3.

BUSINESS OPPORTUNITY
3.1 INTRODUCTION
A business opportunity can be defined as an attractive project idea which an entrepreneur
accepts for investment on the basis of what is known about the possible success of the project.

An attractive investment idea which can provide an adequate return to the risk taker can be
identified as a business opportunity. Further that idea should be a product or a service which
satisfy consumer needs and wants while creating a value for them.
A business opportunity is different from a business idea

The ideas that provide value for the customer, profit for the entrepreneur and benefit for society
and can be transformed into products of services are called business ideas.
A business idea is the first step and the beginning of a business.

A business idea should provide these three criteria:

i. It should provide benefit to the customer
ii. It should bring competitive advantage
iii. It should bring gain to entrepreneur and our shareholders
3.2 SOURCES OF BUSINESS IDEAS

• Individual skills, knowledge, interests, and sometimes through hobbies.

• Experience from former occupation.
• Looking at the type of services and products people need. Examples; health,
information, leisure, power, repair and maintenance, equipment, etc.
• Picking up from poorly run businesses
• New products/services originating from innovative talents
• Copying from existing businesses; observing what others are doing and trying to do
the. Note; awareness of patented products is crucial.
• Through consumer reactions and complaints
• Through mass media

3.3 AREAS OF CONCERN

Apart from thinking about market scope and return on investment, other areas include

• Technical production,
• Commercial viability,
• Availability of the necessary inputs (e.g., raw materials, consumables, and their
disposal)
• Manpower needs,
• And other production requirements.
3.4 CHARACTERISTICS OF A GOOD BUSINESS IDEA
A business idea is a proposal describing the potential product or services to be offered in a
business
The four main characteristics of a good business opportunity include;

• A good income potential

• Reasonable ease of entry into the market
• Low or moderate start-up costs, and
• A good growth potential etc.

i. Good income potential

It is important to select a business opportunity which will give sufficient income to support a
reasonable life style. Documents
ii. Entry base

It is advisable that one should enter into a business in which he/she has the general background.
Some businesses however, require certain skills and experience than you may need to pick up
by taking some course work.

Some businesses may require time to gain certain skills or experience

The best investment one can make is the investment in his/herself. An investment in
experience, education and training is never wasted.
iii. Low or modest start-up costs
It is advisable to select a business opportunity which will require a low capital investment

Assess yourself, then select the business opportunity

iv. Good growth potential

You should try to select a business opportunity which has a chance to survive for a long time
and generate sufficient income to the owner/s or shareholder/s.
By starting a business which soon ceases production due to lack of raw materials, customers
or funds, indicates improper selection of the business opportunity from the very beginning.

3.5 STARTING A BUSINESS

Introduction

Starting a new business presents more opportunities for making mistakes and mistakes can be
fatal.
Business failures tend to be higher for those who start their own new business than for those
who purchase an existing business.
Guidelines before you dive into a business idea include; Information, and good business
planning.

i. Information
Considering the high failure rate in business, it is especially critical for you to read material on
small business management and take advantage of courses, seminars, workshops, and other
available aids.

Most business failures can be attributed to poor management.

You can therefore improve your chances for success by learning all you can about good
management techniques.

ii. A business plan

This is a written strategy for your future operations.

It may include;
– Short-term and long-term goals
– Specific details about your business operations
– A definite course of action to be taken, and
– A specific timetable for the achievement of measurable goals.

Writing a formal plan forces you to face reality, to recognize limitations and specific
requirements, to analyse alternatives, to make decisions, to coordinate your actions and to
schedule a timetable.

Whether you buy a going concern or start your own new business, a business plan can make a
very big difference.
There are four major steps in developing a business plan, they include;
– Step one: Setting goals
– Step two: Knowing the specifics
– Step three: Developing a course of action, and
– Step four: Implementation timetable

i. Setting goals

It is important to know exactly what you want from a business, and hence, what goals you wish
to attain both in the short and in the long run.
Such goals are most useful when stated in specific, concrete terms that can be readily judged
on a time basis. Examples include;

– To have sales of a specific volume in the first year of operation

– To open the business in a specific date, say march 10
 ii. Knowing the specifics
Very often, people enter a business without really knowing the specifics of that business.

Every business has its own characteristic costs and financial ratios, also record keeping,
purchasing, technical, time, personal skill, licenses, zoning registration requirements and many
other specific details.

