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3

Your Business Opportunities

What exactly is a business? According to the American Heritage Dictionary, the word business “pertains broadly to commercial, financial, and industrial activities.” Although the definition doesn’t mention profit per se, it is generally accepted that making money is one of the key—if not the key—goals of business. Yes, there are non-profit businesses whose objectives are to create a different kind of value altogether. However, the discussion in this book is focused on for-profit businesses, where the desire to make money from an activity—whether that involves making and/or selling a product or performing a service—is an essential component for embarking on an entrepreneurial venture.

What Is a Business Opportunity?

A business opportunity occurs when you see a chance to provide a product, service, or even information to other people. What you provide can be something new. Or it can be a better or cheaper version of an existing product or service, or a more convenient way of delivering an existing product or service. In its most basic form, an opportunity means that something is missing from current market choices, and that circumstances are ripe for taking advantage of that lack.

Frequently, business experience itself leads to insight into opportunities for other businesses. If you’re intimately familiar with the home theater design business due to working in a big-box retailer, for example, you might realize that a certain important component could be better designed. Or you might see that most competitors aren’t doing a very good job of providing service to customers, and you could do better. There are the kinds of “aha” moments from which very successful businesses arise.

What Is a Viable Business Opportunity?

Lots of business opportunities exist, but that doesn’t mean they’re all viable. To qualify for that, the opportunity must lead to a sustainable business. And a business is only sustainable if it’s 1) profitable (that is, it brings in more money than it costs to run), and 2) those profits are of sufficient volume to meet your financial goals. There are a lot of business ideas that simply can’t be made profitable, or that are profitable but don’t generate sufficient income to support a single person, much less a family or group of employees. This is frequently the case for solo inventors, who may create a small and much-needed product or service but find the market for it too small to generate enough revenue to make producing it worthwhile.

CASE STUDY

Toxair: Necessity as the Mother of Invention

In Spring 2003, Dave Srebro had just been laid off from his job with an environmental contractor that had finished a project cleaning up a waste site outside Chicago when he had his “Aha” moment. As a part-time real estate agent, he was attending a training class required as part of his continuing education for keeping his license up to date when he began hearing about the very serious mold problem that was plaguing a lot of area homes. “I hadn’t realized it was such a big problem,” he says. “A light bulb went off.” Toxair was born.

Srebro went home and began tinkering with a prototype of an inexpensive attachment to a standard vacuum cleaner that could be used to perform air sampling in the home. Says Srebro, “I ended up inventing a scaled-down version of what the professionals use.”

The Airhound air sampling system is Srebro’s brainchild. It’s a long molded plastic tube that attaches to a vacuum cleaner and provides detailed information about the air in a particular room. It not only determines the presence of contaminants such as mold spores, carbon dioxide, dust mites, and carbon monoxide, but it also tells users the amount of contamination that exists. Srebro markets the Airhound as an inexpensive way for people to test the air in their homes before buying an expensive high-efficiency particulate air (HEPA) cleaner. He sells solely over the Internet, from his website (www.toxair.com).

As a one-person operation with very limited funds, Srebro needed to leverage his time and energy. Since he was attending graduate business school at the University of Illinois at Chicago when he was building Toxair, he paid a fellow student to draw up the engineering diagrams for his invention. He then asked around and got the name of a Chinese manufacturer that would do plastic injection molding at a price he could afford. “I didn’t want to go offshore,” says Srebro, “but U.S. manufacturers were just too expensive.” As it turned out, his experience outsourcing to China was only positive. “They did a really good job. First they sent samples, which I was able to check over for errors and tweak. Then they delivered the final product right to specifications.”

Srebro is in the middle of applying for a patent for Airhound, and he says one of the things he learned that other entrepreneurs should be aware of is that many lawyers will do pro bono work for new cash-strapped businesses. “Sometimes their law firms require it, sometimes they just want to give back to the community, but it’s a tremendous resource,” he says. “I got pro bono help with my patents, which amounted to thousands of dollars of advice. I couldn’t have applied for my patents without it.”

His other advice: become friends with your business associates. “Go beyond the business relationship to a personal relationship. Believe in your dream, and surround yourself with people who believe in it, too.”

