas help to ensure that businesses

operate effectively and efficiently

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 2

HANDOUT 1

Why Should you Generate Business Ideas?

There are many reasons why entrepreneurs or would-be entrepreneurs need to
generate business ideas. Here are just a few:
• You need an idea – and a good one at that – for business. As indicated earlier, in
looking at the rationale for this topic, a good idea is essential for a successful
business venture – both when starting a business and to stay competitive
afterwards.

• To respond to market needs. Markets are made up essentially of customers who

have needs and wants waiting to be satisfied. Those people or firms that are able
to satisfy these requirements are rewarded.

• Changing fashions and requirements provide opportunities for entrepreneurs to

respond to demand with new ideas, products and services.

• To stay ahead of the competition. Remember, if you do not come up with new
ideas, products and services, a competitor will. The challenge is to be different or
better than others.

• To exploit technology – do things better. Technology has become a major

competitive tool in today’s markets, with the rate of change forcing many firms to
innovate. There are several companies in the world, operating in the electronics
and home appliances industries, which come up with dozens of new products every
month. For these and many others in today’s global markets, generation of
business ideas is crucial.

• Because of product life cycle. All products have a finite life. As the product life
cycle chart shows, even new products eventually become obsolete or outmoded.
Thus, there is a need to plan for new products and the growth of these. The firm’s
prosperity and growth depends on its ability to introduce new products and to
manage their growth.

• To spread risk and allow for failure. Linked to the product life cycle concept is
the fact that over 80 per cent of new products fail. It is therefore necessary for
firms to try to spread their risk and allow for failures that may occur from time to
time by constantly generating new ideas.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 2

TRANSPARENCY 3

Sources of Business Ideas

ƒ Hobbies/Personal Interests

ƒ Personal Skills and Experience

ƒ Franchises

ƒ Mass Media (newspapers, magazines, TV,

Internet)

ƒ Business Exhibitions

ƒ Surveys

ƒ Customer Complaints

ƒ Changes in Society

ƒ Brainstorming

ƒ Being Creative

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 2

HANDOUT 2

Generating a Business Idea

A good business idea is essential, or even a prerequisite, for a successful business
venture. However, good business ideas do not usually just occur to an entrepreneur.
Rather, they are the result of hard work and effort on the part of the entrepreneur in
generating, identifying and evaluating business ideas that can be developed into a
business opportunity.

What is a Business Idea?

A business idea is the response of a person or an organization to solving an identified
problem or to meeting perceived needs in the local environment (markets,
community, etc.). Finding a good idea is the first step in transforming the
entrepreneur’s desire and creativity into a business opportunity.

Two things should however be noted:

(a) although it is a prerequisite, a business idea is only a tool;

(b) an idea by itself, however good, is not sufficient for success.

In other words, notwithstanding its importance, an idea is only a tool that needs to be
developed and transformed into a viable business opportunity. Out of 30 business
ideas, there may be only one good business opportunity.

What is Creativity?
Creativity is the ability to design, form, make or do something in a new or different
way. The ability to come up with creative solutions to needs/problems and to market
them often marks the difference between success and failure in business. It also
distinguishes high-growth or dynamic businesses from ordinary, average firms. Real,
successful entrepreneurs are creative in identifying a new product, service or business
idea and turning it into a business opportunity. To be creative, you need to keep your
mind and eyes open as you work through the sources of business ideas explained
below, and apply the techniques.

Sources of Business Ideas

There are millions of entrepreneurs throughout the world and their testimonies
suggest that there are many potential sources of business ideas. Some of the more
useful ones are outlined below.

Hobbies/Interests
A hobby is a favorite leisure-time activity or occupation. Many people, in pursuit of
their hobbies or interests, have founded businesses. If, for example, you enjoy
playing with computers, cooking, music, traveling, sport or performing (to name but a

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Know About Business Module 5: How Do I Find a Good Business Idea?

few), you may be able to develop this hobby/interest into a business. To illustrate
this, if you enjoy traveling, performing and/or hospitality, you may consider going into
tourism, which is one of the biggest industries in the world.

Personal Skills and Experience

Over half of the ideas for successful businesses come from experiences in the work
place. For example, a mechanic with experience in working for a large garage who
eventually sets up his/her own car repair or used car business. Thus, the background
of potential entrepreneurs can play a crucial role in the decision to go into business as
well as the type of venture to be created. Your skills and experience are probably your
most important resource, not only in generating ideas but also in capitalizing on them
to develop a good business opportunity.

