What is Idea Generation?

Idea generation is something that is done to overcome the challenges in the company or the business.

Ideas are generated based on creativity, and the need of the business is looked upon. It usually requires
many people, their feedback, and their innovative ideas. Then the selection of the best of the ideas is
then made.

The making of plans then takes place so that the shortlisted idea gets implemented. In this manner, a
creative and fresh idea will be an edge over the competitors.

Why is Idea Generation important?

ver wondered what the key to innovation is. The very key to innovation is Ideas. New ideas help in
improving the present situations as per the future needs or requirements.

These ideas also provide an insight into possible solutions, might provide a solution to a problem leading
to new opportunities. And it is done by a group of managers, entrepreneurs, or businesspersons.

Idea Generation – Definition,

Definition – Idea generation is the creative process of generating new methods to solve problems and
improve the product’s conditions or the company itself. It is undoubtedly based on factors like idea
development, group discussions, choosing the best alternative, and finally, implementing the idea in
real-world scenarios. The idea doesn’t need to be practical, and it can also be a mere thought.

While operating a business, a lot of many things affect the proper functioning of it. Proper planning,
organizing, directing, and controlling are to be done to carry out the work effectively and efficiently.
After all these, new ideas and effective brainstorming are to be done to earn much higher profits.

Hence, to figure out what is needed to be done?

How it is to be done, what ways will help in generating higher revenue is looked upon.

While sometimes people prefer to operate the business with the past strategies, or some believe
business is the ever-changing and dynamic one, they make new plans, and ideas are added to enhance
the potential.

Because ideas are innovations that can be done to change the potential from high to low, when a new
idea or intelligence is added to a business, it can be seen that it has many effects on the business.

What is Idea Generation?

Idea generation is something that is done to overcome the challenges in the company or the business.

Ideas are generated based on creativity, and the need of the business is looked upon. It usually requires
many people, their feedback, and their innovative ideas. Then the selection of the best of the ideas is
then made.

The making of plans then takes place so that the shortlisted idea gets implemented. In this manner, a
creative and fresh idea will be an edge over the competitors.

Why is Idea Generation important

Ever wondered what the key to innovation is. The very key to innovation is Ideas. New ideas help in
improving the present situations as per the future needs or requirements.
These ideas also provide an insight into possible solutions, might provide a solution to a problem leading
to new opportunities. And it is done by a group of managers, entrepreneurs, or businesspersons.

Sources of Idea Generation

A good idea can come from anywhere and at any time. An idea generation source refers to the people or
places from where the idea was inspired. It can be affected by both external, as well as internal sources.
The R&D department or the analytics employees are a part of the internal sources.

On the other hand, external sources combine to form suppliers, focus groups, educational institutions,
distribution channels, customers, government, and competitors.

Idea generation steps

The idea generation is not compiled in a single approach; instead, it is continuous innovation and
improvement. Companies have recognized the importance of idea generation and are supporting their
employees for the same.

This procedure usually begins with a proper understanding of the job that you are going to execute. The
aim is to generate questions that will act as fuel to your motivation. Secondly, propose suitable solutions
for them. In the end, choose the most effective alternative, followed by its proper implementation.

Thomas Alva Edison developed a systematic method of idea generation that includes a series of
effective steps. This made the idea generation process more convenient to apply and get the desired
results out of them. This proved to be a game-changer in the market practices.

Thomas Edison put forward the following steps:

Enabling: The search for the right field of innovation

Defining: Develop search queries and specify search paths

Inspiring: Search for thoughts and stimuli from other areas

Selecting: Generate and evaluate ideas

Optimizing: From the initial idea to the mature concept

Nurturing: Enrich ideas with various implementation strategies

Several online tools similar to Innolytics® Innovation are used to enhance the systematic idea generation
process. Various solo stages are defined so that the ideas are properly channelized. The ideas can
change an ongoing trend and create a better strategy to generate innovative concepts for everyone.

Idea Generation Techniques

Social Listing

According to Thomas Alva Edison, he suggested some of the steps for ideas generation, which were,
firstly, enabling the search in the right field. Secondly, defining in which each query is looked upon.

Thirdly, inspiration includes searching for thoughts. Fourthly, select the generated ideas. Fifth,
optimizing the idea and providing it the direction. Six, nurturing the ideas with the implementation of
strategies. While some more idea generation steps can be:

1. The 5W+H Method

An ideal generated idea is the one which must answer, Who, What, Where, Why, When and How.,
which is the method of 5W and H. These were the parameters, on which, if the ideas are generated,
might result in a great solution which on implementation might prove to be the best one.

2. Social Listing

A problem arises when more of the competitors are into the same product line as yours. So, to reduce
the communication gap, this social listing is done. It can be done by-polls on social media sites such as
Reddit, Twitter, etc.
The customers’ reactions are taken, and through this reaction, ideas are being formatted so that the
customers feel attracted towards the product and our product turns out to collect huge revenues.

