Ti m m e r m a n I n d u s t r i e s

OBJECTIVE:
Propose solutions in terms of products and
services that will meet the need using
techniques on seeking, screening and seizing
opportunities.
Screen the proposed solution/s based on viability,
profitability, and customer requirements;
S2-
SCREENING
THE
OPPORTUNI
TY
OPPORTUNITY
SCREENING
Is the process of
cautiously selecting
t h e b e s t o p p o r t u n i t y.

Ti m m e r m a n I n d u s t r i e s
Ti m m e r m a n I n d u s t r i e s

OPPORTUNITY
SCREENING
01 02

INTERNAL INTEN T EX T ER N AL IN T EN T
i.e., the main objective which will address the
that the business will compelling needs of the
accomplish in the target market.
entrepreneur ’s life
Ti m m e r m a n I n d u s t r i e s

Entrepreneur should apply due

diligence and independent
judgment in selecting the
opportunities that have a
potential and eliminate those
that are not within the scope
of the entrepreneur ’s risk
appetite (entrepreneur ’s
tolerance of business risks).
Ti m m e r m a n I n d u s t r i e s

Ti m e must be considered by
the entrepreneur in screening
the opportunities at hand, as it
is considered one of the most
critical resources of an
e n t r e p r e n e u r. T i m e s h o u l d o n l y
be devoted to worthwhile
opportunities.
Ti m m e r m a n I n d u s t r i e s

Therefore, entrepreneurs must

always be sharp-eyed for real
opportunities. They must be
intelligently able to say no to
low-compelling opportunities
and proceed with sensible
ones.
The entrepreneur should say no to an
opportunity if it does not contain any of these
business opportunity elements:

1.Has superior value to customers

2.Solves a compelling problem, issue, a
need, or a want
3.Is a potential cash cow
4.Matches with the entrepreneur’s skills,
resources and risk appetite
 The Opportunity Attractiveness Test
 Opportunity Attractiveness Test (OAT) aims to assist
entrepreneurs in ensuring that the opportunity that
they will venture into is an attractive and feasible
prospect.
 This test is designed to detail each entrepreneurial
aspect into small chunks to come up with a sound
entrepreneurial decision.
 The Opportunity Attractiveness Test
 The answers in this test will be the guiding principles of
the entrepreneur in writing the business plan.
 The components of the OAT will be used to channel the
entrepreneur ’s direction in data gathering.
 At the end of this test, the entrepreneur should be able
to at least decipher the relative attractiveness of the
business opportunity.
 The Opportunity Attractiveness Test
1. The “concept” and the “strategy”
 Craft a brief vision statement—what the business should
do in the future.
 Devise a value creation proposition, i.e., the value that
the product or service will offer to the target customers.
 Proposition should be compelling enough to influence
the behavior of the target customers.
 The Opportunity Attractiveness Test
1. The “concept” and the “strategy”
 Last, devise a differentiator or a positioning strategy—
what difference will the new business inculcate to the
target customers as compared with the rest? Is this
compelling enough to influence the behavior of the
potential customers?
 The Opportunity Attractiveness Test
2. Opportunity metrics.
 Considered as the opportunity’s critical success factors.
 Factors will approximately determine the attractiveness
of the new venture depending on the total scores that it
will generate and the risk appetite of the entrepreneur.
 Answers, however, require extensive research so the
entrepreneur must be careful in answering this metrics
table.
 Table 2.2a. Opportunity metrics for market potential
Industry or Market Potential Highest Potential Lowest Potential Attractiveness Score
Description Description
1. Market need • Easily identifiable market • Unclear market 4.25*
• Potential recurring • Revenue just one-time or Students, faculty, and school
revenue from the market seasonal staff are identified as
• Market-driven • Market unstable primary target market even
though recurring revenue is
not guaranteed.
a. Customers Accessible Already stuck with 4
competitors Has two competitors
b. Payback period Within one year or less Three years or more 3
Estimated to be two years
c. Value to customers Significant Insignificant 5
The objective of the venture
is to provide new products
or food foe school cafeteria.
d. Product • Durable or long shelf-life • Perishable
• New or innovative • “Me too”
• Value for money • Unreasonably priced
e. Service Highly demanded Seasonal 5
Business is seasonal
 Table 2.2a. Opportunity metrics for market potential
Industry or Market Highest Potential Lowest Potential Attractiveness Score
Potential Description Description
2. Market structure Emerging Declining or stagnant 4
There is an increasing
demand for new products
or food offers for school
cafeteria
3. Market size • Established and clear • Unknown; 4
• Big enough for the undetermined There are more than 200
entrepreneur • Small students, faculty
members and school staff
to be catered. This is
already big enough for an
entrepreneur.
4. Growth rate Faster and acceptable Small and unacceptable 3
growth rate growth rate Growth of food at these
tend to be stable (i.e., has
a moderate growth rate)
 Table 2.2a. Opportunity metrics for market potential
Industry or Market Highest Potential Lowest Potential Attractiveness Score
Potential Description Description
5. Market capacity Fully capacitated Undercapacitated 3
Market capacity is at
equilibrium as well
6. Market share • Easier and faster market • Difficult and slow 3
penetration market penetration Some student, faculty
• High potential in • Low potential in members and school staff
maximization of market maximization of market may be enticed by this,
share percentage (e.g., share (e.g., 5% or less) but some may not buy
20% or more) them.
7. Cost leadership Cost-efficient Too costly 4
Putting all products under
this business venture is
economical
Total: (Weight = 20%) 3.61 (3.61 x 20% = 0.72)
 Table 2.2b. Opportunity metrics for financial feasibility
Financial Feasibility Highest Potential Lowest Potential Attractiveness Score
Description Description
1. Net income Robust Fragile; inconsistent
2. Return on investment High and faster returns Low returns (e.g., 20% or
(e.g., 20% or more in 1 less in 5 years)
year)
3. Capitalization Reasonable capitalization Unreasonable
required capitalization required
4. Internal Rate of Return High and consistent IRR Low and inconsistent IRR
(IRR)- annual return that (e.g., 20% or more) (e.g., 20% or less)
makes the initial
investment turn into
future cash flows
5. Free cash flow- Highly positive (e.g., 30% • Low or not enough
represents the liquidity of of gross sales/revenue or capital capital
a business after allocation more) expenditures
of capital expenditures • Low in liquidity
 Table 2.2b. Opportunity metrics for financial feasibility