It is therefore important to familiarize with some of these before starting a business

Acquire information from trade associations, product suppliers and manufacturers, etc.

iii. Course of action development

After setting goals and objectives and have learned some specific facts about the business you
plan to enter, it is time to make decisions about your specific course of action.

The four major areas to cover in your planning are:

– Marketing strategy
– Financial plans
– Legal plan (i.e., sole, partnership or company), and
– Management plan

iv. Implementation timetable

The final step in the business plan is to schedule implementation of the various courses of
action spelled out in the marketing, financial, legal, and management plans.

To make up the schedule of implementation, first translate your course of action, including all
the various plans, into individual measurable tasks, each with its own target date or deadline
for completion.
Break this list down into a weekly schedule, separating specific tasks to be completed that week
and long-term tasks to be worked on each week with a future target date for completion.

3.6 BUSINESS OPPORTUNITY EVALUATION

3.6.1 Introduction
In this topic we will discuss the five steps that can guide you to determine if it will be profitable
to start up your own business.

To know whether a business is profitable or not, you should know if the market is big enough,
if there will be enough customers, what volume of sales you might expect, if there is
competition, etc.
3.6.2 The five steps

The five steps necessary to use to determine the profitability of a potential business are:
– Decision on the type of business
 – Choice of location
– Sales forecasting
– Costs estimation, and
– Profits estimation

i. Type of business
There are three major types of business where you can choose one of them;
They are:
– Merchandising business. In this type of business, one buys finished products from
wholesalers or manufacturers and retails (or whole sales) them to others for
consumption (or resale).
– Service business. Such a business offers special services to consumers,
merchandisers, or even manufacturers. The service is rendered in exchange for a
fee.
– Manufacturing or Processing business.

ii. Choosing location

The choice of a location for your business is an important factor in its success or failure.
A poorly run business can often survive in a good location, but even the finest business may
fail in a poor location
You can choose a location depending on:
– Personal factors (near friends, relatives or your health)
– Economic factors (customers have regular income, etc.)
– Competition (a proper evaluation on this is essential)

iii. Sales forecasting

Sales forecasting means estimating the size of your market; that is how much of your product
or service you expect to sell in the future.
Many loan applications ask for a sales forecast and a profit forecast.
This can be obtained after doing a concrete market research
iv. Costs estimate
Once you have determined a sales forecast for a certain period of time in the future, you will
have to estimate the cost of running the business.
Consider the costs of; the goods (purchase and freight), wages, advertising and taxes, of heat,
power and rent, and also of loan payments.
 v. Profits estimates
Once sales and costs have been estimated, then you will have to calculate what your profits
are likely to be.
ESTIMATED PROFITS = ESTIMATED SALES - ESTIMATED COSTS
It is always wise to size up the profitability of the market before you start a BUSINESS.

3.7 IDENTIFICATION PROCESS FOR A GOOD BUSINESS OPPORTUNITY

3.7.1 Introduction
– Engaging in a business looks quite simply, BUT, staying in business and making a
success of it is not simple.
– Setting up a business for the first time, or expanding an existing business, can be the
road to riches and personal fulfillment.
– It can also be the road to financial ruin and personal injury.
– Successful businesses are the result of careful research, planning, enthusiasm, self
confidence and commitment.
– If an entrepreneur identifies a business opportunity, it is ideal to carry out a feasibility
study to ascertain whether the opportunity is viable
3.7.2 Feasibility study
• A feasibility study helps an entrepreneur decide on the viability and profitability of a
project.
• It also acts as a basis upon which financial assistance can be sought from the financial
system.
• The feasibility study can be broken down into three categories

3.7.2.1 Market feasibility study

The factors to consider include:
– Product description.
– Which involves understanding in detail the product one wishes to produce,
identification of users, and the production standards.
– Market Study.
– This focuses on gross market demand.
3.7.2.2 Technical feasibility
This identifies the adequacy of the manufacturing process, plant and machinery to be used for
the production of a given product within the framework of predetermined quality, raw
materials, and time without long or expensive breakdown problems
3.7.2.3 Financial feasibility
This part reveals how attractive the business idea is from the financial point of view.
It is divided into six major components;
– Project cost
– Means of finance
– Capacity Utilization and income estimation
– Expenditure estimates
– Profitability estimates and
– Risk analysis
All in all, technical skills and investment capabilities of an entrepreneur have to be assessed
before a final decision is made.