3. Brainstorming

It is prevalent as well as a popular tactic followed by every business. All the suggestions from the overall
group of people are considered; may it be right, may it be wrong. All that matters here is the idea.

A very quick session on brainstorming and filtering the final idea is done before the execution step.

4. Role-Playing

Working in the same office or with the same colleges, some people might feel bored. As a result of this,
all the business persons need to do is switch places, then trying to ask for ideas will help.

Trying to embrace their view does not guarantee immediate results but would act to be the best one in
the long run. Because it acts as a motivation for colleges and sometimes might lead to great results. This
might turn out to give incredibly new and unique ideas that can be generated.

5. Mind Mapping

Mind mapping can turn out to be another successful method in generating ideas. It can be done by
diagrammatically representing the task of the concept.

A non-linear graphical layout can represent it. Or it can be said that brain-mapping is a screenplay in
which one central character that has a leading role is placed between the map, while the elements that
link to it must be centered around the movie.
6. Think In Reverse

This being a very popular method or idea-generating step will help in the long run. But how can this one
be possible? Sometimes, if we know what is not to be done, we can get to know where the mistake has
taken place if we try thinking this way.

If we aim to think about every possible mistake to reach the desired goal, thinking in advance will help.
In the end, making the idea an all-rounder hit.

7. Idea Capture

Some people might have the same opinion, and their ideas might clash, about any problem in the same
manner at the same time. Hence, to avoid the same situation, Idea Drop software can be used, such as
similar ideas strike off.

8. Questioning Assumptions

In the industry, many times, the work is confined to get all the things done. Hence, this might lead to
untapped opportunities and questions, leading to a barrier to generating ideas.

Thus to avoid the same situation, a creative challenge must be designed, from this collection of feedback
and assumptions might be done. Now looking for that idea or assumption that can be utilized for the
present problem must be chosen.

9. Collaboration

As the name suggests, two or more people work together to achieve a particular goal. This method is
again the most popular one. Many people join their hands for a particular project or so; this is done
because a team always has more ideas and innovations than one business person.
10. The Story Boarding Method

It is a method in which the ideas or the concepts are placed to look like that of a cartoon strip. Then a
story is being developed from it. Ideas are being taken from every colleague, and then a sticky note is
then being passed on aboard.

this makes a story. In this manner, the ideas interact, and a connection is established in them.

11. Sketching as a Group

As we know, if something is drawn as a picture or sketch, our sensors of the brain start acting, and the
sketch which has been visualized by the eyes remains in the memory for a longer time as compared to
the discussions being made.

Thus if a rough sketch of ideas is made on the whiteboard or so, it could be easier for others to
understand, and if they have innovative ideas, they can come up with them.

12. Forced relationship

in this technique or step, all the ideas are combined, leading to the production or invention of a
completely new idea.

13. Visualization and visual prompts

It is the visualization of the issues that are being first overlooked, and in the subconscious mind, the
ideas are functioning for the problem that is being occurred.

It is the illumination in which the person thinks of the problems related to the ideas and pen them down
on paper. This visualizes the actual problem, the real solution is then looked upon, and the ideas are
crafted in that particular style.

14. Use online Tools

Ideas can too be identified across the multidimensional internet. Ideas are available here in great
abundance. One of these platforms can be Evernote, which provides solutions that are well-formatted
and helpful. And this allows one to write thoughts instantly.

15. Scamper

scamper stands for the acronym in which each letter stands for action verbs. Let us check:

S- Substitute

C- Combine

A- Adapt

M- Modify

P- Put to another use

E- Eliminate

R- Reserve
16. Synectics

With this research technique’s help, it can now be possible to describe and teach the process and churn
out more innovative ideas.

17. Daydreaming

It can help in triggering the most innovative ideas. In this technique, a scenario is created to establish an
emotional connection between the goal and the task.

It is a thought process in which creativity and resources are combined so that a new and innovative
solution to the present problem can be figured out effectively.

Idea Generation Examples

Ideas are sprinkled all over. Ever wondered how big companies have become successful? Eventually, all
of them rise from a simple idea.

For instance, the idea of Airbnb emerged when two designers had spare space and hosted travelers. In
the case of Uber, two entrepreneurs were trying to figure out methods to make transportation cost
more generous.

On the other hand, participating in doing courses, conducting competitions, and events come under
external activities. These have their perks as it helps to compare our idea with the ideas created by
others around us.

Idea Generation in Entrepreneurship

Entrepreneurship has always been considered as running a business developed by a single person. Idea
generation is the most important aspect of Entrepreneurship.

The suggested solution should directly focus on solving a major problem. It should be not unique but
also feasible enough to be implemented.
For instance, many people feel it difficult to understand legal jargon and other proceedings in a court.
Hence, your idea should be based on developing a platform that can convert the complex jurisdiction
rules into a simpler language.

Idea Generation Tools

Tools and technologies have made our lives much simpler as compared to the old times. We can even
use several tools to generate an idea for us.

