Sources of Business Ideas

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.
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
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)
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
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.
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.
 Franchising
A slightly different approach
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
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
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
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