Idea or Prime Opportunity? A Framework for Evaluating Business Ideas for New and Small Ventures
Abstract
Entrepreneurs and entrepreneurship educators recognize that only a small percentage of venture ideas actually represent viable business opportunities. This paper addresses the important issue of opportunity recognition using a framework designed with a mnemonic structure for easy recall and based on the extant literature on opportunity recognition. The framework prompts users to examine Product/service, Resource, Individual, Market, and Economic start-up issues. Thus, the PRIME analysis is a heuristic designed for initial opportunity evaluation of a business concept prior to preparing a full-blown business plan. We discuss and apply this framework, demonstrating its effectiveness in the classroom and in practice.
References
Abrams, R. (2003). The successful business plan: secrets and strategies (4th éd.). Palo Alto, CA: The Planning Shop.
Adebowale, A. (1992). Coping with entrepreneurial stress. Leadership and Organization Development Journal, 13(2), 27-32.
Alvarez, S. A., & Busenitz, Lowell, W. (2001). The entrepreneurship of resource-based theory. Journal of Management, 27(6), 755-775.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-120.
Basadur, M. (2001). The power of innovation. Toronto: AC Press.
Baty, G. B. (1974). Entrepreneurship: Playing to win. Reston, VA: Reston Publishing.
Becker, G. S. (1964). Human capital. New York: Columbia Publishing.
Bernrolder, E. (2002). Factors in SWOT analysis applied to micro, small-to-medium and large software enterprises: An Austrian study. European Management Journal, 20(5), 562-573.
Bhide, A. (1992, November-December)). Bootstrap finance: The art of start-ups. Harvard Business Review, 109-117.
Bhide, A. (1994, March-April). How entrepreneurs craft strategies that work. Harvard Business Review, 150-161.
Bhide, A. (1996, November-December). The questions every entrepreneur must answer. Harvard Business Review, 120-130.
Birley, S., & Westhead, P. (1993). The owner-managers exit route. In H. Klandt (Ed.), Entrepreneurship and business development (pp. 123-140). Avebury: Gower.
Boyd, D. P., & Gumpert, D. E. (1983, (March-April). Coping with entrepreneurial stress. Harvard Business Review, 46-56
Brodsky, N. (2000). The first step. Inc. 22 (11), 37-40.
Bygrave, W. D. (1989, Fall). The entrepreneurship paradigm: A philosophical look at its research methodologies. Entrepreneurship Theory and Practice, 9, 7-26.
Bygrave, W. D, & Zacharakis, A. (2004). The portable MBA in entrepreneurship (3"' éd.). Hoboken, NJ: John Wiley & Sons, Inc.
Campos, A., Gonzalez, M. A., & Amor, A. (2003). Limitations of the mnemonic-keyword method. The Journal of General Psychology, 130(4), 399-413.
Chandler, G., & Hanks, S. H. (1993). Measuring the performance of emerging businesses: A validation study. Journal of Business Venturing, 8(5), 391-408.
ClassActionAmerica.com (2004). Check N Go of Florida: Florida payday lender named in class action. Class Action America. Retrieved April 10, 2004 from http://www.classactionamerica.com/public/caseIndex.aspx71ngCaseID= 1011.
Covin, J., & Slevin, D. (1986). The development and testing of an organizational-level entrepreneurship scale. In R. Ronstadt, J. Hornaday, R. Peterson, & K. Vesper (Eds.), Frontiers of Entrepreneurship Research, (pp.628-639). Babson Park, MA: Babson College.
Davis, S. & Meyer, C. (1998). Blur: The speed of change in the connected economy. NY: Warner Books.
Dees, J. G., & Starr, J. A. (1992). Entrepreneurship through an ethical lens. In D. L. Sexton & J. D. Kasarda (Eds.), The state of the art of entrepreneur ship, Boston: PWS-Kent Publishing Company.
Durand, D., & Shea, D. (1974). Entrepreneurial activity as a function of achievement motivation and reinforcement control. Journal of Psychology, 88, 57-63.
Fahey, L, & Randall, R. M. (2000). The portable MBA in strategy (2nd ed.). Hoboken, NJ: John Wiley & Sons.
Fry, R. L., Stoner, C. R., & Weinzimmer, L. G. (1999). Strategic planning for new & emerging businesses: A consulting approach. Chicago: Dearborn Financial Publishing Inc.
Gartner, W. B. (1985, October). A conceptual framework for describing the phenomenon of new venture creation. Academy of Management Review, p. 702.
Gorry, G.A. (1971). The development of managerial models. Shan Management Review, 12(2), 1-17.
Grant, A. (1992). The development of an entrepreneurial leadership paradigm for enhancing new venture success. In Churchill, N. C., Birley, S., Bygrave, W. D., Muzyka, D. E., Wahlbin, C., Wetzel, W. E. (Eds.) Frontiers of Entrepreneurship Research (pp. 18-24), Babson Park, MA: Babson College.