For example, portals like Freeplane, Stormboard, Pinterest, Idea Generator, Mindomo, Mindmeister.
Mindmeister helps you create mind maps; Stormboard includes features like whiteboards, sticky notes,
and others that make brainstorming a child’s play.

Thus, these tools can bring a lot of improvement in idea generation in every sector.

individual creativity
Every individual has creativity within himself or herself in the form of three components namely: (i)
expertise, (ii) creative thinking skills and (iii) motivation.

Exhibit 3.1 illustrates these three components and depicts how, when overlapping, they result in
creativity.

Every individual has creativity within himself or herself in the form of three components namely: (i)
expertise, (ii) creative thinking skills and (iii) motivation.

Expertise is everything an individual knows and can do in the broad domain of his or her work. This
knowledge pertains to techniques and procedures related to work, as well as a thorough understanding
of overall work circumstances.

Creative thinking is the capacity to put existing ideas together in new combinations. It determines how
flexibly and imaginatively individuals approach problems. This capacity depends mainly on the
individual’s personality and work habits.

Motivation refers to an individual’s need or passion to be creative. If an individual fee is a need to be

creative, that individual is more likely to do so.

Process of individual creativity

Stage 1: Preparation

The creative process begins with preparation: gathering information and materials, identifying sources
of inspiration, and acquiring knowledge about the project or problem at hand. This is often an internal
process (thinking deeply to generate and engage with ideas) as well as an external one (going out into
the world to gather the necessary data, resources, materials, and expertise).

Stage 2: Incubation

Next, the ideas and information gathered in stage 1 marinate in the mind. As ideas slowly simmer, the
work deepens and new connections are formed. During this period of germination, the artist takes their
focus off the problem and allows the mind to rest. While the conscious mind wanders, the unconscious
engages in what Einstein called “combinatory play”: taking diverse ideas and influences and finding new
ways to bring them together.

Stage 3: Illumination

Next comes the elusive aha moment. After a period of incubation, insights arise from the deeper layers
of the mind and break through to conscious awareness, often in a dramatic way. It’s the sudden Eureka!
that comes when you’re in the shower, taking a walk, or occupied with something completely unrelated.
Seemingly out of nowhere, the solution presents itself.

Stage 4: Verification

Following the aha moment, the words get written down, the vision is committed to paint or clay, the
business plan is developed. Whatever ideas and insights arose in stage 3 are fleshed out and developed.
The artist uses critical thinking and aesthetic judgment skills to hone and refine the work and then
communicate its value to others.

Of course, these stages don’t always play out in such an orderly, linear fashion. The creative process
tends to look more like a zigzag or spiral than a straight line. The model certainly has its limitations, but
it can offer a road map of sorts for our own creative journey, offering a direction, if not a destination. It
can help us become more aware of where we’re at in our own process, where we need to go, and the
mental processes that can help us get there. And

when the process gets a little too messy, coming back to this framework can help us to recenter, realign,
and chart the path ahead.

For instance, if you can’t seem to get from incubation to illumination, the solution might be to go back
to stage 1, gathering more resources and knowledge to find that missing element. Or perhaps, in the
quest for productivity, you’ve made the all-too-common mistake of skipping straight to stage 4, pushing
ahead with a half-baked idea before it’s fully marinated. In that case, carving out time and space for
stage 2 may be the necessary detour.

opportunity assesment
opportunity assessment is defined as taking a deeper look at the current state of a market to find out
whether there is room to introduce new products, attract new consumers, and improve the overall
business strategy to achieve and maintain growth within the company.

Simply put, marketing opportunity analysis expounds on the prospective size of a business’s sales and
market.

Here are several possible ways to perform a thorough market opportunity assessment for your business:

Take a Good Look at the Market Profitability

There are three things that you need to pay attention to when it comes to determining market
profitability:

See if your consumers are open to spending their money on the products and services that you offer.

Research if the market that you are going into shows signs of steady growth.

Look Out for Similar Opportunities

Keep your opportunities open by looking out for similar business ideas. This doesn’t have to be done
right away, but it is important and is something that should be seriously considered.
Growing your company and adding a similar project can help expand your audience, thus leading to
increased sales and conversions.

Be Aware of Your Competitors

Analyzing your competitors is always a must when it comes to market opportunity assessment. This will
help you gauge whether the demand for the products and services that you are offering is high or low.
Know who your competitors are by doing a simple search on Google or on social media platforms.

Execute Environmental Assessment

As we have mentioned, environmental changes can occur in businesses. Recession and climate change
are two huge factors to consider when performing market opportunity assessments, as these can
directly affect your business.

challenges in new venture

Cash Flow Management

Cash flow as we all know is an integral part of all business ventures. However, instances are not rare
when entrepreneurs struggle with bill payment while waiting for bills to get cleared. Delayed invoicing is
a major trigger of these challenges of entrepreneurs.

Time Management

This is the biggest challenge faced by multi-tasking entrepreneurs who often fall short of time while
accomplishing their objective.