Success Factors

There are a number of factors that can contribute to the viability and success of a business:

■ More innovative. You deliver something to the market that is either new or improves upon an existing offering. Sometimes this involves finding a new use for an existing product or service (or category of product/service). Sometimes this means deploying new technology. In the case of Tom’s of Maine, it meant taking a “mature” product category—toothpaste—and innovating by using all natural ingredients. Voila! A successful entrepreneurial venture is launched—and sometimes later sold. In 2006, Colgate-Palmolive Co. bought a majority stake in Tom’s of Maine for $100 million.

■ Higher quality. Offering a product or service that is of noticeably better quality than what others currently offer can create a very valuable business opportunity. Being dissatisfied with what’s out there now is a good sign that an opportunity is waiting to be discovered. Steve Ells, the founder of Chipotle, loved Mexican food but was struck by the fact that so much of it was simply not healthy. He thought others might want to enjoy this cuisine without the guilt and used the techniques he’d learned in cooking school to create great-tasting burritos and tacos using only fresh and natural ingredients. His instinct was correct: Today, there are more than 600 Chipotle restaurants, and the eatery was at the forefront of new trend in the prepared food industry—that is, providing the same high quality of food that’s found in full-service restaurants in fast food environments.

■ Lower cost. Being the low-cost leader is a time-honored strategy. But be aware that if your only key differentiator is that you provide a cheaper product or service, it is fairly easy for someone else to beat you at your own game. Unless you have some sort of strategic advantage, such as a unique source of supply or arrangements with partners that make your own expenses consistently less than anyone else’s, this can be a strategy that is difficult to sustain in the long term.

■ Better service. A number of very successful companies recognized and seized business opportunities made possible by the less-than-optimal customer service being offered by competitors. For example, JetBlue has built its reputation around providing flyers with more amenities—not just in first or business class but also in economy. Likewise, clothing retailer Nordstrom is famous for accepting returns of merchandise, no questions asked. Providing customers with personal attention and superior service is generally the way that smaller firms attempt to compete with larger ones that have more resources.

■ More convenient. Making a product or service available in a more convenient way for customers can create a viable business opportunity. A neighborhood hardware store might have higher prices, but its location means that customers don’t have to travel to one of the big box retailers. Likewise, a mobile pet grooming service might provide the same basic services as a storefront, but because it goes directly to customers’ homes, will carve out a very profitable niche for itself.

business Buzz

words

“key differentiators”

What makes your product or service truly different from competitors? Is it price? Is it quality? Whatever it is that makes customers want to choose you over others—that’s your key differentiator.

■ Easily available. Frequently the fact that a given market is underserved by a particular kind of business can be the basis for a successful enterprise. For example, a masseuse wanting to open an independent practice could look for a town or city in which the demand currently outstrips supply and build a very lucrative client base that would be difficult to establish in an area already saturated with massage therapy businesses.

Degree of innovation

Innovation can take many forms. There is a whole spectrum of possibilities for how you can innovate to exploit the opportunities you see around you:

■ Tried and true. Sometimes you don’t need to innovate at all. You can simply recognize that there’s room in the market for another doctor in private practice, accountant, graphic designer, or restaurant. Yes, you have to be good at what you do, so providing high quality is generally a prerequisite for succeeding in this area. But ordinary rules of supply and demand can make it possible to be very successful in an existing market that’s not oversaturated. These businesses often have the least risk and are easiest to start.

■ New and improved. Another possibility is going the “better faster cheaper” route by improving on the quality, effectiveness, or price of existing products or services. You’re basically putting a new twist on an existing theme. For example, there are a plenty of Web hosting businesses prepared to act as an electronic “home” for your website, but by offering a lot of additional services—such as the capability to sell things on your website, track who visits it, or place advertisements on it—a number of Web hosting firms have managed to distinguish themselves in a crowded market.

Better, Faster, Cheaper

In the high-tech industry, “smaller, faster, cheaper” has become the mantra for how to differentiate your product or service from other like products or services. (Sometimes that mantra is modified to “better, faster, cheaper.”) The concept applies to all types of business opportunities. The beauty of this mantra is its simplicity: people are indeed always looking for a better, cheaper product. And Faster can apply to either a way of getting a product out there more quickly and easily or the fact that the product is more current or actually performs faster. Either way, this phrase captures what you should be trying to do as you assess the viability of a business opportunity. In other words, ask yourself: Is your product better, faster, or cheaper than the competition?

business Buzz

words

“innovate”

Innovation is the act of producing something truly new. According to basic economic theory, to innovate is to produce something significantly different, not just make a minor change in an existing idea, product, or service. And that thing you produce must provide value to someone. In an economic context—which is what business is mostly concerned about—creating something new that no one values does not qualify as true innovation. You might design a cool, new household gadget, but if no one needs it, it’s not a true business innovation.