Hall, J. & Hofer, C. W. (1993, January). Venture capitalists' decision criteria in new venture evaluation. Journal of Business Venturing, 8(1), 25-42.
Hesseldahl, A. (2004). Google's mail plans call for serious storage. Forbes.com. Retrieved April 2, 2004, from www.forbes.com/technology/2004/04/02.
Hill, T., & Westbrook, R. (1997). SWOT analysis: It's time for a product recall. Long Range Planning, 30(1), 46-53.
Hills, G. E., & LaForge, R. W. (1992). Marketing and entrepreneurship: The state of the art. In D. L. Sexton & J. D. Kasarda (Eds.), The state of the art of entrepreneurship (pp. 164-190), Boston, PWS-Kent Publishing Company.
Hofman, M. (1997, August). Desperation capitalism: A bootstrapper's hall of fame. Inc., 56-58.
Hornaday, J. A., & Aboud, J. (1971). Characteristics of successful entrepreneurs. Personnel Psychology, 24, 141-153.
Human, S. E., & Matthews, C. H. (2004). Future expectations for the new business. In W. B., Gartner, K. G. Shaver, N. M. Carter, P. D. Reynolds (Eds.), Handbook of entrepreneurial dynamics (pp.386-400), Thousand Oaks, CA: Sage Publications, Inc.
Kamm, J.B., & Nurick, A.J. (1993, Winter). The stages of team venture formation: A decision-making model. Entrepreneurship Theory & Practice, 17-27.
Katzenbach, J. R. & Smith, D. K. (1993). The wisdom of teams. Boston: Harvard Business School Press.
Kourilsky, M. L., & Carlson, S. R. (2000). Entrepreneurship education for youth: A curricular perspective. In D. L. Sexton & R. W. Smilor (Eds.), Entrepreneurship 2000 (pp. 193-213). Chicago: Upstart Publishing Company,
Kunkel, S. W. & Hofer, C. W. (1993). The impact of industry structure on new venture ?performance. In Churchill, N. C., Birley, S., Bygrave, W. D., Doutriaux, J., Gatewood, E. J., Hoy, F. S., & Wetzel, W. E. (Eds.), Frontiers of Entrepreneurship Research, Babson Park, MA: Babson College.
Kuratko, D. F. & Hodgetts, R. M. (2003). Entrepreneurship: Theory, Process & Practice (6th Ed.). Southwestern College Publishers.
Lodish, L., Morgan, H. L., & Kallianpur, A. (2001). Entrepreneurial marketing. New York: John Wiley & Sons, Inc.
Longenecker, J. G., Moore, C. W., & Petty, J. W. (2003). Small business management: An entrepreneurial emphasis (12th ed.). Australia: Thomson Southwestern.
MacMillan, I. C., Siegel, R., & Subbanarasimha, P. N. (1985). Criteria used by venture capitalists to evaluate new venture proposals. Journal of Business Venturing, 1(1), 119-128.
McCline, R. L., Bhat, S., & Baj, P. (2000, Winter). Opportunity recognition: An exploratory investigation of a component of the entrepreneurial process in the context of the health care industry. Entrepreneurs flip Theory & Practice, 81 -94.
McGrath, R., & Hoover, G. (2001). The entrepreneurial mindset: Strategies for continuously creating opportunity in an age of uncertainty. Boston, MA: Harvard Business School Press.
McMullen, J. S., & Shepherd, D. A. (2001). Entrepreneurial orientation as ambiguity tolerance: The effect of work environment upon innovative inclination. In W. D. Bygrave, Autio, E., Brush, C. G., Davidsson, P., Green, P. G., Reynolds, P. D., & Sapienza, H. J. (Eds.), Frontiers of Entrepreneurship Research, Babson Park, MA: Babson College.
Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29(7), 770-791.
Nestor, M. J. (2000). Five surefire ways to waste your training dollars. Training, 37(10), 1 GO104.
Paine, S. S. (1994, March-April). Managing for organizational integrity. Harvard Business Review, 105-121.
Panagiotou, G. (2003). Bringing SWOT into focus. Business Strategy Review, 14(2), 8-10.
Penley, L. E., (2000, Spring/Summer). Challenges ahead for small business education. Journal of Small Business Strategy, 1-7.
Petty, W. (2004). Harvesting your venture: A time for capturing value. In W. D. Bygrave & A. Zacharakis (Eds.), The Portable MBA in Entrepreneurship (pp. 427-454). Hoboken, NJ: John Wiley & Sons.
Pickle, H. B. (1964). Personality and success: An evaluation of personal characteristics of successful small business managers. Small Business Research Series No. 4. Washington, DC: U.S. Government Printing Office.