Hiring Of Employees

In reality, entrepreneurs dread job interviews more than the prospective candidates as it is usually very
time-consuming.

Entrepreneurs need to review resumes, conduct interviews and filter out unqualified candidates for
finding the ones who are best suited for the job.

Once the screening process is completed, entrepreneurs need to negotiate on the salary aspect for
retaining those candidates without bleeding the company’s exchequer.
Choosing The Product

Entrepreneurs are often unsure about the products and services they wish to sell. However, it is
imperative to take the right pick which can determine the ultimate success and failure in a competitive
scenario.

Delegation Of Tasks

The successful delegation comprises of building the right process apart from providing the resources and
authority required for its enactment. However, finding the right resources and choosing the delegation
drive can be a very complicated task.

venture capital

What do you mean by Venture Capital?

Entrepreneurs need investments for their start-up companies. The investments or the capital that these
entrepreneurs receive from wealthy investors is called Venture Capital and the investors are called
Venture Capitalists.

Types of Venture Capital

VC can be categorised as per the stage in which it is being invested. Generally, it is of the following 6
types –

Seed money: Low level financing for proving and fructifying a new idea.

Start-up: Funding is required for new businesses to cover marketing and product development costs.

First-round: Manufacturing and early sales funding.

Second-round: Operational money provided to early-stage businesses that are selling products but are
not profitable.

Third-round: Often known as Mezzanine financing, is money used to expand a newly profitable business.
Fourth-round: Also known as bridge financing, the fourth round is recommended to fund the "going
public" process.

angel investors
Angel investors are individuals who fund early stage businesses in exchange for equity in a company.
Beyond traditional bonds and stocks, angel investments provide new ways to diversify investment
portfolios. Learning about angel investment can help you understand how angel investment works and
what are their pros and cons.

Difference between angel investors and venture capitalist

Conditions

While venture capital has strict funding conditions, angel investors do not have very strict funding
conditions.

Amount invested

Venture capitalists invest large amounts of capital in a business. On the other hand, angel investors do
not invest large amounts of capital in a business.

Returns

While venture capitalists demand high returns out of their investments, angel investors do not demand
high returns out of their investments.

Source of funds

While venture capital comes from third parties such as banks, pension funds, insurance companies,
financial institutions and high net worth persons, angel investors use personal funds to fund promising
developing businesses.

Other roles in the business

Venture capitalists assist in business networking, product development, sales expertise and advertising
strategies. On the other hand, angel investors undertake minimal roles such as acting as business
mentors and helping in decision making.

Forms of capital
Forms of venture capital used include income notes, equity financing, conditional loan and participating
debenture. On the other hand, angel investors use forms of capital including common stock, business
loans or a preferred convertible stock.

crowd funding
Crowdfunding is a method of raising capital through the collective efforts of a large number of
individual investors. Crowdfunding is done primarily online via social media and websites.

So Crowdfunding is the practice of funding a project or venture by raising small amounts of

money from many people, basically via the Internet or such dedicated websites.

Crowdfunding has also been used to arrange funds for entrepreneurial ventures such as artistic
and creative projects and startups etc.

As per an estimation, around US$34 billion was raised worldwide by crowdfunding in 2015.

Types of Crowdfunding

Basically there are three types of crowdfunding. Namely;

1. Equity-Based Crowdfunding

2. Reward-Based Crowdfunding

3. Donation-based crowdfunding

What is entrepreneurial competency?

Entrepreneurial competency is a set of skills and behaviour needed to create, develop, manage,
and grow a business venture. It also includes the ability to handle the risks that come with
running a business. Without a doubt, business owners and startup founders must possess most
of the entrepreneur competencies to succeed.

Just like other types of competencies, there are different sub-categories here. The
competencies could be technical, behavioural, attitude-based, or productivity-based.

Those with an entrepreneurial zeal need to play three prominent roles.

Creator

Organizer

Market maker

So the competencies for entrepreneurship are designed to help people perform in these roles
effectively.

Core competencies in entrepreneurship

While there are a lot of core competencies in entrepreneurship, here are some basic ones you
can look for in your employees the next time there is a competency evaluation process
happening.

Risk-taking abilities

Out-of-the-box thinking and creativity

Problem-solving abilities

Taking initiative

Persistence

Persuasion and social skills

Business management skills

Critical thinking skills

Networking skills
Effective communication skills

business opportunity in various sector

Tourism:

By now, tourism has emerged as number one largest smokeless and fast growing industry in the
world due to its ample promises and prospects. Presently, it accounts for 8% of the world trade
and around 20 % of service sector in the world.

Automobile:

India has made much headway in automobile industry and by now has emerges as a hot spot
for automobiles and auto-components. A cost- effective hub for auto components sourcing for
global auto makers, the automobile sector is by all indications a potential sector for
entrepreneurs in India.