Franchises
A franchise is an arrangement whereby the manufacturer or sole distributor of a
trademark, product or service gives exclusive rights for local distribution to
independent retailers in return for their payment of royalties and their willingness to
conform to standardized operating procedures. Franchising may take several forms,
but the ones of interest to potential entrepreneurs are the types that offer a name,
image and method of doing business and operating procedures.

In the 1990s franchising experienced tremendous growth, becoming a much-used

method of going into business for the millions of enterprises that were starting up in
the USA and Europe. In the 1990s, there were over 2,000 types of franchise
businesses, accounting for over US$300 billion in annual sales revenue and about a
third of all retail sales in the United States. There are many directories and handbooks
as well as associations, including the International Franchise Association, which can
provide further information.

Mass Media
The mass media is a great source of information, ideas and often opportunity.
Newspapers, magazines, television, and the Internet are all examples of mass media.
Take a careful look, for example, at the commercial advertisements in a newspaper or
magazine and you may well find businesses for sale. One way to become an
entrepreneur is to buy an existing business.

Articles in the printed press or on the Internet or documentaries on television may

report on changes in fashions or specific consumer needs. For example, you may read
or hear that people are now increasingly interested in healthy eating or maintaining
their physical fitness.

You may also find advertisements calling for the provision of certain services based on
skills, for example accounting, catering or security. Or you may discover a new
business concept, but investors would be needed.

Exhibitions
Another way to find ideas for a business is to attend exhibitions and trade fairs. These
are usually advertised on the radio or in newspapers. By visiting such events

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Know About Business Module 5: How Do I Find a Good Business Idea?

regularly, you will not only discover new products and services, but you will also meet
sales representatives, manufacturers, wholesalers, distributors and franchisers. These
are often excellent sources of business ideas, information and help you in getting your
business started. Some of them may also be looking for someone just like you to be a
business partner.

Surveys
The focal point for a new business idea should be the customer. The needs and wants
of the customer, which provide the rationale for a new product or service, can be
ascertained through a survey. Such a survey might be conducted informally or
formally by talking to people. Surveys may be conducted using a questionnaire,
through interviews or through observation.

You may start by talking to your family and friends to find out what product or service
they think is needed or wanted but is not available in the market. Or, for example,
whether they are dissatisfied with an existing product or service and what
improvements or changes they would like to see. You can then talk to people who are
part of the distribution chain, that is manufacturers, wholesalers, distributors, agents
and retailers. It would be useful to prepare a set of questions which might be put on a
questionnaire or used in an interview. Given their close contact with customers, these
people have a good sense of what is required and what will sell and what will not sell.
Finally, you should talk to as many customers as possible (both existing and potential
customers). The more information you can get from them, the better.

Besides talking to people, you could also get information through observation. For
example, in deciding whether to open a shop on a particular street, you can observe
and count the number of people going past on given days and compare these
numbers to other sites. Or, if you are interested in an area frequented by tourists, you
might sell products from a craft business. Or you may have noticed that there is no
decent restaurant or hotel on a tourist route or in a given town.

One way of ensuring that you are not negligent in identifying new business ideas is to
be alert at all times to customer needs. One entrepreneur apparently went round at
every cocktail party asking if anyone was using a product that did not adequately fulfil
its intended purpose. Another monitored the toys of a relative’s children looking for
ideas for a market niche.

Complaints
Complaints and frustrations on the part of customers have led to many a new product
or service. Whenever consumers or customers complain bitterly about a product or
service, or when you hear someone say “I wish there was .....” or “If only there were
a product/service that could ....”, you have the potential for a business idea. The idea
could be to set up a rival firm offering a better product or service, or it might be a
new product or service which could be sold to the firm in question and/or to others.

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Know About Business Module 5: How Do I Find a Good Business Idea?

Change

The world is constantly changing. Change can be a threat; however, most

entrepreneurs consider change as a challenge and opportunity to trigger new needs
for products and services. An innovative entrepreneur always responds to changes in
a positive manner.

Brainstorming
Brainstorming is a technique for creative problem-solving as well as for generating
ideas. The objective is to come up with as many ideas as possible.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 2

TRANSPARENCY 4

Brainstorming

Brainstorming is a technique for creative problem

solving and for generating ideas. The objective is to
come up with as many ideas as possible.
Brainstorming usually starts with a key question or
problem statement. Each idea leads to one or more
additional ideas. As a result, you will have in a good
number of business ideas.

