Sources of business ideas

1. Sources of Business Ideas

2. Moving Forward
We have previously looked at why people
may want to start up their own business
and the risks and benefits that brings.
Now we will look at how a budding
entrepreneur will generate a business idea
and where they may be inspired.

3. Possible Sources
Research suggests that the following are
four major sources of ideas for
entrepreneurs:
Spotting Trends and anticipating their impact
Identifying a market niche
Copying ideas from other countries
Taking a scientific approach

4. Spotting trends
Tapping into what is happening in society
around us or in the market and responding
quickly to these changes.
E.g. Innocent Drinks
(1999)

5. Identifying a Niche
Involves noticing something missing in the
market or that can be improved on.
About spotting “Gaps”! E.g. Red Letter
Days – experiences as gifts

6. Copying ideas from other countries
Travelling to different countries and
cultures enables entrepreneurs to pick up
ideas that have worked elsewhere
E.g. Howard Shultz from Starbucks copied
the coffee bar culture from Italy and
adapted it for US.

7. Scientific Approach
Some entrepreneurs spend time inventing
new products.
Can take a lot of time to produce product
but do benefit from short term niche
market before the idea is copied, e.g.
James Dyson made 5,127 prototypes
before the final design.

8. Franchising
A slightly different approach

9. Franchising
This is when you purchase the right to sell
a product or service.
Or
When a business (franchisor) gives
another business (franchisee) the right to
supply its product or service.
Some examples include: Burger King,
McDonalds, Dynorod

10. Involvement Varies
Some franchisors have a lot of
involvement in how the franchisee
operates e.g. McDonalds
Others may give more independence to
the franchisor e.g. Toyota

11. Benefits of Franchising
Least risk in starting business.
Usually established brands with proven
success
Easier to get finance
Usually incur lower marketing costs
Franchisee usually has exclusive rights in
area
Supplier relationships often already
established
Franchisor offers support, training, advice

12. Drawbacks of Franchising
Costs can be high, initial start up cost to
get rights, then ongoing royalties and
percentages of turnover
Other franchisees could give brand bad
reputation
Agreements often have restrictions on how
business must be run
Heavy reliance on success and methods of
franchisor
Franchisees have to sign non-competition
clauses