PRESENTATION

EVALUATION OF BUSINESS IDEA FOR

DEVELOPING AN ENTERPRISE

SUBMITTED BY
HNDII/URP/792
HNDII/URP/793
HNDII/URP/794

IN THE
DEPARTMENT OF URBAN AND REGIONAL
PLANNING
SCHOOL OF ENVIRONMENTAL STUDIES
FEDERAL POLYTECHNIC NASSARAWA

JULY 2017

1
EVALUATING BUSINESS IDEA FOR DEVELOPING AN
ENTERPRISE
Evaluating and choosing between projects: since there are diverse
technologies, production techniques and either investment, hence business
evaluation is needed to know the viability or feasibility of that project.
Evaluation is measured through indicators as profit, rate of return, capital,
market etc. as business grows, detailed evaluation techniques is required to
assess the overall business performance
FACTORS TO BE CONSIDER WHEN EVALUATING BUSINESS IDEA
FOR DEVELOPING AN ENTEPRISE
Every business venture starts with an idea. That idea may be as simple as
opening a shop that features local artwork or as complex as creating a new
biotechnology company. Either way, your success depends on the strength of
your idea, how well it fits your nature, how well you can plan for success, and
what resources you can bring to the effort.
IS THIS BUSINESS IDEA SOMETHING I REALLY WANT TO DO?
For most successful entrepreneurs, running their own company is more
than just a job its a full-time passion. Successful business people truly
believe in their ideas, care about the products or services that they offer,
and love what they do even when the going gets tough.

Take a moment to think about turning your idea into a business. Is your
heart in it? Is it something you really care about? Is it how you want to
spend your time? If you answer all the questions with an enthusiastic
uYes! read on. If not, maybe you need to go back to brainstorming.

IS THIS BUSINESS IDEA SOMETHING I AM CAPABLE OF DOING?

Thomas Edison called genius 1 percent motivation, 99 percent sweat.
Your idea is a stroke of inspiration, but do you have what it takes to sweat
out the details and do the hard work required to turn your inspiration into
reality? Beyond desire, do you have the capability? In other words, can
you do it? Do you have the resources, connections, skills, and experience
to turn your idea into a success story? And if you dont have everything
required to do the job well, do you have the knowledge and resources to
assemble a team that does?

2
DOES THIS BUSINESS IDEA TAP MY PERSONAL STRENGTHS?
Not everyone can run a high-tech business or a local gift shop, for that
matter. Your strengths and weaknesses will go to work with you every
day, so take time to consider whether your idea aligns well with your
personal attributes or whether it requires talents in areas where youare a
little weak. Successful entrepreneurs devote themselves to businesses that
influence their strengths and work around their weaknesses.

How do your strengths and weaknesses match up to the business idea

youare considering? If the business requires plenty of personal contact,
for example, are you good with people? If the business requires you to
move rapidly to seize an opportunity, are you prepared for long,
sometimes stressful days?

CAN I DESCRIBE THIS BUSINESS IDEA IN 25 WORDS OR LESS?

If your business idea is so complex that you need a half-hour and 20 flip charts
to explain it, guess what? Its too complicated. You can describe almost every
great business idea in 25 words or less. Consider a few examples:

Examples:
Bilal planning consult and provision of comfortable, aesthetic, liveable
environment.
A combination electronic organizer and wireless Internet device (8
words)
A gift certificate that you can redeem online to contribute to the charity of
your choice (16 words)
A catering service that delivers meals based on The Zone, Atkins, or
Weight Watchers diets (15 words)
GPS-based audio tours of major travel destinations around the world (11
words)
As part of your evaluation, pare down your idea to its essentials and describe it
as simply and concisely as you can. A simple, polished phrase can make your
idea shine or it may reveal a fatal flaw.

3
WHATS THE CLOSEST THING TO THIS BUSINESS IDEA IN THE
MARKETPLACE?
As the age-old saying goes, theres nothing new under the sun. In fact,
refining or combining existing ideas generates most new business ideas.
Heres a television, theres the web hey, how about WebTV? As you
judge your idea, think about similar products or services already
swimming in the marketplace, and then ask a tough question: How is
your idea better?

DOES THIS BUSINESS IDEA MEET A NEED OR SOLVE A

PROBLEM?
Customers spend money because they believe that what they buy can
solve their problems, fulfil their needs, or satisfy their desires. If your
business idea doesnt address a real problem, need, or desire, getting it off
the ground will be doubly difficult, because instead of presenting your
product as the best solution to existing needs, you have to create the sense
of need and then present your product as the solution.