Are You an Industry Insider?

Precisely because they are so immersed in a particular product or service industry, some people see opportunities that others less familiar with the territory would miss. For example, no one would be in a better position to know what types of kitchen utensils are missing from restaurants and high-end cooking shops than a working chef. Likewise, a manager of rock bands might see the need for better software to track bookings and billing and have a better understanding of how to go about building this kind of Web application tool than would a software engineer likely to be recognized only by industry insiders. No matter what your industry or area of expertise, you should be constantly looking to spot these kinds of opportunities.

■ Something completely different. You can also strive for true innovation—creating a new type or category of product or service. This approach has the most risk: It’s difficult to be truly different; research and development costs are high; the market may not be ready; and you may even fail. And even if you succeed, competitors may eventually appear. But this approach also promises huge payoffs. In the early days of the Web, for example, you had to know and type in the exact name of a website. Then online directories came along, and one of them—Yahoo—became a huge company. Others kept continue to innovate with ways of finding information, and many search engines were launched. Google came up with innovative, effective mechanisms based on algorithms—and it became a multi-billion-dollar company.

Identifying Opportunities

The best way to think about opportunities is in terms of people’s needs and wants. If you know what they are—and have a plan to satisfy them—your business will have a much better chance of succeeding. Knowing what you want and need is not enough. You’ll need to step outside yourself and see what potential customers are looking for.

Here are some questions you can ask to identify opportunities:

■ What is missing from the current field you’re interested in?

■ What sorts of things do you (as someone passionate about this area) need or want?

■ What sorts of things are people always asking you (as someone in the field) to help with?

Degrees of Innovation

worksheet: Identifying Opportunities

Filling out this worksheet will help you identify areas of opportunities in the business you’d like to explore.

What industry/market/area are you passionate about serving?

What are some of the biggest trends in this industry/market/area?

What sorts of products/services do you wish were available?

What are people always asking you about/for?

What products/services could improve your field?

Researching Opportunities

Knowledge is power. With accurate information at your fingertips, you can better judge whether the opportunity you’ve identified is a viable one. And the only way to get this information is through research. Research can be as simple as interviewing people who are already doing what you hope to do. Or it can involve looking up some basic facts about your particular industry on the Internet. Think of research as a reality check that will align your vision with what’s really happening in the world. You will do more, and more in-depth, research after you come up with your specific business concept (see Chapter 4) and begin formulating an actual business plan (see Chapter 16).

At this preliminary stage of research, you may want to view historical trends in your chosen field or industry: for example, how many vegetarian restaurants have opened in your area over the past year few years—and how many are still in business? If only a few such restaurants opened, and they’re all thriving, that niche might represent a good opportunity. You can also look for data to help forecast future trends. For example, if you’d like to go into the business of decorating and staging houses for sale, you’d want to both see how many houses had been sold in recent months—and at what prices—and what future house sales projections are. And if the housing market is in a slump, you’ll probably want to find another opportunity. Your research can help you learn from mistakes others have made—and avoid them in your own entrepreneurial efforts.

Don’t try to be exhaustive in your preliminary research efforts; it’s not necessary or possible. You are merely looking for information that will answer key questions about the particular opportunity you have identified. At the same time, your research must be thorough enough to give you insight into whether you should proceed along the path you have chosen or investigate other options.

For example, if you’re thinking about manufacturing dolls, one of the questions you might ask yourself is, “How large is the market for my product?” For this, you may only have to consult one source, the U.S. Census Bureau, which can provide free-of-charge information about the size and location of a demographic group (such as young girls) to get a reliable answer. However, answering other questions, such as “What are the current trends in doll-buying habits,” may require consulting three or four industry sources, paying a professional researcher, or conducting your own market research to compile information you trust.