FOUR RULES FOR BRAINSTORMING:

ƒ Don’t criticize or judge the ideas of others
ƒ Freewheeling is encouraged – ideas that seem to
be wild or crazy are welcome
ƒ Quantity is desirable – the greater the number of
ideas, the better
ƒ Try to combine and improve upon the ideas of
others

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 2

WORKSHEET 1

Identifying Business Ideas

Introduction
1. A business idea is a prerequisite for a successful business venture. Good business
ideas, however, do not usually just occur to an entrepreneur. Rather, they are the
result of effort and often creativity on the part of the entrepreneur.
2. Finding a good idea is the first step in transforming the entrepreneur’s desire and
creativity into a business opportunity.
3. There are numerous sources of good ideas. To be successful in generating or
finding one, however, the entrepreneur needs to keep his/her mind and eyes open
and be alert to opportunities.
4. An idea, however good, is only a tool. The idea needs to be developed and
transformed into a viable business opportunity.

Activity 1
Each learner should write down the skills, experience, training and background that
they have to start a business. Examples could include: catering, welding, computer
programming, secretarial experience, etc.

Activity 2
Divide the class into small groups based on the common hobbies/interests listed by
the group members. Each group of learners must now choose one idea they wish to
develop into a business. Group members are to negotiate this themselves. On a
separate sheet of paper, the group should describe their best business idea, including
the product or service in detail as well as who the likely customers might be. Each
group would have 15 minutes for this task, after which each group will be given 5
minutes to present their idea to the entire class.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 2

WORKSHEET 2

Mass Media: Newspapers/Magazines

Your group should identify 7 business ideas from the articles as well
as the commercial opportunities section of a newspaper or magazine.
The commercial section may contain advertisements for businesses or
machines on sale whilst articles may describe new types of businesses
or announce changes in fashion or consumer needs. Then, for each
idea chosen, give reasons as to why you are interested in it. You have
20 minutes for this task.

Business idea Reason(s) for interest

1.

2.

3.

4.

5.

6.

7.

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Know About Business Module 5: How Do I Find a Good Business Idea?

I TOPIC 3: Identifying and Assessing Business

Opportunities

II SUGGESTED TIME:
• 3 hours/sessions

III OBJECTIVE:
• To enable learners to appreciate the importance of, and possess techniques
for identifying and assessing business opportunities.

IV RATIONALE:
• The recognition of a business opportunity coupled with the ability to
respond effectively is the basis for starting and maintaining successful
ventures. It is also a characteristic of successful entrepreneurs. It involves
not only generating ideas or identifying opportunities but also screening and
evaluating them to determine the most viable, attractive propositions to be
selected.

V ACTIVITIES:
1. Have the learners define the term `business opportunity’. Show
TRANSPARENCY 1 to clarify. In the process, draw a distinction between an
idea and an opportunity.

2. Ask learners to list the factors involved in the identification and

assessment of a business opportunity. Compare the list with
TRANSPARENCY 2. Have learners read HANDOUT 1 as the basis for the
discussion.

3. Invite an entrepreneur to talk to the learners about how he or she found a

business idea/opportunity and transformed it into a successful venture.

4. Ask someone from the local community or a regional/national organization

– such as an investment promotion centre, an employers’ organization, the
regional/local economic development board, a business promotion agency,
the university or polytechnic, the business community or a consultancy
firm – to come and talk about business opportunities.

5. Divide the learners into groups. Ask them to draw up a simple

questionnaire to use in interviewing an entrepreneur. Then, have each
group visit and speak to a successful entrepreneur. The interview should
focus on
• how the entrepreneur generated the business idea,
• how he or she identified or recognized the business opportunity,

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Know About Business Module 5: How Do I Find a Good Business Idea?

• how he or she assessed the opportunity and

• how he or she transformed it into a successful business.
During this interview, each group should also collect some basic
background information about the entrepreneur and his/her firm, such as
the type of business, number of employees, how long ago the business
was established etc. Group members must negotiate and arrange the
whole process by themselves, although the facilitator may provide some
assistance where required. When they have completed the exercise, each
group would prepare a report and presents it to the entire class.