Social Ventures:

Like many other developmental activities, entrepreneurship development is also context-

specific. The recent social issues providing a different entrepreneurial context has given
emergence to yet another breed of entrepreneurship called’ social entrepreneurship

Software:

India is known for its largest pool of world class software engineer’s world over. IT sector has
contributed substantially to the Indian economy. With one of the largest pool of software
engineers, Indian entrepreneurs can set higher targets in hardware and software development.

Reason of new business failure

Lack of research

Not having a business plan

Financial mismanagement

Poor marketing

Failing to adapt

Growing too quickly

Failing to hire and retain the right people

 Developing a Business Plan

An important task in starting a new venture is to develop a business plan. As the phrase
suggests, a business plan is a "road map" to guide the future of the business or venture. The
elements of the business plan will have an impact on daily decisions and provide direction for
expansion, diversification, and future evaluation of the business.

Sections of the Business Plan

A business plan should be structured like a book with the title or cover page first, followed by a
table of contents. Following these two pages, the main parts of the plan normally appear in this
order: executive summary, business mission statement, goals and objectives, background
information, organizational matters, marketing plan, and financial plan.

Executive Summary

The executive summary is placed at the front of the business plan, but it should be the last part
written. The summary describes the proposed business or changes to the existing business and
the sector of which the business is (or will be) a part. Research findings and recommendations
should be summarized concisely to provide the reader with the information required to make
any decisions. The summary outlines the direction and future plans or goals of the business, as
well as the methods that will be used to achieve these goals.

The summary should include adequate background information to support these

recommendations. The final financial analysis and the assumptions used are also a part of the
executive summary. The analysis should show how proposed changes will ensure the
sustainability of the current or proposed business. All challenges facing the existing business or
proposed venture should also be discussed in this section. Identifying such challenges shows
the reader that you have explored and taken into account all considerations during the
research process.

Mission, Goals, and Objectives

This section has three separate portions. It begins with a brief, general description of the
existing or planned business. The overview is followed by the mission statement of the
business. You should try to limit the mission statement to three sentences if possible and
include only the key ideas about why the business exists. An example of a mission statement for
a produce farm might be: "The mission of XYZ Produce is to provide fresh, healthy produce to
our customers, and to provide a safe, friendly working environment for our employees." If you
have more than three sentences, be as concise as possible.

The third (and final) portion sets the business's goals and objectives. There are at least two
schools of thought about goals and objectives. One is that the goals are the means of achieving
the objectives, and the other is exactly the opposite--that the objectives are the means of
achieving the goals. Whichever school you follow, this is a very important part of the business
plan. These goals and objectives should show the reader what the business wishes to
accomplish and the steps needed to obtain the desired results. Goals or objectives should
follow the acronym SMART, which stands for Specific, Measurable, Attainable, Reasonable, and
Timed, to allow for evaluation of the entire process and provide valuable feedback along the
way. The business owner should continually evaluate the outcomes of decisions and practices
to determine if the goals or objectives are being met and make modifications when needed.

Background Information

Background information should come from the research conducted during the writing process.
This portion should include information regarding the history of the industry, the current state
of the industry, and information from reputable sources concerning the future of the industry.
This portion of the business plan requires the most investment of time by the writer, with
information gathered from multiple sources to prevent bias or undue optimism. The writer
should take all aspects of the industry (past, present, and future) and business into account. If
there are concerns or questions about the viability of the industry or business, these must be
addressed. In writing this portion of the plan, information may be obtained from your local
public library, periodicals, industry personnel, trusted sources on the Internet, and Penn State
Extension. Industry periodicals are another excellent source of up-to-date information. The
more varied the sources, the better the evaluation of the industry and the business, and the
greater the opportunity to have an accurate plan.

The business owner must first choose an appropriate legal structure for the business. The
business structure will have an impact on the future, including potential expansion and exit
from the business. If the proper legal structure is not chosen, the business may be negatively
impacted down the road. Only after the decision is made about the type of business can the
detailed planning begin.
Organizational Matters

This section of the plan describes the current or planned business structure, the management
team, and risk management strategies. There are several forms of business structure to choose
from, including sole proprietorship, partnership, corporations (subchapter S or subchapter C),
cooperative, and limited liability corporation or partnership (LLC or LLP). These business
structures are discussed in Starting or Diversifying an Agricultural Business.

The type of business structure is an important decision and often requires the advice of an
attorney (and an accountant). The business structure should fit the management skills and
style(s) of the owner (or owners) and take into account the risk management needs (both
liability and financial) of the business. For example, if there is more than one owner (or multiple
investors), a sole proprietorship is not an option because more than one person has invested
time and/or money into the business. In this case, a partnership, cooperative, corporation, LLC,
or LLP would be the proper choice.

If the business is not a sole proprietorship, the management team should be described in the
business plan. The management team should consist of all parties involved in the decisions and
activities of the business. The strengths and backgrounds of management team members
should be discussed to highlight the positive aspects of the team. Even if the business is a sole
proprietorship, usually more than one person (often a spouse, child, relative, or other trusted
person) will have input into the decisions and therefore should be included as team member(s).