Questions to consider in preliminary research:

■ Historical trends

■ Future economic projections

■ Demographics

■ Market size

■ Competitors

Research resources

An almost unlimited number of resources exists, which you can consult to find out just about anything you want to know about any topic. With the advent of the Internet and electronic search capabilities, you have a wealth of information at your fingertips.

■ People. People will provide you with some of your best resources for discovering details about just about any topic under the sun. Interview current and past business owners about their experiences. You might think that such people could be reluctant to share information with a would-be competitor, and in some cases this is true. But in many instances, people are delighted to provide up-and-comers with informational interviews about their experiences and lessons learned. Indeed, there are associations—many of them national, with regional or local chapters—that exist primarily for like-minded business-people to share ideas and experiences, and to provide assistance to one another. The local Small Business Development Center is always a good place to start to find help as well.

■ Libraries. A business library or large branch of your local library is one logical place to start. You’ll find books devoted to your area of interest, years’ worth of magazines that you can search through—increasingly via electronic means—and online databases. The reference section will have books or binders of business research that are usually updated annually, if not quarterly. Librarians are trained in research and are enthusiastic about helping you find information on your chosen area. They can be one of your most valuable research resources. If you live near a college or university, chances are good it has a business library with specialized resources for entrepreneurs. If you are not a current student or alumni, such libraries will generally issue you a day or week pass for a nominal fee.

■ Internet searches. The breadth of what’s available about every industry and field is extensive. Typing in relevant keywords causes relevant websites, articles, book references, speeches, and other resources to pop up on your screen. Frequently you’ll get hundreds if not thousands of “hits.” The problems are understanding what information is reliable and accurate, and taking the time to truly dig deep.

■ Business research databases. Business information is valuable. For this reason, the most reliable and useful information is often collected by business research companies and compiled into databases. These are often available in university and public libraries. In the past, most for-fee business databases were only accessible at libraries or via subscription. Today, an increasing number of them will provide you with a specific article or report on the Internet for a one-time fee. Sometimes this fee is quite reasonable, but it can range up to thousands of dollars for in-depth market research reports by top-tier companies.

You might wonder why you would spend money on research when you can do a Google search for free. The answer lies in the quality and timeliness of the information you get from professional research and analyst firms, which specialize in doing original primary research based on the kind of custom surveys and complex analyses that are well beyond the means, and expertise, of most entrepreneurs (or even established businesses). With access to the databases and reports of professionals, you hear about emerging trends ahead of people not subscribing to these resources. And the opposite holds true: if you don’t pay for this market wisdom—that is, you may well find yourself behind the curve. You may have to hand over what seem to be significant dollars to get your hands on industry reports. But it might a smart use of your marketing dollars—especially when you’re researching the possible opportunities out there.

There are specialized databases such as Lexis (for performing legal research) and Nexis (for business-related topics) (www.lexisnexis.com). Other leading for-fee market research databases include Factiva (www.factiva.com), Dialog (www.dialog.com), and Alacra (www.alacra.com). Generally, whatever you want is out there in one form or another—and increasingly it’s online and accessible from your computer.

■ Government resources. Government resources can be some of your best sources of information, and for the most part, they are free. An increasing proportion of them are available online. Occasionally, you’ll have to pay for a hard copy of a report, but that’s generally a minimal fee designed to cover printing and postage costs. Some reports are still only available by mail, and you have to request them specifically. Among the best resources for entrepreneurs are the website of the Small Business Administration (SBA) (www.sba.gov), the U.S. Census Bureau (www.census.gov), and Statistics Canada (www12.statcan.ca/english/census/index.cfm).

Industry Associations

One of the best sources of information about virtually any type of business or industry is the appropriate industry association. An association exists for every market niche you can imagine: Restaurant owners have the National Restaurant Organization; businesses centered around clothing, sports, or outdoor equipment have the Outdoor Industry Association; exterminators have the National Pest Management Association; and on an on. These groups routinely collect industry news, statistics, and trends and make it all available to members to help them run their businesses better. Most sponsor conferences and training events as well. One of the smartest things you can do is join the trade association for your type of enterprise. For a list of industry associations, go to www.planningshop.com/tradeassociations.asp.

The government collects data on a mind-boggling breadth of topics, ranging from growth projections in a broad range of industries to population demographics—segmented by state, county, even city—to analysis of economic trends. Always do a search to see what the government might have already collected and analyzed for you before doing your own research or paying someone else to do it for you.