6. Finally, draw some conclusions from the exercise and reinforce the key
learning points:

A. The recognition of a business opportunity coupled with the ability to

respond effectively is the basis for starting and maintaining successful
ventures. This involves not only generating ideas or identifying
opportunities, but also screening and evaluating them to determine the
most viable, attractive opportunity to be pursued.
B. A business opportunity may be defined as an attractive investment
idea or proposition that provides the possibility of a financial return for
the person taking the risk. Such opportunities are reactions to
customer needs and lead to the development of a product or service
that creates added value for its buyers or end-users.
C. A good idea is not necessarily a good business opportunity. Consider,
for example, that over 80% of all new products fail. It is therefore
important for all ideas and opportunities to be well screened and
assessed.
D. Identifying and assessing business opportunities is not an easy task.
However, it is necessary to minimize the risk of failure. It involves, in
essence, determining potential risks against potential rewards.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 3

TRANSPARENCY 1

What is a Business Opportunity?

A business opportunity may be defined simply as an

attractive investment idea or proposition that
provides the possibility of a monetary return for the
person taking the risk.
Such opportunities are represented by customer
requirements and lead to the provision of a product
or service which creates or adds value for the buyers
or end-users.
Distinction between ideas and opportunities
ƒ A good idea is not necessarily a good business
opportunity. Consider, for example, that over
80% of all new products fail.
ƒ So, what turns an idea into a business
opportunity?
ƒ To put it simply in economic terms, Income must
exceed Costs to earn a Profit.
ƒ The characteristics of a good business
opportunity need to be carefully examined.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 3

HANDOUT 1

Identifying Business Opportunities

Seeing, seeking and acting on opportunities is one of the characteristics of successful
entrepreneurs. It is also the basis for starting and maintaining successful ventures. It
involves not only generating ideas and recognizing opportunities, but also screening
and evaluating them to determine the most viable, attractive propositions to be
pursued.

What is a business opportunity?

A business opportunity may be defined simply as an attractive idea or proposition that
provides the possibility of a return for the investor or the person taking the risk. Such
opportunities are determined by customer requirements and lead to the provision of a
product or service which creates or adds value for its buyers or end-users.

However, a good idea is not necessarily a good business opportunity. For example,
you may have invented a brilliant product from a technical point of view and yet the
market may not be ready for it. Or the idea may be sound, but the level of
competition, and the resources required may be such that it is not worth pursuing.
Sometimes there may even be a ready market for the idea, but the return on
investment may not be acceptable. To underscore the point further, consider the fact
that over 80% of all new products fail. Surely, to the inventors (and their backers) the
idea seemed a good one, yet clearly it could not withstand the test of the market.

What turns an idea into a business opportunity? A simplified answer is when income
exceeds costs and generates a profit. In practice, to be comprehensive, you need to
examine the factors listed below.

Characteristics of a good business opportunity

To be a good business opportunity, it must fulfill, or be capable of meeting, the
following criteria:
• Real demand: responds to unsatisfied needs or requirements of customers who
have the ability to purchase and who are willing to buy
• Return on investment, provides acceptable returns or rewards for the risk and
effort required
• Be competitive: be equal to or better (from the viewpoint of the customer) than
other available products or services
• Meet objectives: meet the goals and aspirations of the person or organization
taking the risk
• Availability of resources and skills: the entrepreneur is able to obtain the
necessary resources.

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Know About Business Module 5: How Do I Find a Good Business Idea?

Assessing Business Opportunities

Ideas and opportunities need to be screened and assessed for viability once they have
been identified. This is not an easy task, and yet at the same time, the assessment of
business opportunities is extremely important. This assessment can make the
difference between success and failure, between making a fortune and losing
everything. While the assessment exercise does not guarantee success, it certainly
helps in minimizing the risks and reduces the odds for failure.

Identifying and assessing business opportunities involves, in essence, determining

risks and rewards/returns reflecting the following factors discussed below.

Industry and market

The key question to be answered is whether there is a market for the idea. A market
in this context consists of customers – potential or actual – who have needs and
wants, and who have the ability to purchase your intended product or service. There
is also a need to consider whether what the customer wants can be provided at the
right price, in the right place, and in a timely manner.

Another important consideration is the size of the market and the growth rate of the
market. The ideal situation is a market that is large and growing, where getting even
a small market share can represent a significant and increasing volume of sales.

For this assessment exercise, the would-be entrepreneur needs to gather information.
If some potential entrepreneurs are tempted to think that it involves too much hard
work, they might take some comfort from the saying that the data available about
markets (size, characteristics, competitors etc.) is often inversely related to the real
potential of an opportunity. In other words, if market data is readily available and if
the data clearly shows significant potential, then it is likely that a large number of
competitors will enter the market and the opportunity will not be as good. There are
several sources of published information (also called secondary information), including
libraries, chambers of commerce, investment promotion centers, government
ministries, universities, foreign embassies, the Internet, newspapers, and so on.