4. THE FUNCTIONAL AREAS OF MANAGEMENT IN A PRODUCTION UNIT

Include:
i. Finance
ii. Marketing
iii. Personnel and Industrial Relations
iv. Production

4.1 FINANCE
• Financial structure

Financial structure implies the way assets of the company are financed, i.e., it represents the
whole liabilities side of the Position statement, i.e., Balance Sheet, which includes both long
term and long-term debt and current liabilities.
The mix of long term and short-term funds employed by the company to procure the assets
which are required for day-to-day business activities is known as Financial Structure.
• Financial planning and budgeting
The essence of planning is to see opportunities and threats in the future and respectively
exploit the opportunities and combat the threats as the case may be. A planning process is a
set of interrelated and interdependent activities towards achieving the planning goals.
Budget: it is a formal plan of action expressed in monetary terms.
A budget is a quantified expectation for what a business wants to achieve. Its characteristics
are:
• The budget is a detailed representation of the future results, financial position, and cash
flows that management wants the business to achieve during a certain period of time.
• The budget may only be updated once a year, depending on how frequently senior
management wants to revise information.
• The budget is compared to actual results to determine variances from expected
performance.
 • Management takes remedial steps to bring actual results back into line with the budget.
• The budget to actual comparison can trigger changes in performance-based
compensation paid to employees.

Forecast: is an estimate of what will actually be achieved.

Its characteristics are:
• The forecast is typically limited to major revenue and expense line items. There is
usually no forecast for financial position, though cash flows may be forecasted.
• The forecast is updated at regular intervals, perhaps monthly or quarterly.
• The forecast may be used for short-term operational considerations, such as adjustments
to staffing, inventory levels, and the production plan.
• There is no variance analysis that compares the forecast to actual results.
• Changes in the forecast do not impact performance-based compensation paid to
employees.
4.1.1 Steps involved in the financial planning process;
Step One: Developing an awareness of the present state
It is at this stage that managers create a foundation from which they will develop this plan for
the next planning period.
Step Two: Establishing Goals
Specific goals are established during the second stage of planning just as your goal in this
course might be to get a certain grade, managers set specific goals of various levels in the
organization’s hierarchy
Step Three: Premising

During this stage of the planning process, managers establish the premises, or assumption on
which their action statements are built. The quality and success of any planning depends on the
quality of assumption on which it is based throughout the planning process, assumptions must
be brought to the surface, monitored and updated.

Step Four: Determining a course of Action

In this fourth stage of the planning process, managers decide how to move from their current
position toward their goal or into their identified domain. They develop an action statement
those details what needs to be done, when, how and by whom.

Step Five: Formulating supportive plans

The planning process seldom stops with the adoption of a general plan. Managers often need
to develop one or more supportive or derivative plans to bolster and explain their basic plans.
Suppose an organization decides to switch from a five-day, forty-hour workweek to a four-day,
forty-hour workweek in an attempt to reduce employee turnover.
4.1.2 Types of plans
Four types of plans that managers create and apply to direct business operations, monitor and
control organizational activities for achieving set goals
(1) Hierarchical plans

✓ Strategic plans
Strategic plans: They are usually associated with the institutional level. They define an
organization’s long-term vision; specify what business the organization hopes to be in and
stipulate how the organization intends to make its vision a reality. To a large extent, strategic
plans define how an organization will integrate itself into its task environment.

✓ Administrative plans
Administrative plans: Managers use this plan to allocate organizational resources and to
coordinate their organization’s internal sub-division. These plans, therefore, are associated
with the organizational responsibility of middle management.

✓ Operating plans
Operating plans: They cover day-to-day operations of an organization and thus, govern the
workings of an organization’s technical core. The network of organizational plans discussed
earlier suggests that an organization’s operating plans are nested within and support its sub-
division’s administrative plans, which nested within and support its strategic plans.

(2) Frequency of use plans (Repetitiveness)

✓ Standing plans
Standing plans: They are designed to cover issues that managers face repeatedly. For
example, managers may be concerned about employees’ tardiness, a problem that may occur
often in the entire workforce. These managers might decide to develop a standing policy to
be implemented each time an employee is late for work. The procedure involved under such
a standing plan is called a standard operating procedure (SOP). Some of the most common
standing plans are policies, rules and procedures.

✓ Single-use plans
Single use plans: They are developed for unique situations or problems and are usually
replaced after one use. Managers generally use four types of single-use plans, programs,
projects and budgets.
(3) Time frame plans

✓ Short-range plans
Short-range plans: It is also known as operational planning; it covers a period of one year
or less. It covers activities that unfold relatively quick. The most widely used short-range
planning mechanism is the operating budgeting system and management by objective
mechanism.