DOES THIS BUSINESS IDEA TAKE ADVANTAGE OF A NEW

OPPORTUNITY?
Business success often hinges on having the right idea in the right place
at the right time. The rise of the Internet and the simultaneous passion
in America for collecting presented twin opportunities that helped turn
the booming auction site eBay into a household word. The nations
ballooning waistline was the opportunity that Weight Watchers rode all
the way to a multimillion-dollar success story.

Lately, companies that help people consolidate credit card debt have been
scoring big successes, for obvious reasons. Does your business idea stand
a good chance of catching a similar wave of opportunity? Is your idea
robust enough to weather a downturn?

4
WHATS THE BIGGEST DRAWBACK OR LIMITATION TO THIS
BUSINESS IDEA?
Even the greatest business ideas have drawbacks and limitations. Maybe
your idea is very easy for would-be competitors to copy, for example. Or
maybe it requires a difficult-to-achieve change in some ingrained
customer behavior. Perhaps your idea requires a long R&D phase, or
maybe it poses difficult marketing challenges.

By thinking long and hard about the potential drawbacks of your idea,
you put your business opportunity in perspective. If the pluses far
outweigh the worst-case scenarios you dream up, chances are your
business idea stands a pretty good chance of succeeding.

WILL THIS BUSINESS IDEA MAKE MONEY AND HOW FAST?

Oddly enough, this simple question is the one most likely to go unasked
by want be entrepreneurs, maybe because its one of the toughest
questions to face up to. It goes well beyond your answer to the question
of whether or not customers will be willing to pay for your product or
service; this question takes you into the realm of forecasting:

How long will it take before your business idea will generate profits?
How long can you afford to wait?
Who specifically will spend money for your product or service?
After the sales start rolling in, can you sustain profitability over time?
Take the time to give questions like these serious thought sooner
rather than later.

AM I WILLING TO REMORTGAGE MY HOUSE TO FUND THIS

BUSINESS IDEA?
We are not suggesting that you take out a second mortgage to fund your
new business venture. But as a test of your passion and belief, ask
yourself: If I had to, would I be willing? Even if you plan to persuade

5
 outside investors to take on some of the risk, you need that kind of
personal belief as you make the pitch.

And if you decide to take a bank loan instead, you have to sign on the
dotted line to pledge to repay the money, absolutely, positively. One way
or another, you assume financial risk when you launch a business. If
youare not willing to take on that risk, you may not be cut out for the
business youare thinking about starting

TECHNIQUES FOR PROJECT EVALUATION:

There are two common techniques for project evaluation namely, non-time
value approach and the time value approach. Non financial approach attaches no
financial importance to the timing of cash flows. Gradational method of
appraisal cut-off period, payback and arr. While time value approach attach
financial importance to time and cash flows.
BUSINESS EVALUATION TECHNIQUES
1. PAY BACK PERIOD: this is a method used in evaluating business,
which reveals when the total cost invested in a business is to be realized
or payback. The method leads one to choose that business or project
which recovers its capital lusts. In the shortest period of time, denoted as
100/n (dividing hundred by the number of years in the payback period).

2. NET PRESENT VALUE: this is the discounted proceed (benefits)

anticipated throughout the economic life of a business, it is also seen as
the net benefits to be gained by venturing on a project after both costs and
benefits have been discounted with a discount rate to present value
(worth). Denoted as NPV=PVB-PVC. Discount factor

3. Internal rate of return: this is similar to net present value (NPV) but do
not use fixed discount rate, rather the IRR is determine. The discount rate
at which an investment capital outlay is repaid from a stream of cash
inflows from the project over a specified life span of investment i.e IRR
is the discount rate, such that the present value of benefit, (cash inflow)
equals present value if cost (cash out flow) =NPV=0. IRR= lower
discount rate + difference between the two discount rate

6
 PV of cash inflow of low discount rate
Difference between PV of cash flow at
4. The terminal value: this is another time adjusted evaluation method, looks
at time value of money for entire life span of a project. This method is to
be used in ranking projects, then they must have a common termination
date in order to arrive at a comparable result. However, where economic
lives of projects differs the longest life is selected as the termination date.

7
REFERENCE
Prof.ShetimaA,Dr Pius O Salami Etal2016 Entrepreneurship development
316&426, vol 2
Google. Com 2017