Venture Opportunity Screening Analysis

NOTE: Please delete any text in italics before using this template for your analysis. The
bulleted questions are there to guide you to answer the question. Replace the question
with a one-two sentence answer.

The first step in identifying a suitable business opportunity is to outline your concept, begin to
define the scope of your business, and to evaluate the viability each of the principal parts of your
prospective business. In order to do this effectively, you must first understand the dynamics that
are affecting the industry and marketplace in which you will compete. The Venture Opportunity
Screening Analysis provides the reader with a dispassionate view of the industry.

1. Industry Overview
2. Product/Service Delivery
3. Marketplace Analysis
4. Marketing Dynamics
5. Distribution and Sales Dynamics
6. Financial Estimates
7. Opportunity Screening Analysis
8. Conclusions

The attached worksheets will help to guide you through this initial look at the industry where you
will start your business. In this initial stage, understand that you are not developing your
business plan, but are gaining a better understanding of the industry where your business
will compete. Use objective research to answer all of the questions and complete all of the
worksheets. In subsequent steps, you will be investigating and developing these issues in
depth as you create the business plan for your new venture.

Industry Name: _______________________________________________________

Student Name: ______________________________________________________

_____________________________________________________________________

Course: ______________________________________________________________

Section: _________________________

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 1. Industry Analysis

The Industry Analysis section dispassionately describes and outlines the industry in
which you will compete. When finished with this section, you and your readers should
understand the dynamics, problems, and opportunities driving your industry.

 What is the industry that addresses this market?

 NAICS Code

 Market Capitalization

 Growth Rate

 Number of competitors

 Relative size of competitors

 What trends are important in this industry?

o Sociocultural trends?

o Demographic trends?

o Technology trends?

o Economic trends?

o Geopolitical trends?

 How does this industry segment the market?

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 2. Product/Service Delivery

The Product and Services section is a detailed description of the products and/or services
currently being sold in the industry. You should not assume that the reader is familiar with
these products/services, so be sure to explain and describe them carefully.

 What exactly are the types of products or services being offered in the industry?

 What aren’t they? Carefully describe.

 What is unique about these products/services?

 What are their key features and benefits?

 Do the industry competitors benefit from any proprietary rights to the

products/services (for example, technology, patents, copyrights, trade secrets,
etc.)?

 What differentiates the competitors, and what are the similarities?

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 3. Marketplace Analysis

The Marketplace Analysis section dispassionately describes and outlines the

marketplace in which you will compete. When finished with this section, you and your
readers should understand the dynamics, problems, and opportunities driving your
marketplace.

 What is the market that the industry currently serves?

 How large is it?

 What is its growth potential?

 What motivates customer purchase decisions?

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 4. Marketing Dynamics

The Marketing Strategy section of your plan will make or break the prospects for your
venture. In the Marketing Strategy section, show how you are going to fit into your
marketplace. What are unmet needs in the marketplace and how are you going to fill
them? How will you differentiate your product or service from your competitors? What
unique features, benefits, or capabilities will you bring to the marketplace? Who are your
customers?

 Who are the target customers of the marketplace?

 What problems are being solved for them?

 What are their profiles?

 What motivates their buying decisions?

 What are the strengths of the products/services currently being offered?

 Weaknesses?

 Who are the key competitors?

 How do they differentiate their products or services?

 How are the products or services currently priced?

 What are gross revenues per unit sold?

 What are anticipated annual sales?

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 5. Distribution & Sales Dynamics

How does the market reach its customers? How does the market close the sale with its
customers? Remember, "Nothing happens until the sale is made."

 What distribution channels does the marketplace currently use (e.g., direct sales,
mail-order, wholesalers, etc.)?

 How does the marketplace currently communicate with customers (e.g., advertising,
promotions, etc.)?

 How does the marketplace currently sell its products or services?

 Who does the selling (internal sales people, manufacturing representatives, etc.)?

 What are the costs associated with this sales strategy?

 Which costs are fixed?

 Which are variable?

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 6. Financial Estimates

The Pro Forma Financial Estimates should illustrate what the average competitor should
expect within the industry and marketplace that you have defined. For purposes of this
analysis, set both variable and fixed costs to equal 50% of COGS.

Summarize estimates made in previous sections:

A. Annual unit sales: __________

B. Price per unit: __________
C. Variable cost per unit (production and sales): __________
D. Fixed costs (admin, production, and sales): __________
E. One-time start-up costs* (eqpmt, mktg, legal, etc.): __________
F. Working capital rqd* (receivables, inventory, etc.): __________

Calculate estimated annual gross revenues and income:

G. Estimated annual revenues (AxB): __________

H. Estimated annual variable costs (AxC): __________
I. Estimated annual contribution margin (G-H-D): __________

Calculate break-even figures:

J. Contribution margin per unit (B-C): __________

K. Annual break-even quantity (D/J): __________
L. Ratio of break-even to expected quantities (K/A): __________

Estimate the money you will initially need to start your business:

M. Total up-front funds required (E+F): __________

N. Additional units to cover up-front funds (M/J): __________
O. Break-even quantity with up-front funds (K+N): __________

Calculate financial performance figures:

P. Payback period for startup funds (M/I): __________

Q. Annual return on start-up investment (I/M): __________
R Variable cost to price ratio (C/B): __________
S. Contribution margin ratio (I/G): __________

* - Start-up and Working Capital costs should be calculated using the Start-Up Calculator
on my website. Attach the completed calculator as an appendix to this document.

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7. Venture Opportunity Screening (VOS) Analysis
In this final section, you will evaluate the all of the information from the previous
sections to determine the probability that a new venture will succeed in the industry
and marketplace that you have analyzed. The specific criteria for ranking the new
venture using the VOS Indicator will be provided in class.

VOS Indicator

Factor Categories High Average Low

Industry/market
Market Size Potential
Venture Growth Rate
Market Share (year
three)
Entry barriers

Pricing/Profitability
Gross margins
After-tax margins
Asset intensity
Return on assets

Financial/Harvest
Cash flow breakeven
Rates of return
IPO potential
Founders control

Management Team
Experience/Expertise
Functional areas
Flexibility/Adaptability
Entrepreneurial focus

Total Points by ranking

Overall total points (OTP)

Average core (OTP/16)

High=3; Average=2; Low=1

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 8. Conclusions

 Do these results look attractive enough to proceed with the development

of a new venture in this industry?

 How can we improve the probability of success of a new venture in this

industry?

 If we were to start a new venture in this industry, what size (scale) and
scope (breadth of product offerings) would have the greatest probability
of success?

 What other information do we need in order to make an effective decision

to proceed with a new venture in this industry, or to choose another
industry for analysis?

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