✓ Medium-ranged plans
Medium-range plans: It focuses on the development of major plans that extend beyond the
traditional operating period which normally is one year. The typical planning period for
medium-range plans is between one and five years.

✓ Long-range plans
Long range plans: It usually covers the period of over five years. It tends to be strategic
planning. That is, it focuses on a long-time horizon and also tends to be consequently in terms
of import, resources deployed and actions required. Also, it focuses on the organization’s
basic goals and strategies for growth and development.
(4) Organization scope plans

✓ Business/divisional level plans

Business/divisional-level plans: For an organization that operates multiple divisions or a
number of different businesses, it is usually applicable to it. Divisional-level plans focus on a
division’s competitive position in the market and on the ways in which it can complement
other divisions.

✓ Unit/functional-level
Unit/Functional-level plans: Plans at this level are focused on the day-to-day operation of
a lower-level organizational units i.e., the functional areas of an organization namely,
production, marketing, human resources and the finance departments.
(5) Contingency plans
They are created to deal with what might happen if these assumptions turn out to be wrong.
Contingency planning, thus, is the development of alternative courses of actions to be
implemented if events disrupt a planned course of action. A contingency plan allows
management to act immediately if an unplanned occurrence such as a strike, boycott, natural
disaster or major economic shift renders existing plans inappropriate.

• Efficient & effective utilization of assets

• Effective accounting system and control procedures

4.1.3 Financial Management

Financial management is the practice of making a business plan and then ensuring all
departments stay on track.
4.1.3.1 Objectives of Financial Management
Building on those pillars, financial managers help their companies in a variety of ways,
including but not limited to:
 i. Maximizing profits
Provide insights on, for example, rising costs of raw materials that might trigger an increase in
the cost of goods sold.
ii. Tracking liquidity and cash flow
Ensure the company has enough money on hand to meet its obligations.
iii. Ensuring compliance
Keep up with state, federal and industry-specific regulations.
iv. Developing financial scenarios
These are based on the business’ current state and forecasts that assume a wide range of
outcomes based on possible market conditions.
4.2. MARKETING

Marketing is a comprehensive term and it includes all resources and a set of activities necessary
to direct and facilitate the flow of goods and services from producer to consumer in the process
of distribution.
Marketing is referred to a process of creating or directing an organization to be successful in
selling a product or service that people not only desire, but are willing to buy.
4.2.1 5-Ps of Marketing
• Product
• Promotion
• Pricing
• Place (or distribution system)
• People
4.2.2 The Branches of Marketing (Marketing Cycle)
i. Market Research
This involves gathering, recording and analysis of Data; that will help to provide answers to
the questions of: what can be sold, in what quantities, where, how, and when.
It is concerned with assessing demand for new products and with the acceptability of the
existing products.

ii. Product – Planning

Information acquired from gathering market research, in sub-section we consider identification
of consumer needs.

iii. Product – Development

This is carried out in close collaboration with research and development section as it is the
stage at which a proposed product is engineered.
 iv. Sales Promotion
It is responsible for developing the means whereby the customer is persuaded to buy the
product and this includes such activities as advertising, public relations personal selling and
merchandizing (e.g., window display, etc.)
Other areas of consideration include:
– The consumer
– Distribution and
– The Production
4.2.3 PRODUCT LIFE CYCLE (PLC)
PLC is a process where a product introduced to a market, grows in popularity and then removed
from market.

The PLC is a phase of five cycle which helps the marketer to make a pre-plan before making
entry of a new product into the market.
Once the product gets commercialized it competes with rivals, for making sales and earning
profits. Product have a length of life this is called PLC.

i. Product development - sales are zero, investment costs are high.

