2.

2 Opportunity Screening
Opportunity seeking comes the rigorous process of
Opportunity Screening. Many possible for the entrepreneur, it is
important to come up with a short list of a few very promising
opportunities.
 The Personal Screen
In screening opportunities, the entrepreneur first has to consider his or her
preferences and capabilities by asking three basic questions:
1. Do I have the drive to pursue this business opportunity to the end?
2. Will I spend all my time, effort, and money to make the business
opportunity work?
3. Will I sacrifies my existing lifestyle, endure emotional hardship, forego my
usual comforts to succeed in this business opportunity?
 If “YES is your answer to all of the above, then you can begin your earnest pursuit of that opporunity.
At the simples level, the entrepreneur may want to make a risk-return grid (table 2.2) shown as follows.

Table 2.2. Risk-Return Grid for Screening Opportunities.

Return Risk Low Risk Medium Risk High Risk

High Return Best Good Fair

Table
Medium Return
2.2. Risk-Return
Good
Grid
Fair
for Screening
Bad

Low Return
Opportunities
Fair Bad Worst
 The 12 Rs of Opportunity Screening
1. Relevance to vision, mission, and objectives of the entrepreneur.
2. Resonance to values.
3. Reinforcement if Entrepreneurial Interests. Entrepreneur’s personal interests,
talents, and skills.
4. Revenues. Sales potential of the products or services you want to offer.
5. Reponsiveness to customers needs and wants.
6. Reach. Expanding through branches, distributorship, dealership or franchise
outlets.
7. Range wide range of possible product or service offerings.
8. Revolutionary Impact “next big thing” or even a game changer that will revolutionize the
industry.
9. Returns low costs of productiion and operations but are sold at higher price.
10. Relative Ease of Implementation relative easy implement for the intrepreneur or will there
be a lot of obstacles and competency gaps to overcome?
11. Resources Required requiring fewer resources from the entrepreneur.
12. Risks entrepreneurial endeavor, there will always be risks.

These 12 criteria can be better managed if qualified and formed into a matrix to help the
entrepreneur concretize the evidence that the chosen opportunity/ opportunities is well worth
pursuing.
Table 2.3. Opportunity Screening Matrix
Criteria Very High High Average Very Low Simple Score
Weight
Opportinity Screening Gfrid for each Opportunity
Rating 5 4 3 1 Weight Score*
1. Relevance 2
2. Resonance 1
3. 1
Reinfocement
of
Entrepreneura
l Interests
4. Revenues 2
5. 1
Responsivenes
s
6. Reach 1
 7. Range 1
8. 2
Revolutiona
ry Impact
9. Returns 4
10. Relative 1
Ease of
Implementa
tion
Rating 1 2 3 4 5
11. 1
Resources
Required
12. Risks 3
Total Score
 The Pre-Feasibility Study
The ultimate goal of doing the opportunity screening matrix is to narrow down the
many opportunities into one or two most attractive ones. This time, the entrepreneur
must go down to the details and take time to cosider the follwing factors that are
contained in a pre-feasibility study:
• Market potential and prospects
• Availability and appropriateness of technology
• Project investment and detailed cost estimates
• Financial forecast and determinatiin of financial feasibility.
 Market Potential and Prospects
Market potential is based on the estimated number of possible customers who
might avail of the product or service.
Market Potential: It represents the upper limits of the market for a
product. Market potential is usually measured either by sales value or sales
volume.
Market Prospect: Market prospects are a company's potential future
performance in a competitive marketplace. In other words, a company's market
prospects are the company's forecasted ability to compete in a marketplace.
 Segmenting the Marker
Using a set of demographics (gender, age, place of residence, income class
etc.,) will be the most basic approach in determining the target segment. Keep
ibn mind that some general statistics fot these demographics can be found
online.
The entrepreneur must be able to do actual field research like surveys, focus
group discussions, in-depth interviews, observation techniques, etc.
 Assessing Competition
Market potential is also affected by the number of establishments supplying
and servcing your target customers.
An assessment typically involves creating a list of competitors and creating
a profile for each competitor that includes information such as the types of
products and services they sell, their market share, marketing strategies, and
notable strengths and weaknesses.
 Estimating Market Shares and Sales
A company's market share is its sales measured as a percentage of an industry's
total revenues. You can determine a company's market share by dividing its
total sales or revenues by the industry's total sales over a fiscal period. Use this
measure to get a general idea of the size of a company relative to the industry.
• Who has dominance?
• Who has greater bargaining power?
• Which segments of the total market are saturated and over served and which ones
are relatively underserved?
• Are there market segments whoch are more attractive than others for the entrepreneur, either
because of past expertise in the segment or weaker competition on the segment?