In addition to the above, there is often the need to collect information at the source
(also called primary research) by interviewing key people, such as customers and
suppliers. In that case, you will need to conduct survey research.

Length of the ‘window of opportunity'

Opportunities are said to have a ‘window of opportunity.’ That is, they do exist, but
they do not remain open forever. Markets grow at different rates over time, and as a
market gets bigger and more well-established, conditions for success are not as
favorable. Timing is therefore important. The issue then is to determine the length of
time the window will be open, and whether the opportunity can be created or seized
before the window closes.

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Know About Business Module 5: How Do I Find a Good Business Idea?

Personal goals and competencies of the entrepreneur

An important question for anyone venturing into business is whether they want to
undertake that particular venture. Personal motivation is an essential attribute of a
successful entrepreneur. Unless a person really wants to do that kind of business, he
or she should not venture into it.

A related question is whether the potential entrepreneur has the necessary

competencies (including the knowledge, skills and abilities) for the requirements of
the business and, if not, whether other people could be brought in. Many small
business owners/managers have entered into business based on the strengths of their
own skills and ability.

When the above aspects are combined, the issue then becomes one of whether there
is a good fit between the requirements of the business and what the entrepreneur
wants or desires. This is important, not only for success, but also for the
entrepreneur’s happiness. As the saying goes, “Success is getting what you want;
happiness is wanting what you get.”

Management team
In many ventures, particularly those involving a large amount of capital, high risk,
sophisticated markets and high competition, the management team is usually the
most important dimension in determining the success of a business. The experience
and skills that the team possess in relation to the same or a similar industry often
determine success or failure of a new business. This explains why venture capitalists,
or those people who provide finance for businesses, put so much emphasis on the
management factor. Investors often say that they would rather have good
management with an average idea/product/service than a brilliant
idea/product/service with bad management.

Competition
To be attractive, an opportunity must have a unique competitive advantage. For
example, a business may have a competitive advantage by lowering costs in terms of
production and marketing. Or better, a business may offer better quality. In addition,
the availability of entry barriers – which could take the form of high amounts of
capital required, protection such as patents or regulatory requirements, contractual
advantage such as exclusive rights to a market or with a supplier – can make the
crucial difference between a ‘go’ and a ‘no go’ investment decision. If a business
cannot keep most would-be competitors out of its market, or if it faces existing entry
barriers, then the opportunity may not be very attractive.

Capital, technology and other resource requirements

The availability and access to capital, technology and other resources such as skills
determine the extent to which certain opportunities can be pursued. As a general rule,
the more difficult the resource requirements are to obtain, the more attractive the
proposition, provided of course that there is a market for the idea/product/ service. To
give an example, while marketing a breakthrough product based on a patented
technology is no guarantee of success, it certainly creates a formidable competitive
advantage.

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Know About Business Module 5: How Do I Find a Good Business Idea?

Business environment
The environment within which the business will operate has a great influence on the
attractiveness of any opportunity. By business environment, we are referring not only
to the physical environment, which is important and increasingly so, but also the
political, economic, geographical, legal and regulatory contexts. Political instability, for
example, renders business opportunities unattractive in many countries, especially for
those ventures requiring high investment with a long payback period. Similarly,
inflation and exchange rate fluctuations, or a weak judiciary system, are not a good
environment to start a business, even if the potential returns are high. The lack of
infrastructure and services (such as roads, electricity, water supply,
telecommunications, transportation, and even schools and hospitals) also affect the
attractiveness of an opportunity in a given environment.

Business Plan
The process of examining the factors discussed above is often the initial step in
developing a business plan. Investors and lenders may require these issues to be
considered and set out in the form of a business plan.

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Know About Business Module 5: How Do I Find a Good Business Idea?

MODULE 5: Topic 3

TRANSPARENCY 2

Identifying and Assessing Business

Opportunities

ƒ Not an easy task. Out of approximately 30

business ideas, there may only be one good
business opportunity
ƒ A good business opportunity should take into
account:
- Industry and market, real demand for a
product or service
- Length of the ‘window of opportunity’
- Personal goals and competencies of the
entrepreneur
- Management team (human resources)
- Competition
- Capital, technology and other resource
requirements
- Business environment (political, economic,
legal, government regulations etc.)

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