2.2 Introduction to Opportunity: The concept of matching

As illustrated by the opening case, opportunity is the marriage between the entrepreneur and the business environment. Some people are able to perceive and take advantage of opportunities while others are not. Two major factors that differentiate those who recognize and pursue opportunities are, first, the unique knowledge and prior experience of the individual, and second, their willingness to take action. This chapter discusses these concepts.

This is a book that focuses on entrepreneurial opportunity, that is, the possibility for new goods and services to be created and sold. Not all opportunities are created equally. From the perspective of the entrepreneur an opportunity is at its best when the proposed product or service offering solves a customer problem in a way that is significantly better than already existing solutions. Thus the emerging firm is able to move into uncontested market space. This makes entry easier, survival more sure, and growth more probable and profitable. Under such positive conditions mistakes, the constant companion of all entrepreneurs, are not as likely to be fatal to the emerging business.

Opportunities are highly individualized. A set of circumstances that may present a good opportunity for one person may not be an opportunity for a different individual with different knowledge, skills, and proclivities. This is so because business opportunity is only recognized when an individual or teams encounters circumstances in the business environment which their past knowledge and skills suggest the presence of current or future unmet customer needs.

Thus, opportunity is a function of both the entrepreneur and the business environment. Individuals or small groups cannot recognize all opportunities, because they lack the requisite knowledge to do so. Likewise, no single set of circumstances would be an opportunity for all individuals, because only some will have the necessary knowledge, skills, and resources to take advantage of the opportunity. Because opportunity is contingent on the alignment of environmental forces and individual characteristics, other people typically cannot tell you what would be a good opportunity for you. Your best opportunities will be uniquely suited to you. Thus, the first requirement of a good opportunity is that it is suited to your knowledge, skills, abilities and passions. Generally, the most important resources that entrepreneurs control are their own knowledge, skills, abilities, and willingness to work. They may also have developed a professional reputation. Generally, entrepreneurs have limited financial and physical resources. Given these generalities, the opportunity is most favorable when the following three conditions are met: (1) the proposed product or service leverages the knowledge, skills, abilities, and work ethic of the entrepreneur, (2) it is possible to prove that the business model works without spending a lot of money, and (3) the venture begins to generate cash flow rapidly.

Even though opportunities are highly individualized there are industries and sectors in which emerging firms seem to grow more rapidly and profitably than others. Almost all entrepreneurial companies that make it into a high growth phase do so because they have managed to find market space where customers want their product or service, and they do not have a lot of direct competition from more powerful competitors. High growth entrepreneurial firms are usually not trying to supplant existing competitors. Existing competitors have already survived the liabilities of being small and new. They already have an existing customer base. If your major contention is that you can provide better service at a lower cost, the probability of profitable growth is diminished. Though growth is still possible in less than optimal conditions, it requires greater effort and skill, and allows less margin of error. A vital aspect of the most favorable opportunities is relatively uncontested market space. When market space is uncontested the entrepreneur is able to defend the market space for a period of time sufficient for them to be able to reap the financial benefits.

The objective of this first chapter is to introduce the concept of matching your own knowledge and skills to conditions in the business environment. The most viable new ventures match the knowledge, skills, abilities and passions of the entrepreneur with an unsolved problem or unmet need in the market place. The following four examples illustrate how the conditions in the business environment match the skills and resources of the entrepreneurs.

Portable Church Industries

First, we refer to Pete van der Harst of Portable Church Industries. As a student at the University of Michigan he participated in a short-term internship at United Parcel Service. He was assigned to a logistics engineering project. He was greatly impressed by the company's ability to translate exhaustive performance metrics into productivity gains. In 1990, Pete was hired as the Operations Manager for the Kensington Community Church in Troy, Michigan. KCC had no building and thus planned to hold services in a variety of venues which might change from week to week. Thus, as a "portable church," they wanted to do "church" as efficiently as possible. Because of his unique background in engineering and his experience at UPS logistics, Pete was able to effectively study the different ways to move the equipment necessary to hold church meetings efficiently with less people hours. Thus, was born the concept which formed the foundation of Portable Church Industries (PCI).

Kensington Community Church gained a reputation as the most efficient "portable church" in the area. Two years after the initial launch, Kensington Community Church was setting up for 800 people per service. To do this they needed only six volunteers for 2.25 hours. The equipment for this many people included seating, books, speakers, pulpit, and dozens of other pieces of equipment. The church's efficiency contrasted greatly with another local portable church that was using 25 volunteers for three hours for a service with half as many people.

After leaving the Kensington staff in 1993, Pete began independently consulting with churches that wanted to emulate Kensington Community Church's efficiency. One afternoon, as Pete was explaining to a pastor how an efficient portable church runs, it struck him that churches would be willing to buy prepackaged portable solutions for their services. Churches needed the freedom to focus on the ministry, not on logistics. Armed with this insight, Pete started Portable Church Industries, which offered both consultations and equipment to interested churches. As the company developed its product was called "Church in a Box", "Porta-Church", "Church on Wheels", and other forms of "Portable Church."