Regardless of the business structure, all businesses should also have an external management
support team. This external management support team should consist of the business's lawyer,
accountant, insurance agent or broker, and possibly a mentor. These external members are an
integral part of the management team. Many large businesses have these experts on staff. For
small businesses, the external management team replaces full-time experts; the business
owner(s) should consult with this external team on a regular basis (at least once a year) to
determine if the business is complying with all rules and regulations. Listing the management
team in the business plan allows the reader to know that the business owner has developed a
network of experts to provide advice.
The risk management portion of the business plan provides a description of how the business
will handle unexpected or unusual events. For example, if the business engages in agricultural
production, will the business purchase crop insurance? Does the business have adequate
liability insurance? Is the business diversified to protect against the unexpected, rather than
"putting all its eggs in one basket"? If the business has employees, does the business carry
adequate workers' compensation insurance? All of these questions should be answered in the
risk management portion of the business plan. More information how liability can affect your
business and on the use of insurance as a risk management tool can be found in Agricultural
Business Insurance and Understanding Agricultural Liability. The business structure will also
determine a portion of the risk management strategy since the way that a business is
structured carries varying levels of risk to the owner and/or owners. All marketing strategies (or
objectives) carry a degree of risk and must be evaluated, and mitigation strategies should be
included in this portion of the plan.

Marketing Plan

Every purchase decision that a consumer makes is influenced by the marketing strategy or plan
of the company selling the product or service. Products are usually purchased based on
consumer preferences, including brand name, price, and perceived quality attributes.
Consumer preferences develop (and change) over time, and an effective marketing plan takes
these preferences into account. This makes the marketing plan an important part of the overall
business plan.

In order to be viable, the marketing plan must coincide with production activities. The
marketing plan must address consumer desires and needs. For example, if a perishable or
seasonal crop (such as strawberries) will be produced, the marketing plan should not include
sales of locally grown berries in January if the business is in the northeastern United States. If
the business plans to purchase berries in the off-season from other sources to market, this
information needs to be included. In this way, the marketing plan must fit the production
capabilities (or the capability to obtain products from other sources).

A complete marketing plan should identify target customers, including where they live, work,
and purchase the product or service you are providing. Products may be sold directly to the
consumer (retail) or through another business (wholesale). Whichever marketing avenue you
choose, if you are starting a new enterprise or expanding on an existing one, you will need to
decide if the market can bear more of what you plan to produce. Your industry research will
assist in this determination. The plan must also address the challenges of the marketing
strategy proposed. This portion of the plan contains a description of the characteristics and
advantages of your product or service. Identifying a "niche" market will be of great value to
your business.

Other variables to consider are sales location, market location, promotion and advertising,
pricing, staffing, and the costs associated with all of these. All of these aspects of the marketing
plan will take time to develop and should not be taken lightly. Further discussion on marketing
fruits and vegetables can be found in Fruit and Vegetable Marketing for Small-scale and Part-
time Growers.

An adequate way of determining the answers to business and marketing issues is to conduct a
SWOT analysis. The acronym SWOT stands for Strengths, Weaknesses, Opportunities, and
Threats. Strengths represent internal attributes and may include aspects like previous
experience in the business. Experience in sales or marketing would be an area of strength for a
retail farm market. Weaknesses are also internal and may include aspects such as the time,
cost, and effort needed to introduce a new product or service to the marketplace.
Opportunities are external aspects that will help your business take off and be sustained. If no
one is offering identical products or services in your immediate area, you may have the
opportunity to capture the market. Threats are external and may include aspects like other
businesses offering the same product in close proximity to your business or government
regulations impacting business practices and costs.

Financial Plan

The financial plan and assumptions are crucial to the success of the business and should be
included in the business plan. One of the foremost reasons new businesses fail is not having
enough startup capital or inadequate planning to cover all expenses and be profitable. The
scope of your business will be determined by the financial resources you can acquire. Because
of this, you will need to develop a financial plan and create the supporting documents to
substantiate it.

The financial plan has its basis in historical data (for an existing business) or from projections
(for a proposed business). The first issue to address is recordkeeping. You should indicate who
will keep the necessary records and how these records will be used. Internal controls, such as
who will sign checks and handle any funds, should also be addressed in this section. A good rule
to follow for businesses other than sole proprietorships is having at least two people sign all
checks.

The next portion of the financial plan should be assumptions concerning the source of
financing. This includes if (and when) the business will need additional capital, how much
capital will be needed, and how these funds will be obtained. If startup capital is needed, this
information should be included in this portion. Personal contributions should be included along
with other funding sources. The amount of money and repayment terms should be listed. One
common mistake affecting many new businesses is underfunding at startup. Owners too often
do not carefully evaluate all areas of expense and underestimate the amount of capital needed
to see a new business through the development stages (including living expenses, if off-farm
income is not available).

