Generating Ideas for a Small Business

1
Generating Ideas fora Small Business

• Evaluating the Environment

2
Identify Trends

• Fad vs Trend
• Fad Hit Run, short-term, risky
• Trend Long Haul, longer-term
• Be observant
• Just watch people
• Listen to friends, family, strangers
• People in general
• Dont stop observing listening
• Keep in touch

3
Questions to Think About

• What product/service is needed
• What P/S is missing in the area
• What would make life more convenient
• What is the most inconvenient aspect.
• What would make things easier
• What would make life better
• What are people complaining about
• What are they praising

4
More Questions

• How could existing P/S be bundled more
  conveniently
• Can I provide P/S at higher quality and/or lower
  price
• Bigger, stronger, faster, smarter, cheaper, etc.
• What complementary products are needed
• What do you like about your P/S provider
• What dont you like about your P/S provider

5
Alexs Advil Principle

• Listen to what people complain about
• Find a way to ease their pain!!
• Easier, more convenient, faster, etc.

6
Assessing the Business Environment

• Industry
• What can industry overview tell you?
• Community
• Scout out the community
• Potential Customers
• Profile your customers
• Macroeconomic issues
• State of the overall economy

7
Industry Overview

• Retail
• Professional Services
• Technology Industry
• Manufacturing
• Health Care
• Construction
• Agriculture

First Rate the main industries of the area Weak
to Strong
Next Rate the area as White Collar or Blue
Collar
8
Industry

• Strong technology, professional services,
  education
• White collar community
• Strong manufacturing, construction, agriculture
• Blue collar community
• Look for infrastructure for your ideas
• Finance, transportation, processing,
  communications, service, etc.

9
Blue Collar vs White Collar

• What businesses, products or services are better
  suited for
• Blue Collar Area White Collar Area

10
Community

• School system
• Health care/fitness
• Technology (internet access, etc.)
• Infrastructure
• Cost of living
• Social activities/shopping
• Natural amenities
• Population growth

11
Rate the Community

• Rate as growing, stable, or declining
• Think of businesses, products, services to match
  the community
• Keep white collar vs blue collar in mind!

12
Customer Profile

• Number of potential customers
• Income
• Home ownership
• Education
• White/Blue collar
• Interests, trends, etc.
• Need to TARGET your market

13
Customer Profile

• BE SPECIFIC!!!!
• Not everyone who has money or everyone who
  has a house
• Target your customers
• Who is most likely to want your product?
• income between 50-100,000 or houses with
  value between 150-400,000

14
Example Customer Profile

• Bluegrass Music Store
• Between ages of 35-60
• Predominantly white (Caucasian)
• Income between 45-100,000
• College-educated
• Tend to be earthy, folky, green
• Read Bluegrass Unlimited, Southern Living, etc.
• And so on
• May have several customer profiles for your
  products/services

15
Macroeconomic Indicators

• PMI Purchasing Managers Index
• Unemployment Rate
• Capacity Utilization
• CPI Consumer Price Index
• PPI Producer Price Index
• New Housing Starts
• Yen/USD

16
Purchasing Managers Index (PMI)

• Measure of perceived strength of retail sector
• Reliable indicator
• Rating
• Greater than 50 - strong
• 43-50 - cautious
• Less than 43 weak
• Look for trends as well as absolutes

17
US Unemployment Rate

• Percentage of US workforce w/o a job
• Rating
• 5-7 - solid economy
• Under 4.5 - inflationary
• Above 7.5 - recessionary
• Back it up with Capacity Utilization
• Percent of production capacity being used
• Less than 80 - recessionary
• Above 85 - inflationary

18
Consumer Price Index (CPI)

• Measure of inflation
• Annual growth rate of CPI inflation rate
• Look for annual growth between 1-3
• Less than 1 - recessionary
• Over 4 - inflationary
• Back up with PPI (Producer Price Index)
• Large increases in PPI indicate future increases
  in cost of consumer goods

19
New Housing Starts

• Bellwether for economy
• Multiplier effect
• Permits for construction of new houses
• Rating
• 1.5-1.8 million is solid
• Less than 1.2 million recessionary
• Over 1.9 or 2.0 million - inflationary
• Good measure for horticulture landscape industry

20
Japanese Yen/US Dollar

• Useful for analyzing imports/exports
• Number of Yen needed to purchase 1
• Yen/USD Rating
• Over 125 strong dollar
• Good for import businesses consumers
• Under 105 weak dollar
• Good for exporters, commodity agriculture

21
Inflation or Recession?

• Signs pointing to growth or inflationary period
• Look for Fed to raise interest rates (tighten)
• Impact on housing market?
• 1 increase in mortgage APR reduces purchasing
  power by over 200/month
• Other impacts?
• Consumers in a growth/inflationary period
• 1. Buy now wealth effect
• 2. Buy now, before prices go up
• 3. Cut back on purchases (becomes too expensive)
• - Leads to recessionary period if not careful

22
Macro - So What?

• Growth/Inflationary period
• Luxury items, specialty items
• Personal services, landscaping
• Vacations, relaxation, hobbies
• Recessionary period
• Necessities, consumer goods
• Stress management, child care
• See what corporate America is cutting
• Replacement services

23
Pull It Together

• Synthesize your assessments
• Trends
• Community, Industry, Customer, Macro
• Brainstorm potential ideas
• Cull ideas that dont match your assessment
• But dont forget them!! Write em down
• Investigate the ideas that do match
• Build a business plan
• Implement the plan open the business!