 Dave Bowman of New Horizon Church in North Carolina was the first pastor to buy a solution from PCI. New Horizon was an existing church that needed help streamlining their setup/teardown process. The following year, River Valley Church in Minnesota became the first new church to hire PCI. They spent $2,500 on a consultation with PCI. In 1999, PCI logged its 100th customer. Between 1999 and 2006, PCI provided consulting to another 400 churches and sold equipment to a further 300.1

EVSource

The second story follows a similar pattern, but in a very different industry. In 2004 Ryan Bohm was an undergraduate electrical and computer engineering student at Utah State University in Logan, Utah. For his senior project he set about converting his 1984 Nissan 200SX Turbo, with a seized-up engine, to an electric vehicle. The conversion cost was about $7,500, but Ryan had a difficult time tracking down all of the parts that he needed to make the conversion.

As a result of that experience, he thought that there might be other electric vehicle hobbyists with the same problem. He had some good computer skills and had been designing and hosting websites for a limited number of small businesses while he was attending school. Using his computer background and his experience retrofitting his own car, he decided to start a small venture. He contacted suppliers, arranged drop-ship agreements, and developed a website. Much of this was accomplished while he was attending school full-time and working an almost full-time job.

Ryan completed his car and engineering degree in 2005 and also completed an MBA degree in June of 2007. The venture had grown sufficiently by that point in time that he devoted his full attention to the business. A customer wrote of Ryan's business, "[I got] a ton of parts (and good measure of advice) from Ryan Bohm at EVSource (highly recommended) as he completed his electric vehicle conversion."

In this emerging industry, some suppliers are not as reliable or responsive as they could be. For a period of time, one of the suppliers of electric motor controllers was unable to provide controllers. The lack of performance by the producers of controllers not only left a void, but impacted the sales of both Ryan's venture and those of one of his suppliers, a motor manufacturer named NetGain Motors. During a discussion with NetGain, the idea of manufacturing a new controller that utilized automotive quality components, and took advantage of new state-of-art components was tossed around. Ryan provided the technical design and customer support, while NetGain provided the manufacturing capability. Therefore, in January of 2009, Ryan of EVSource initiated a joint venture with George Hamstra of NetGain Motors to form NetGain Controls to manufacture their controller.2

Stampin' Up

April 1988, marked a milestone in Shelli Gardner's life, though she didn't quite realize it at the time. She and her sister had moved to Las Vegas, Nevada. In their spare time the two young mothers worked for Tupperware and similar companies to raise extra cash for their families. Meanwhile, the sisters became involved in the interesting hobby of rubber stamping. Shelli enjoyed working in a home-party environment and was curious whether similar businesses existed in the rubber stamp industry. After some searching she was unable to locate any that did; consequently, as Shelli's biographical sketch explains, "Shelli began to imagine the possibilities of beginning a stamp company that offered a wide variety of stamp styles, high-quality accessories, and an ongoing commitment to customer service and sharing the art of rubber stamping through home workshops with family and friends."3

Her family had saved some money for a down payment on building a home, but this plan would have to wait. Instead, the money was used to launch Stampin' Up!, quite literally, on the top of a table in their home. Shelli had little college background or business experience, however, she was confident in the business idea. Stampin' Up! opened for business in 1988 with a 64-page catalog filled with stamps other companies manufactured. Orders were first filled from her living room. Shelli had eight demonstrators in the fall of 1988 – mostly family members willing to share the risk. They had sales of nearly $50,000 their first year. In 1989 the sisters moved to Boulder City, Nevada to expand operations. By 1992, Stampin' Up! was "custom designing, manufacturing, and selling its own line of exclusive designs…of rubber stamp sets and accessories."4 It took six years to transition away from carrying the art of other companies to having their own exclusively designed and manufactured stamp line in 1997.

In 1993, Stampin' Up! relocated again, this time to the sisters' hometown of Kanab, Utah. The sisters' husbands quit their jobs and used their skills to make stamps for the company. This manufacturing plant would soon become the largest private employer in the small town of 3,564. Yet, Shelli soon realized the limitations of working from the small, isolated town. The infrastructure was underdeveloped in comparison to their needs and some positions were hard to fill, severely limiting their growth.

Because of these concerns, in 1996, Stampin' Up! opened an office and subsequent distribution center in Salt Lake City. As of 2008, Stampin' Up's sales exceeded $200 million. Due to the recession there was a 10% decrease in sales in the spring of 2009, yet Stampin' Up is weathering the storm successfully.5

Prime Time Boxing

Former professional boxer Angelo Nunez along with his wife, Cary Williams-Nunez, founded Sacramento-based Prime Time Boxing in 1998. According to Williams-Nunez, the idea for Prime Time came from Angelo. He found that he had to go to one gym to box but a separate one to do a traditional cardio workout. "There weren't treadmills or there weren't weights there; it was just boxing," says Williams-Nunez. "A light bulb went off and I said, 'Why don't we open something where people can come in and learn real boxing and go through the conditioning principles?"6

Instead of traditional boxing classes, the firm holds boxing boot camps. The fast-paced camps cover topics from how to throw a punch – a jab – to how to hit a heavy bag. Williams-Nunez says, "Boxing is one of those activities that you're going to be able to get in shape much faster and more effectively than doing just one type of exercise."7 Students have a "weigh-in" at the beginning and the end of their training to help them keep track of their fitness level. As of 2009, Prime Time had three franchised locations in California and is working to open new locations. The founders of the firm are achieving considerable success thanks to their background in boxing and because of media attention in outlets including Entrepreneur, USA Today, New York Times, Men's Fitness, FHM, Muscle & Fitness HERS and Oxygen.8