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Designing Innovative Business Models with A Framework that Promotes Experimentation

A idea becomes a business idea when it is worked upon to gain some kind of benefit which may be financial or otherwise. An idea unless worked upon cannot be termed as an opportunity. There are many ideas someone of them are workable and some may not be or mere imagination. So before get into an business idea understanding of an idea is important.

Business idea

As per the ideal definition ideas are generally a thought or suggestion with a possible course of action with an aim to achieve a purpose well served. An idea would be something which would help towards the either betterment of existing process or activity or completely a new process or activity with a expected outcome. Now the first question which should eventually come into the mind that, “Is the idea realistic?” as most of the times people just pretend it to be realistic and towards the end they end up knowing that something they thought was never possible at all or vice versa, so validation of business idea is also very important

There are several individuals who start an innovation with an idea. The best (or worst sometimes) irony of an idea is they most of the times come to you as a slow hunch or it may strike you like lightning. Let’s think about several occasions when people think about how often they have thought something like, “That’s a great idea, I must make it a reality.” But by the virtue of infortune they most of the times ends up simply thinking about it. Facts elaborate that most of the time nothing materializes just because an individual even with revolutionary idea don’t contributes the courage & time in order to put them into action which the most important part of an idea. As an idea kept without action is as waste as a crap. However transforming an idea into a reality regardless of the required investment of time and money is most of the times extremely difficult but as quoted by Roberth Goddard,” It is difficult to say what is impossible, for the dream of yesterday is the hope of today and the reality of tomorrow.”

A business idea (may be a big or small, may be a manufacturing or servicing, etc.) must be evaluated first before committing into the act. Such evaluation is the primary stage. In this stage the idea-holder must conduct a financial feasibility study, identify the target market, and its competitors. These are three very important tasks.

Feasibility study: this indicates project costs and means of financing along with all sorts of benefits and constraints. Suppose a bank loan of $20,000 has to be taken for the financing part.

Target market: this is the area of doing business. Suppose the market is very near to industrial belt.

Competitors: this indicates challenges. A monopoly market doesn’t have competition but a monopolistic market has huge competition.

There are many issues around everyone, which gives a business idea to bridge a gap to a make it business opportunity and here an idea is to start a food delivery business i.e. home kitchen.

Cake Baking

This cake baking business idea is a home-based bakery that defines what baked products I want to provide, looks into the competition, and describes my market niche for the cake products. From birthday parties to weddings and other special occasions, cakes are an integral part of many celebrations. Industry innovations have made it possible for consumers to turn their confectioner's dream into a reality and enable bakers to become more imaginative with their creations. In order to start this business based on the evidence I collected, a home-based bakery kitchen normally has to undergo inspection by the relevant institutions or health department before you can legally start a bakery business and offer cakes. I will ensure that I meet health standards and ensure that my kitchen is up to standards before carrying out marketing for my baked products.

Assumptions about potential customers and the market that would this business idea to a viable business opportunity

The Target Market

 Based on evidence gathered, when creating a business plan for the cake, I have identified my target market (to be families who lack the time to prepare special occasion cakes and cupcakes. Or target food-related businesses that would prefer to have another person focus on the bread, rolls, cookies, cakes, and pies, such as caterers and restaurants). I have also carried out a study of other bakers in the area and identify a business gap in the society that is not being met. These niches appeal to me. Organic cakes, vegan products, and gluten-free options are niches that I have explored. I will also want to specialize in wedding cakes. I have identified the facets of the business that most appeal to me based on the evidence I have collected, I will now start to create my buyer personas and target them in marketing efforts.

Potential Customers

 On the basis of local research done that there are the community I live in has young crowd which is office goers and quite busy in their work life, so I have identified my target customer to be families who lack the time to prepare special occasion cakes and cupcakes, upscale family neighbourhoods are one place I will find them. Or target food-related businesses that would prefer to have another person focus on the bread, rolls, cookies, cakes, and pies, such as caterers and restaurants. I will also find customers through the Internet, phone book as well as a restaurant review websites.

Why this business idea presents a business opportunity in the light of gather evidence

In light of gathering evidence, the identified cake business idea presents a business opportunity. This is because of the readily available market and lower cost of capital required to start the business. Currently, there is still a gap in the community regarding the cake business because not very many people have ventured into the cake business. Cake business is also booming during December when there are several weddings and Christmas season and this presents a business opportunity as well.

Financial Plan

 

Year 1

Year 2

Year 3

Year 4

Revenue

12000

14400

15840

17424

COGS

7200

 8640

9504

10454

Profit

4800

5760

6336

6970

Cumulative

4800

10560

16896

23866

Assumptions:

  • For simplicity only one product is considered for calculation purpose
  • Price per Product will remain same for 2 years and then it will increase by 10 % yearly
  • Year 1 Sales 50 cakes/month, thereafter it will grow by 20% next year and 10% thereafter
  • Price per cake is $20
  • Cost of good sold is 60% of sales revenue

Startup Cost requirement

Professional Oven $10000

Advertisement $ 500 

Website (domain +hosting + design) $1500

Delivery Bike $1000

Initial working capital $500

 Total Cost $13500

Validation of The Business Idea

To ensure that entrepreneurs do not hang on too long to a failed business concept an entrepreneur should develop business models and conduct feasibility analysis early on. When this is done the reality of failure (if the venture does not have a chance to succeed) will strike in a tangible manner and the entrepreneur will get a reality check. This will prevent the entrepreneur from hanging on for too long to a failed business concept.

  1. The first step in the evaluation of a new business idea is identifying a target market. In this stage, you have to analyse market which is going to purchase your product or service. Through this, I can understand more from customers like about their taste, habits etc. by considering their age, income, gender, education, occupation, family members etc., and that market research I have done.
  2. Next step is to do a research about the future competition of product. Under this, I will be able to analyse the other business firms with similar products. Also it helps us to better our product than the competitors. Under this case, I after seeing that there is gap in the field no other cake supplier is there in radius of 3 KM, moreover the quality and Pricing of my cake will be completive edge for my business.
  3. Next step is to conduct an analysis on the financial feasibility. Through this step, you will be able to understand the cost of starting the business, its needed capital, its earning potential etc. Thus, it provides us with a financial data about the business idea and for the formation of those resources.

There are various method’s to check the financial Viability of the business idea like NPV, Payback period etc, ROE model etc, In this case the capital required is not much so I expect to be viable business idea. , because I will get my investment back in with in first two years even if the sales are as low as per the table above.

References for Business Idea Evaluation

Wrigley, C., Straker, K., 2016. Designing innovative business models with a framework that promotes experimentation. Strategy & Leadership, 44(1),11-19.

Zott, C., Amit, R., & Massa, L. (2011). The Business Model: Recent Developments and Future Research. Journal of Management, 37(4), 1019–1042. https://doi.org/10.1177/0149206311406265

Mark Caine Quotes. (n.d.). BrainyQuote. Retrieved August 11, 2020, from https://www.brainyquote.com/quotes/mark_caine_156100

‌Schmidt, S. (2018). 5 Keys to Conducting a Market Opportunity Analysis. Marketresearch.Com. https://blog.marketresearch.com/5-keys-to-conducting-a-market-opportunity-analysis

‌Spaeder, K. E. (2019). How to Research Your Business Idea. Entrepreneur. https://www.entrepreneur.com/article/70518

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Management Assignment Help

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