Financial Feasibility Highest Potential Lowest Potential Attractiveness Score

Description Description
a. Sales growth High Low
b. Asset intensity Low High
(assets/sales)
c. Working capital Low High
d. Research and Low High
development and
other capital
expenditures
e. Gross income High (e.g., 30% or Low (e.g., 30% or
more) less)
6. Capital recovery Fast (e.g., 2 years or Slow (e.g., 5 years)
period less)
Total (Weight):
 Table 2.2c. Opportunity metrics for exit strategies or harvest options

Exit Strategy or Highest Potential Lowest Potential Attractiveness

Harvest Options Description Description Score
1. Value –added High strategic value Lowest strategic
potential value
2. Exit strategies Many envisioned Limited or no exit
options, e.g., strategies
merger, acquisition
or strategic alliance
3. Capital valuation • Reasonable • Unfavorable
capital valuation capital valuation
• Realizable capital • Credit crisis
Total (Weight):
 Table 2.2d. Opportunity metrics for competitive advantage
Competitive Advantage Highest Potential Lowest Potential Attractiveness Score
Description Description
1. Fixed and variable cost Cost-efficient Costly
2. Control over prices, Strong Weak
distribution and costs
3. Barriers to entry Difficult to enter No barrier(s) at all or easy
to enter
a. Legal and proprietary Exclusivity None or unsecured
protection
b. Response and lead Competition is not yet • Tough competition
time aggressive • Unable to gain
competitive
advantage
c. Networks Accessible and close Limited access and
relationship requires extensive
relationship building
Total (Weight):
 Table 2.2e. Opportunity metrics for management team

Management team Highest Potential Lowest Potential Attractiveness Score

Description Description
1. Entrepreneurial Fully dedicated, Undedicated and just
lineup driven and united testing the waters
2. Industry and Highly skilled and Weak background
technical experience experienced in the and experience in the
industry chosen industry chosen
3. Integrity and Highest degree of Questionable and
concern to the new integrity and concern unsure
venture
4. Intellectual Willing to understand Unwilling to
honesty what they don’t understand what
know they don’t know
Total (Weight):
 Table 2.2f. Opportunity metrics for strategic differentiation
Strategic Differentiation Highest Potential Lowest Potential Attractiveness Score
Description Description
1. Degree of fit High Low
2. Entrepreneurial Excellent and innovative Mediocre and less-
differentiation entrepreneurial team skilled entrepreneurial
team
3. Service management Excellent customer Mediocre and
intimacy unimportant customer
servicing
4. Timing Perfect timing- Bad timing- weakness
strengths and and threats all over the
opportunities conspiring place
5. Fatal flaw Almost none or almost Few to many
risk-free
6. Technology “I first” “Me too”
7. Flexibility Adaptability to changes Traditional and slow
 Table 2.2f. Opportunity metrics for strategic differentiation

Strategic Highest Potential Lowest Potential Attractiveness Score

Differentiation Description Description
8. Opportunity Opportunity is Opportunity treated
orientation treated as continuum as vaccum
9.Pricing Price leadership Lower than
competitors
10. Place of Accessible in many Inaccessible or
distribution traditional and limited channels
alternative channels available to the
customers
11. Margin for Forgiving and Unforgiving and stiff
mistakes and errors believes in second
chances
Total (weight):
 Table 2.2g. Opportunity metrics for assessment of personal resources

Assessment of Highest Potential Lowest Potential Attractiveness Score

Personal Resources Description Description
1. Personal goals and Has clear objectives Goals unclear and
fit and matches with the disconnected to the
entrepreneur’s entrepreneur’s
capacity and resources capacity and resources
2. Success or failure Prosperity to succeed Prosperity to fail high
high
3. Opportunity costs Willing to sacrifice first Contented with status
for a better quo
opportunity
4. Desirability Matches with the Ultimate desire is only
lifestyle and big returns
preference of the
entrepreneur
 Table 2.2g. Opportunity metrics for assessment of personal resources

Assessment of Highest Potential Lowest Potential Attractiveness Score

Personal Resources Description Description
5. Risk appetite Calculated risks Undefined and
unknown risks
6. Stress management Can live comfortably Inability to manage
with stress stress
Total (Weight):
 Total Attractiveness Score
At the end of this test, entrepreneurs should:
 First compute the total scores per factor
 A corresponding weight or percentage should be given
as to the importance of the factor to the venture’s
overall standing.
 This weight must be multiplied to the total score
accumulated per test.
 Total Attractiveness Score
Entrepreneur should also establish a tiered scale and
description on the total attractiveness score.
Sample tiered scale:
4.00-5.00 – Very attractive
3.00-3.99 – Attractive
2.00-2.99 –Tolerable but must take caution and due
diligence of the risks
1.00-1.99 – Not attractive or too risky
Ti m m e r m a n I n d u s t r i e s

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