Typically, a balance sheet, income statement, cash flow statement, and partial budget or
enterprise budgets are included in a business plan. More information on agricultural budgets
can be found in Budgeting for Agricultural Decision Making. These documents will display the
financial information in a form that lending institutions are used to seeing. If these are not
prepared by an accountant, having one review them will ensure that the proper format has
been used.

Financial projections should be completed for at least two years and, ideally, for five years. In
agricultural businesses, five-year projections are sometimes difficult to make because of
variability in prices, weather, and other aspects affecting production. One way to illustrate
these risks is to develop several scenarios covering a range of production assumptions. This
attention to detail will often result in a positive experience with lenders because they realize
that the plan covers several possible circumstances and provides insight into how the business
plans to manage risk. More information on financing agricultural businesses can be found in the
publication Financing Small-scale and Part-time Farms.

Financial Statements
Balance Sheet

A balance sheet is a snapshot of a business's assets and liabilities and its owner's equity at a
specific point in time. A balance sheet can be prepared at any time but is usually done at the
end of the fiscal year (for many businesses, this is the end of the calendar year). Evaluating the
business by using the balance sheet requires several years of balance sheets to tell the true
story of the business's progress over time. A balance sheet is typically constructed by listing
assets on the left and liabilities and owner's equity on the right. The difference between the
assets and liabilities of the business is called the "owner's equity" and provides an estimate of
how much of the business is owned outright. Owner's equity provides the "balance" in a
balance sheet.

Assets are anything owned by or owed to the business. These include cash (and checking
account balances), accounts receivable (money owed to the business), inventory (any crops or
supplies that the business has stored on farm), land, equipment, and buildings. This may also
include machinery, breeding stock, small fruit bushes or canes, and fruit trees. Sometimes
assets are listed as current (those easily converted to cash) and fixed (those that are required
for the business to continue). Assets are basically anything of value to the business.

Balance sheets may use a market basis or a cost basis to calculate the value of assets. A market-
basis balance sheet better reflects the current economic conditions because it relies on current
or market value for the assets rather than what those assets originally cost. Market values are
more difficult to obtain because of the difficulty in finding accurate current prices of assets and
often results in the inflation of the value of assets. Cost-basis balance sheets are more
conservative because the values are often from prior years. For example, a cost-basis balance
sheet would use the original purchase price of land rather than what selling that land would
bring today. Because purchase records are easily obtained, constructing a cost-basis balance
sheet is easier. Depreciable assets, such as buildings, tractors, and equipment, are listed on the
cost-basis balance sheet at purchase price less accumulated depreciation. Most accountants
use the cost-basis balance sheet method. Whether you choose to use market basis or cost
basis, it is critical that you remain consistent over the years to allow for accurate comparison.

Liabilities are what the business owes on the date the balance sheet is prepared. Liabilities
include both current liabilities (accounts payable, any account the business has with a supplier,
short-term notes, operating loans, and the current portion of long-term debt, which are
payable within the current year) and non-current liabilities (mortgages and loans with a term
that extends over one year).

Owner's equity is what remains after all liabilities have been subtracted from all assets. It
represents money that the owner has invested in the business, profits that are retained in the
business, and changes caused by fluctuating market values (on a market-basis balance sheet).
Owner's equity will be affected whenever changes in capital contributed to the business or
there are retained earnings; so, if your practice is to use all earnings as your "paycheck" rather
than reinvesting them in the business, your owner's equity will be impacted. On the balance
sheet, owner's equity plus liabilities equals assets. Or, stated another way, all of the assets less
the amount owed (liabilities) equals the owner's equity (sometimes referred to as "net worth").

Income Statement

The income statement is a summary of the income (revenue) and expenses for a given
accounting cycle. If the balance sheet is a "snapshot" of the financial health of the business, the
income statement is a "motion picture" of the financial health of the business over a specific
time period. An income statement is constructed by listing the income (or revenue) at the top
of the page and the expenses (and the resulting profit or loss) at the bottom of the page.

Revenue is any income realized by the sale of crops or livestock, government payments, and
any other income the business may have (including such items as fuel tax refunds, patronage
dividends, and custom work). Other items affecting revenues are changes in inventory and
accounts receivable between the start of the time period and the end, even if these changes
are negative. Expenses include any expense the business has incurred from the production of
the products sold. Examples of expenses include feed, fertilizer, pesticides, fuel, labor,
maintenance and repairs, insurance, taxes, and any changes in accounts payable. Depreciation,
which is calculated wear and tear on assets (excluding land), is included as an expense for
accounting purposes. Interest is considered an expense, but any principal payments related to
loans are not an expense.

As the income statement is created, the desired outcome is to have more income than
expenses, so the income statement shows a profit. If not, the final number is shown in
parentheses (signifying a negative number). Another name for this financial record is a "profit
and loss statement." Income statements are one way to clearly show how the farm is making
progress from one year to the next and may provide a much more optimistic view of
sustainability than can be seen by looking at a single year's balance sheet.