■ Research firms. There are market research companies that charge for the research they routinely perform into various industries, markets, and subject areas. Some of the largest and most reputable ones include Gartner (www.gartner.com), Yankee Group (www.yankee.com), International Data Corp. (www.idc.com), Frost & Sullivan (www.frost.com), and Yankelovich (www.yankelovich.com). The research from these firms is usually quite pricey—but it can be worth it once you get serious about a particular business area.

These research houses do extensive primary research, generally in the form of surveys, on just about every area of business you can imagine, and produce comprehensive reports in which specialists in a particular field—say, the music business—analyze what the survey results mean. Most established firms in the majority of industries routinely subscribe to the services of these research houses on the premise that everyone else in their industry is reading them, and they don’t want to miss an important emerging trend.

Researching an industry

When you’re researching opportunities, you’ll generally be interested in resources that give you information at the industry, rather than specific company, level. (You’ll want to research specific competitors once you have narrowed down your specific business concept.) Here are some resources that provide detailed industry data.

Free resources

These are generally available through government agencies, particularly the U.S. Census Bureau.

■ American FactFinder Quick Reports. Your source for population, housing, economic, and geographic data in the U.S. Use it to uncover everything from economic projections for specific industries and geographic locations to population trends and housing statistics by country, state, county, or city. (www.factfinder.census.gov).

■ Statistics Canada studies and reports. In addition to carrying out a Canadian census every five years, Canada’s central statistical agency conducts surveys on virtually all aspects of Canadian life, the results of which can be viewed at the agency’s website (www.statcan.com/menu-en.htm).

■ Economic Census. The U.S. Economic Census provides a detailed portrait of the nation’s economy once every five years, from the national to the local level. Use it to gauge what is likely to happen in a particular industry or geographic region. (http://factfinder.census.gov/jsp).

■ Industry Statistics Sampler. Takes data from the U.S. Economic Census and provides snapshots of particular industries. Use it to discover historical trends as well as the current facts about a particular industry. (www.census.gov/econ/census02/data/industry/index.html).

Fee-based resources

Many research resources for up-to-date business industry information require that you pay—sometimes quite a lot—for their data. (Free access to some of these resources may be available through your public, college, or university library.)

■ ABI/INFORM Global. Offers abstracts and full-text articles from leading publications. You can find out anything that’s been published about a particular market or industry in a major business or trade magazine by searching through this database (www.proquest.com).

■ Mintel. A global supplier of consumer, media, and market research. You can use these custom reports to find out what is going on in a broad range of markets and industries (www.mintel.com).

■ Plunkett Research Online. Provides market research, company profiles, analysis, trends, statistics, data, and business information. This is an excellent resource for researching potential competitors (www.plunkettresearchonline.com).

■ Standard & Poor’s NetAdvantage. Comprehensive gathering of in-depth business and investment information. One of the top business databases, this provides independent research, data, and commentary on stocks, bonds, funds, and industries—all of which helps entrepreneurs get the “big picture” of what’s going on in their chosen markets and/or industries. Note: available only through libraries (www.netadvantage.standardandpoors.com).

■ Business & Company Resource Center. A premier online research site that is of special use to entrepreneurs, Business & Company Resource Center has its own content and search engine that allows users to look up detailed information about potential competitors; often available at public libraries (www.galegroup.com/BusinessRC/).

Successful Business Research

The basics of business research and a wealth of both free and for-fee research services are listed in a companion publication to Passion to Profits. Successful Business Research walks you through how to get verifiable numbers to support your business plans in a step-by-step manner. Harnessing the often-difficult-to-master power of the nation’s leading public and private data sources, this book not only takes you to the information, it shows you how to filter it, interpret it, and use it to your business’ advantage. Find it at your bookseller or at www.PlanningShop.com

worksheet: Industry Research

This is a good time to test the research waters by using some of the free resources listed on the preceding pages to begin to uncover facts about your chosen industry or market. Use the worksheet below to record some rudimentary facts.

Question	Research Reveals	Opportunities Suggested by Research Results
Describe the economic history and past business trends of this industry or market in terms of the following characteristics: —Demographics —Market size —Competitors —History of industry
What are the future projections for this industry or market?
What are the demographics?
What is the size of this market or industry?
Who are the main competitors?