Opportunity

Screening
 Because many opportunities are
possible for the entrepreneur, it is
important to come up with a short
list of a few very promising
opportunities, which could be
scrutinized in detail.

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The Personal Screen
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In screening opportunities, the entrepreneur has to consider
his preferences and capabilities by asking this questions:
1. Do i have the drive to pursue this opportunities to the
end?
2. Will I spend all my time, effort and money to make
business opportunity work?
3. Will I sacrifice my existing lifestyle, endure emotional
hardship , and forego my usual comforts to succeed in this
business opportunity?

If you answered yes in all the questions, then you can begin
your earnest pursuit of that opportunity.

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The 12 Rs of Opportunity
Screening
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1. Relevance to vision, mission, and objectives of the
entrepreneur. The opportunity must be aligned with what
you have as your personal vision, mission, and objectives
for the enterprise you want to set up.
2. Resonance to values. Other than vision, mission, and
objectives, the opportunity must match the values and
desired virtues that you have or wish to impart.
3. Reinforcement of Entrepreneurial Interest. How
does the opportunity resonate with the entrepreneur’s
personal interest, talents, and skills?

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4. Revenues. In any entrepreneurial endeavour, it is important
to determine the sales potential of the products or services you
want to offer. Is there a big enough market out there to grab and
nurture for growth?
5. Responsiveness to customer needs and wants. If the
opportunity that you want to pursue addresses the unfulfilled or
underserved needs and wants of customers, then you have a
better chance of succeeding.
6. Reach. Opportunities that have good chances of expanding
through branches, distributorships, dealerships or franchise
outlets in other to attain rapid growth are better opportunities
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7. Range. The opportunity can potentially lead to a wide range of possibilities of
product or serving offerings. Thus, tapping many market segments of the industry.
8. Revolutionary impact. If you think that the opportunity will most likely be the
‘’next big thing’’ or even a game-changer that will revolutionize the industry, then
there is a big potential for the chosen opportunity.
9. Returns. It is a fact that the products with low cost of production and operations
but are sold at higher prices will definitely yield the highest returns or investments.
Returns can be also intangible; meaning, they come in the form of high profile
recognition or image projection.

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10. Relative ease of implementation. Will be the
opportunity will relatively easy to implement for the
entrepreneur or will there be a lot of obstacle or
competency gaps to overcome.
11. Resources required. Opportunities requiring fewer
resource from the entrepreneur may be more favoured
than those requiring more resources.
12. Risk. In an entrepreneurial endeavour, there will
always be risk. However, some opportunities carry
more risks than others, such as those with high
technological, market, financial, and people risks.
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The pre-feasibility
study
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The ultimate goal of doing the opportunity screening matrix is to narrow
down the many opportunities into one or two attractive one.
The next step is to conduct a pre-feasibility study to ascertain the
viability of the opportunity. The idea is to focus on a few key items that
could make or break the business concept. This time, the entrepreneur
must go down to the details and take time to consider the following
factors that are contained in a pre-feasibility study:

 Market potential and prospects

 Availability and appropriateness of a technology
 Project investment and detailed cost estimates
 Financial forecast and determination of financial feasibility

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 MARKET
POTENTIAL
PROSPECTS
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It is based on the estimated
number of possible
costumers who might avail
of the product or service.
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The customers would, oftentimes make the final choice on what to buy according to several
factors such as:

 The purchasing power or disposable income

 Their proximity or accessibility to the goods or services
 Their individual desires and preferences
 Their age or generational grouping
 Their social, cultural or ethnic background
 Their peer group preferences
 Their gender
 The season of the year
 Their personal identification with trend setters
 Their educational attainment
 Their technical proficiency and product expertise
 Their motivational impetus
 Their lifestyle preferences
 Their susceptibility to certain advertising and promotional appears, and many others

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SEGMENTING
THE MARKET
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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. Keep in mind that
some general statistics for this
demographics can be found online 16
 ASSESSING
COMPETITION
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Market potential is also affected by the numbers of establishments
supplying and serving your target customers. This process would
determine how saturated the market is in the given area of coverage. The
more suppliers and competitors there are within a confined area, the
greater the level of saturation.

In order to assess one’s strengths and weaknesses there must be a

comparison made with the closest competitors. Profiling this competitors
will help the entrepreneur gauge their respective strengths and
weaknesses and, therefore, enables the entrepreneur to craft a strategy

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ESTIMATING
MARKET
SHARES AND
SALES 19
The entrepreneur can go for a small market share unless the entrepreneur has a very superior product or
service that can immediately command a large market share.

In a pre-feasibility study, the most important task is to quantify the market potential in a systematic way.

the first thing that the entrepreneur must do is to define the market coverage or reach he or she wants
to serve.
second, the entrepreneur must determine the broad market segments within tis area or total targeted
population. In a first level attempt at quantifying the market, the entrepreneur could select such broad
categories like gender, age, and income class.

in the assessment of market potential, the entrepreneur should evaluate the relative strength of the
various suppliers or competitors in the market place by asking the following questions:
 who has dominance?
 Who has greater bargaining power?
 Which segments of the total market are saturated and over served and which ones are relatively
undeserved?
 Are the market segments which are more attractive than others for the entrepreneur, either because of
past expertise in the segment or weaker competition in the segment?

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 The final task of the entrepreneur in this
portion of the pre-feasibility study is to
determine what slice or share of the targeted
market segment he or she wants to carved
out.

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Technology assessment and operations viability

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In order to get the enterprise going, the entrepreneur must go through the intricacies of detailing the
operations that would be required by the business, which also includes technology assessment.

