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Transcript of OPPORTUNITY SCREENING
Do I have the drive to pursue this opportunity to the end?
Will I spend all my time, effort, and money to make the business opportunity work?
Will I sacrifice my existing lifestyle, endure emotional hardship, and forego my usual comforts to succeed in this business opportunity?
It is important to come up with a short list of a few very promising opportunities, which could scrutinized in detail.
The 12 R's of Opportunity Screening
The Pre-Feasibility Study
To narrow down the many opportunities into one or two attractive ones. The next step is to conduct a pre-feasibility study to ascertain the viability of the opportunity. This time, the entrepreneur must go down to details and consider the following factors:
Reinforcement of Entrepreneurial Interest
Relative Ease of Implementation
A. Market Potential and Prospects
Market potential is based on the estimated number of possible customers who might avail the product or service.
Using a set of demographics (e.g., gender, age, place of residence, income class, etc.) will be the most basic approach in determining the target segment.
Segmenting the Market
This process would determine how saturated the market is in the given area of coverage.
Estimating Market Share and Sales
Entrepreneur should assess the potential market share he or she can attract.
Technology Assessment and Operation Viability
The entrepreneur would be able to determine whether the product or service offering will meet the demand or not.
This would determine the needed capacity of operations.
Quality specifications demanded
Dictates the quality of input, quality assurance of the process transforming input to output, quality output, and quality outcomes for the costumers who will be looking for specific results.
Knowing how much, how frequent, and when to deliver to costumers.
The selling price would be evaluated by the costumer.
Investment Requirements and Production/Servicing Costs
The entrepreneur needs to determine how much money is needed to start the business opportunity which consideration to the technologies and operation levels required.
These are the costs related to the preparation for the launch of the business.
Production/Service Facilitate Investments
Long term investments for the actual business establishments.
Working Capital Investments
This includes the investment needed to operationalize the business, composed of cash, accounts receivable, and inventories
Financial Forecasts and Determination of Financial Feasibility
Monetary transactions that the business is expected to engage in. Financial forecasts will indicate the feasibility of the enterprise.
Measures an enterprise performance in terms of revenue and expenses over a certain period.
Revenues - Expenses = Income or Profit (loss)
Assets- all the investments in the enterprise including the initial investments.
Liabilities- represents the enterprise debts to suppliers, to banks, to government, to employees, and other financiers
Stockholders' equity- investors' investments in the stock (or shares) on the business.
Assets= Liabilities + Equity
Financial Ratios and Measurements
Payback Period= (Total Investment)/(Annual Net Income After Tax)
Return on Sales= (Net Profit after Tax)/(Sales)
Return on assets or Investments=
(Net Profit after Tax)/(Total Assets or Investments)
The Feasibility Study
A feasibility study is more comprehensive and detailed
A feasibility study is prepared to convince bankers and investors to put money into the business opportunity.
1. A more in-depth study of market potential to ensure that the business proposal will reach the forecasted sales figure.
2. Proof that the product or service being offered has the right design, attributes, specifications, and preferred feature.
3. Proof that the entrepreneur and his or her team have the necessary experience, skills, and capabilities to maximize the venture;s chances of success.
4. Legal visibility
5. More detailed costing on the different assets and more justification for the production and operating expenses.
6. More through analysis of the technology and its sustainability.