ii. Introduction - profits do not exist, expense of product introduction expense of product
introduction.
iii. Growth - rapid market acceptance and increasing profits
iv. Maturity - slowdown in sales growth. Profits level-off. Increase outlay to compete off.
v. Decline - sales fall-off and profits drop off.
4.3 PERSONNEL AND INDUSTRIAL RELATIONS
Industrial relations imply the relation between both employer and employees during the period
of employment in an industrial organization. The relationship between management and
employees within the organization within the organizational settings is defined by industrial
relations.
This area covers the quality of human and industrial relations at all levels within an
organization.
All enterprises have some kind of personnel and industrial relations policy by which the
attitudes and practices of managers and supervisors are directed.
Objectives of Industrial Relation
Following are the different objectives of industrial relation.
i. To establish industrial peace.
ii. To safeguard the interests of both workers and management.
iii. To avoid industrial disputes.
iv. To raise the production capacity.
v. To establish industrial democracy.
vi. To minimise the labour turnover rate and absenteeism.
vii. To safeguard the workers economic and social interests.
viii. To contribute to the economic development of the country through productivity.
ix. To establish a full employment situation.
x. To minimise strikes, lockout, Heroes, etc., by providing good working conditions and
fair wages to the workers.
Functions of Industrial Relations
The important functions of industrial relations are:
i. To establish communication between workers and management to maintain the sound
relationship between the two.
ii. To establish support between managers and employees.
iii. To ensure the creative contribution of trade unions to avoid industrial conflicts.
iv. To safeguard the interests of workers and the management.
v. To avoid an unhealthy and unethical atmosphere in an industry.
vi. To formulate such considerations that may promote understanding, creativity, and
cooperativeness to enhance industrial productivity.
vii. To ensure better workers’ participation.
Personnel and Industrial Relations can broadly be classified as
• Employer Attitude
That is, individual managers and supervisors must use the best of their personality to motivate
people work effectively and efficiently.
Other areas called for in employers attitude include different acts on: Company contracts and
employment, redundancy payments, employment protection, pensions and social security,
Trade unions, etc.

• Employer Practices
This is concerned with a personnel policy which covers practical procedures within the
Company that have to comply with labor laws which are pressed upon the Company/Enterprise.
They can as well be summarized as:

1. Manpower planning
It enables an Organisation to estimate present and future manpower requirements, its
deployment needs and development. Planning involves;

• Demand forecasts

Estimates the qualifications and numbers of employees the company will need to reach its
goals.

• Supply forecasts

Estimates the availability and qualifications of current employees now and in the future, as well
as the supply of qualified workers in the external labor market.

• Outsourcing

Using outside suppliers and manufacturers to produce goods and services. Using contract
workers rather than hiring them. Provides human capital at a lower cost.
2. Recruitment, selection and placement

This means:

• Choosing the right people, that will help an organization achieve its goals.
• Placing them according to the job requirements (based on job analysis)

Equal Employment Opportunity (EEO)

Is the equal right of all citizens to the opportunity to obtain employment regardless of their
gender, age, race, origin, religion, or disabilities.
3. Training and Development
• Ensures that organizational members develop the skills and abilities that will enable
them to perform their jobs effectively in the present and the future.
• Changes in technology and the environment require that organizational members learn
new techniques and ways of working
• Training them to be of better use in the present job or
• Grooming them to take up higher responsibilities
 4. Pay and Benefits

Pay - Includes employees’ base salaries, pay raises, and bonuses.

Legally required: social security, workers’ compensation, health insurance
Rewarding high performing organizational members with raises, bonuses and recognition.

5. Safety, health and welfare

It is very necessary for the employer to introduce stringent measures to ensure that the workers
are working in a health and safe environment
• It is the responsibility of the employer to establish an active safety policy.
• It is presently essential to have a safety committee which executes the regulations already
passed in the factories act and associated ordinances or clauses
6. Records and statistics
It is important for administration purposes that the employer should maintain records of its
workers performance and behaviour
• Examples:
– Date of commencing employment
– Referees, qualification, health/illness,
– Accidents, previous experience,
– date of retirement, punctuality, etc

7. Performance Appraisal and Feedback

Performance Appraisal – The evaluation of employees’ job performance and contributions to
their organization.
The Types of Performance Appraisals
Performance appraisals can be broken down into four distinct significant types:
i. The 360-Degree Appraisal: The manager gathers information on the employee’s
performance, typically by questionnaire, from supervisors, co-workers, group
members, and self-assessment.
ii. Negotiated Appraisal: This type of appraisal uses a mediator to help evaluate the
employee’s performance, with a greater emphasis on the better parts of the
employee’s performance.
iii. Peer Assessment: The team members, workgroup, and co-workers are responsible
for rating the employee’s performance.
iv. Self-Assessment: The employees rate themselves in categories such as work
behaviour, attitude, and job performance.
Performance Feedback – The process through which managers share performance appraisal
information, give subordinates an opportunity to reflect on their own performance, and develop
with subordinates, plans for the future.
8. Government legislations Documents
This goes hand in hand with above records/benefits of the employer/employees