1.) quantities demanded

this would determine the needed capacity of operations.
2.) quality specifications demanded
this would dictate the ffg:
a.) quality of input or raw materials.
b.)quality assurance process in transforming input to output
c.) quality output that meet the operations, standards set
d.) quality outcomes for the customers who will be looking for specific results.

3.)delivery expectations
knowing how much, how frequent, and when to deliver to customers.
4.) price expectations
the selling price of the product or service would be evaluated by the customers according
to the value they would receive

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Investment requirements and production/servicing costs
most challenging part. The entrepreneur needs to determine how much money is needed to start
the business opportunity with consideration to the technologies and operating levels required.

THREE INVESTMENTS THAT NEED TO BE FUNDED:

1.)Pre-Operating Costs, these are the costs related to the preparation for the launch of the business.
These include the pre-feasibility study, in-depth feasibility study, market research, product development,
organizational development, and organizational development and initial promotional costs.
2.) production/service Facilities investment, this refers to the long term investment for the actual
business establishment, including investment in land, buildings, machinery, furniture, etc. if the business
would be renting or leasing space, the leasehold improvement (or renovation) would also be part of the
facilities investment.
3.) Working Capital Investment, this indicate the investment needed to operationalize the business,
composed of cash, accounts receivable, and inventories. The entrepreneur must see to it that he or she
has enough cash to cover the inventories to be purchased, the accounts receivable to accommodate
customers, and the operating expenses to be incurred. These operating expenses would include the
following

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 Employee salaries, wages, and benefits
 Rent and lease expenses
 Utilities
 Fees and licenses
 Commissions
 Office supplies, etc

In effect, this part of the pre-feasibility study asks two questions:

1.) do I have enough resources to cover the necessary investment?
2.) would my sales estimates be significantly higher than my monthly production?
Service costs in order to produce profits?

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 FINANCIAL
FORECASTS AND
DETERMINATION OF
FINANCIAL
FEASIBILITY
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 The financial forecasts refer to the monetary transactions that the business is
expected to engage in. Ultimately, the end result of the financial forecasts will
indicate the feasibility of the enterprise.
Financial forecasting calls for the creation of the four critical financial
statements

 Income statement
 Balance sheet
 Cash flow statement
 Funds flow statement

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 INCOME
STATEMENT

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The income statement is a financial statement that measures an enterprise’s
performance in terms of revenue and expenses over a certain period. Simply put,
the formula is:

REVENUES – EXPENSES = INCOME OR PROFIT (LOSS)

From revenues forecasted (quantities sold times the prices they are sold for). The
entrepreneur must subtract the estimated cost of goods sold corresponding to the
forecast sales. this should give the operating profit. Then, the taxes due are
subtracted to derive the net profit after taxes. If the enterprise has non-operating
revenues and expenses, these should be added or subtracted from the operating
profit before the taxes are computed.

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BALANCE
SHEET
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 Creating balance sheet is a bit more complicated because one has to look at
three different things: assets, liabilities, and equities
assets represent all the investment in the enterprise including the initial
investments that you considered in the pre-feasibility study (investment
requirement)
financing the assets or investments are the liabilities and equity. Liabilities
represent the enterprise’s debts to suppliers, to bank, to government, to
employees, and other financiers. Stockholder’s equity represents the investor’s
investment in the stock (or shares) of the business.

the balance sheet equation is:

ASSETS=LIABILITIES+EQUITY
the above equation means that the sources invested into the enterprise in the
form of liabilities and stockholder’s equity must be equal to the total value of the
assets or the enterprise itself.
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FINANCIAL
RATIOS AND
MEASUREMENT

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 In any business endeavor, the investor or the entrepreneur himself or herself will
always be interested in knowing the payback period or how long will it take for him or
her to get back what he or she has invested in the enterprise.
However, payback period is just one of the many financial computations one can
take a look at in considering a particular business opportunity. But this will only be
possible if the entrepreneur can come up with financial statements. The income
payback period can recover the investment:

INCOME PAYBACK PERIOD = TOTAL INVESTMENT

ANNUAL NET INCOME AFTER TAXES

to compute for the income payback period based on ABC company’s financial
statements, which specify investment of 1,500,000 and net income after taxes of
500,000 a year, we an conclude that it would take around 3 years for the company to
recover the investment

INCOME PAYBACK PERIOD = 1,500,000 = 3 YEARS

500,000 33
 There is also the return on sales (ROS) ratio where the entrepreneur calculates how much profit
the enterprise is earning for each peso sold. The formula is as follows:

RETURNS ON SALES = NET PROFIT AFTER TAXES

SALES
Substituting the variables into ABC company’s estimated figure:

RETURN ON SALES = 500,00 = 10%

5,000,000
furthermore, if the entrepreneur is interested to know the return on the investments made, which
come in the form of assets, then he or she can compute for the return on assets (ROA) shown by the
formula

RETURNS ON ASSETS or RETURN ON INVESTMENT= NET PROFIT AFTER TAXES

TOTAL ASSETS/INVESTMENT
again, substituting the variables using ABC company’s estimated figures:

RETURN ON ASSETS = 500,000 =33%

1,500,000
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THE FEASIBILITY STUDY

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 For bigger projects that entail millions of pesos worth of investment, a full-
blown feasibility study might be required more then the pre- feasibility study. As
compared to a pre-feasibility study, a feasibility study is more comprehensive and
detailed. It requires a more rigorous approach. A feasibility study is prepared to
convince bankers and investors to put money into the business opportunity. In
writing the feasibility study, the entrepreneur should take into consideration the
following:

1. A more-in-depth study of market potential to ensure that the business

proposal will reach the forecasted sales figures;
2. Proof that the product or service being offered has the right design, attributes,
specifications, and features
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; and
6. More through analysis of the technology and its sustainability. 36
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