Porter, M. E., Competitive strategy: Techniques for analyzing industries and competitors. New York: The Free Press.
Reynolds, P. D. (2000). National panel study of U.S. business start-ups: Background and methodology. In J. A. Katz (Vol. Ed.), Advances in entrepreneurship, firm emergence, and growth: Vol. 4. Databases for the study of entrepreneurship, pp. 153-227). Amsterdam: JAI.
Reynolds, P. D., Bygrave, W. D., Autio, E., Cox, L. W. & Hay, M. (2002). Global entrepreneurship monitor: Executive report. Babson College, Ewing Marion Kauffman Foundation & London Business School.
Roberts, M. J., Stevenson, H. H., & Morse, K. P. (2000). Angel investing. Boston, MA: Harvard Business School Publishing.
Robinson, P. B., Stimpson, D. V., Huefner, J. C., & Hunt, H. K. (1991, Summer). An attitude approach to the prediction of entrepreneurship. Entrepreneurship Theory & Practice, 13-31.
Ronstadt, R. (1986). Exit stage left: Why entrepreneurs end their entrepreneurial careers before retirement. Journal of Business Venturing, (3), 323-338.
Ronstadt, R., & Shuman, J. C. (1988). Venture feasibility guide. Natick, MA: Lord Publishing.
Sahlman, W. A. (1984). Sustainable growth analysis. Boston, MA: Harvard Business School Publishing.
Sahlman, W. A. (1997, July-August). How to write a great business plan. Harvard Business Review, 98-108.
Schollhammer, H. & Kuriloff, A. H. (1979). Entrepreneurship and small business management. New York: John Wiley & Sons.
Shane, S. A. (1997). Who is publishing the entrepreneurship research? Journal of Management, 23, 83-95.
Shaver, K. G., & Scott, L. R. (1991, Winter). Person, process, choice: The psychology of new venture creation. Entrepreneurship Theory & Practice, 23-45.
Shulman, J. M. (2004). Debt and other forms of financing. In W. D. Bygrave & A. Zacharakis (Eds.), The portable MBA in entrepreneurship (pp. 195-221). Hoboken, NJ: John Wiley & Sons.
Slevin, D. P. & Covin, J. G. (1992). Creating and maintaining high-performance teams. In D. L. Sexton & J. D. Kasarda (Eds.), The state of the art of entrepreneurship (pp.358-386). Boston: PWS-Kent Publishing Company.
Smith, R. & Smith, J. K. (2004). Entrepreneurial finance. Hoboken, NJ: John Wiley & Sons, Inc.
Smith, M. C., & Phillips, M. R., Jr. (2001). Age differences in memory for radio advertisements: The role of mnemonics. Journal of Business Research, 53(2), 103109.
Stevenson, H. H. & Gumpert, D. E. (1985, March-April). The heart of entrepreneurship. Harvard Business Review, 85-94.
Thompson, A.A. & Strickland, AJ. (2003). Strategic management: Concepts and cases, 13th edition. Boston: McGraw-Hill Irwin.
Timmons, J. A., Smollen, L. E., & Dingee, L. M. (1977). New venture creation: A guide to small business development., Homewood, IL, Richard D. Irwin, Inc.
Timmons, J. A., & Spinelli, S. (2004). New venture creation: Entrepreneurship for the 21s' century (6th éd.). Boston: McGraw-Hill Irwin.
Ucbasaran, D., Westhead, P., & Wright, M. (2001). The focus of entrepreneurial research: Contextual and process issues. Entrepreneurship Theory & Practice, 25(4), 57-81.
Ullius, D. (1997). ART: Acronyms reinforce training. Training & Development, 51(2), 9-10.
Vesper, K. H. (1990). New venture strategies. Englewood Cliffs, NJ: Prentice-Hall, Inc.
Warnaby, G. (1999). Marketing strategy. Journal of Marketing Management, 15(5), 440-443.
Weinzimmer, L.G., Fry, F.L., & Nystrom, P.C. (1996). The search for opportunities by small business owners. Journal of Small Business Strategy, 7(3), 1-14.
Wiltbank, R. & Sarasvathy, S. (2002). Patterns of business model change as measures of causation and effectuation in entrepreneurship. In W. D. Bygrave, C. G. Brush, P. Davidsson, J. Fiet, P. G. Greene, R. T. Harrison, M. Lerner, G. D. Meyer, J. Sohl, & A. Zacharakis (Eds.), Frontiers of Entrepreneurship Research, Babson Park MA: Babson College.
Zacharakis, A. (2004). Building your pro forma financial statements. In W. D. Bygrave & A. Zacharakis (Eds.), The portable MBA in entrepreneurship (pp. 141-166). Hoboken, NJ: John Wiley & Sons.
Zider, B. (1998, November-December). How venture capital works. Harvard Business Review, 131-139.