Cash Flow Statement

A cash flow statement is the predicted flow of cash into and out of a business over a year. Cash
flow statements are prepared by showing the total amounts predicted for each item of income
or expense. This total is then broken down by month to show when surpluses and shortfalls in
cash will occur. In this way, the cash flow statement can be used to predict when additional
cash is needed and when the business will have a surplus to pay back any debt. This monthly
prediction allows the owner(s) to better evaluate the cash needs of the business, taking out
applicable loans and repaying outstanding debts. The cash flow statement often uses the same
categories as the income statement plus additional categories to cover debt payments and
borrowing.

After these financial statements are completed, the business plan writer will have an accurate
picture of how the business has performed and can project how the business will perform in
the coming year(s). With such information, the owner--and any readers of the business plan--
will be able to evaluate the viability of the business and have an accurate understanding of
actions and activities that will contribute to its sustainability. This understanding will enable the
owner(s) to make better informed decisions regarding loans or investments in the business.

Putting It All Together

After the mission, background information, organization, and marketing and financial plans are
complete, an executive summary can then be prepared. Armed with the research results and
information from the other sections, the business will come alive through this section. The next
step is to share this plan with others whose opinions you respect. Have them ask you the hard
questions, making you defend an opinion you have expressed or challenging you to describe
what you plan to do in more detail. Often people are hesitant to share what they have written
with their families or friends because they fear the plan will not be taken seriously. However, it
is much better to receive constructive criticism from family and friends (and gain the
opportunity to strengthen your plan) than it is to take it immediately to the lender, only to have
any problems pointed out and receive a rejection.
Summary

Once all parts of the business plan have been written, you will have a document that will enable
you to analyze your business and determine which, if any, changes need to be made. Changes
on paper take time and effort but are not as expensive as changing a business practice only to
find that the chosen method is not viable. For a proposed venture, if the written plan points to
the business not being viable, large sums of money have not been invested and possibly lost. In
short, challenges are better faced on paper than with investment capital.

Remember, a business plan is a "road map" that will guide the future of the business. The best
business plan is a document in continual change, reacting to the influence of the outside world
on the business. Having the basis of a writ¬ten plan will give you confidence to consider
changes in the business to remain competitive. Once the plan is in place, the business will have
a better chance of future success.

Feasibility analysis evaluates all key factors pertinent to a project, including the economic,
technological, and legal aspects and project time frame — all of which help predict the
likelihood of project success.

Feasibility analysis

Feasibility analysis, also known as Feasibility Study, intends to equitably and logically examine
the pros and cons of an existing or a proposed business, dangers related to the venture,
required resources to carry out the operations, and eventually the probability of success.

Here’s looking at the key pointers of a Feasibility analysis:

Feasibility Study evaluates the viability and feasibility of a proposed venture.

The feasibility of a project depends on the cost required and forecasted profits.

A company carries out a feasibility study to decide whether to launch a new venture or a new
product range.
A well-structured and executed feasibility analysis will provide a clear history of the business or
a venture, a complete study of the product, financial records, attributes of the operation,
details of the market research, legal policies, tax, and other financial information.

Feasibility studies are a prelude to technical execution and project commissioning.

Economic analysis

Economic analysis essentially entails the evaluation of costs and benefits. It starts by ranking
projects based on economic viability to aid better allocation of resources. It aims at analyzing
the welfare impact of a project. Economic analysis can address the following questions/issues:

•Should the project be undertaken by the public or private sector?

•What will be the fiscal impact of the project?

•How will we ensure efficiency and equity of cost recovery?

•what will be the environmental impact of a project?

Indeed, economic analysis entails three main elements: These are:

1.identification and estimation of costs related to an investment

2.identification and estimation of benefits to be obtained from an investment

3.Comparing the costs with benefits to determine the appropriateness of the investment.

Financial analysis is the process of evaluating businesses, projects, budgets, and other finance-
related transactions to determine their performance and suitability. Typically, financial analysis
is used to analyze whether an entity is stable, solvent, liquid, or profitable enough to warrant a
monetary investment.

If conducted internally, financial analysis can help fund managers make future business
decisions or review historical trends for past successes.

If conducted externally, financial analysis can help investors choose the best possible
investment opportunities.

Fundamental analysis and technical analysis are the two main types of financial analysis.

Fundamental analysis uses ratios and financial statement data to determine the intrinsic value
of a security.

Technical analysis assumes a security's value is already determined by its price, and it focuses
instead on trends in value over time.

Technical feasibility is a standard practice for companies to conduct feasibility studies before
commencing work on a project. Businesses undertake a technical feasibility study to assess the
practicality and viability of a product or service before launching it. Whether you are working as
a product engineer, product designer or team manager, there may be plenty of situations in
your career where you are required to prepare a technical feasibility study. In this article, we
discuss what is technical feasibility, explain how to conduct one and share tips on writing a
feasibility study report.