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

Having determined the forecast or derived market share, the enttrepreneur should then
estimate potential sales. Computing formula (Estimated Sales Volume x Estimated Price)
 Technology Assessment and
Operation Viability
1. Quantities demanded. This would determine the needed capacity of operations.
2. Quality specifiactions demanded. This would dictate the following: (a)quality of input
or raw materials; (b) quality assurance process in transforming input to output; (c) quality
output that meet the operatiobs, standards set; and (d) quality outcomes for the customers
who will be lookinh for specific results
3. Delivery expectations. Knowing how much, how frequent, and when to deliver to
customers.
4. Price expectations. The selling price of the product or service would be evaluated by the
customers according to the value they would receive (in terms of quality, delivery and
quantity) and this value added should be matched against competitors.
 Investment Requirements and
Production/Servicing Costs
1. Pre-Operating Costs. These are the costs related to the preparation for the
launch of the business.
2. Production/Service Facilities Investments. This refers to the long-term
investment for the actual business establishment, including investment in land,
bulding machinery, equipment, computers, softwwte, furniture, vehicles, etc.
3. Working Capital Investment. This include the investment needed to
operationalize the business, composed of cash, accounts receivable and
inventories (raw materials, work in process and finished goods.)
 These operating expenses would include the following:

a. Employee salaries, wages and benefits

b. Rent and lease expenses
c. Utilities
d. Transportation
e. Fees and licenses
f. Commisaiona
g. Office supplies, etc.

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

1. Do I have enough resources to cover the necessary investments?
2. Would my sales estimates be significantly higher than my monthly production/service costs
in order to produce prodifits?
 Financial Forecasts and Determination of
Financial Feasibility
The financial forecast refer to the monetary transactions that the business is
expected to engage in. Financial forecasting calss for the creation of the four
critical financial statements namely, (1) income statement; (2l balance sheet;
(3) cash flow statement; (4) funds flow statement. The marketing strategu
and action program should translate into revenue or sales forecasts. The
operation strategy and production or service delivery program should translate
into forecast od costs of goods produced.
 Income Statement
The income statement is a financial statement that measures an enterprise’s
performance in terms of revenue and expenses over a certain period. Simply
put the fomula is:
REVENUES-EXPENSES= INCOME OR PROFIT(LOSS)
 Table 2.4. Monthly Income Statement of Mang Juan’s Manufacturing

Gross Sales P750,600

Less: Cost of Good Sold* 467,487

Gross Profit/Margin 282,113

Less: Operating Expenses 166,145

Operating Profit/Margin 115,968

Less: Taxes 21,392

Net Profit After Taxes P94,576

 Balance Sheet
Balance sheet has to look at 3 different things: assets, liabilities, and equities.
• Assets represents all the investments in the enterpriae including the initial
investments that you considered in the pre-feasibility study.
• Liabilites represent the enterprise’s debts to suppliers, to banks, to government, to
employees, and other financers.
• Stockholders’ Equity represents the investors’ investments in the stock/shares of
the business.
The balance sheet equation is:
ASSETS = LIABILITES +EQUITY
 Table 2.5. Balance Sheet of Mang Juan’s Manufacturing

ASSETS LIABILITES

Current Assets Current Liabilities

Cash P100,500 Accountd Payable P150,00
Accounts Receivable 370,200 Income Taxed Payable 20,500
Inventory 405,350 Wages Payable 75,000
Short Term Debt 125,000
Fixed Assets Long Term Liabilities
Land 422,100 Long Term Debt 777,650
Building 200,000 STOCKHOLDERS’ EQUITY
Vehicles 150,000 Capital 350,000
Retained Earnings* 150,000

TOTAL ASSETS P1,648,150 TOTAL LIABILITIES & EQUITY P1,648,150