Starting with a Good Idea: Forty Concepts for a Small Business (Concepts 18-31)

Welcome to the Canada Business audio workshop. This 6 part series will help you with basics of starting and growing your business and will cover some of the most challenging aspects of business ownership.

In this introductory episode we will discuss 14 of the Forty Concepts for a small business.

18. Locate A Patent Opportunity

Sometimes a business opportunity can be found by locating a patent for a product or service that has commercial value but has never been produced, or has been produced but inadequately marketed. This could include patents which have expired and can be duplicated without a licence.

Some Examples

A farmer recognized a need for mechanical rock-pickers and wanted to manufacture and market such a product. He performed a patent search, contacted the patent owners and purchased the patent rights from a patent owner who wasn't producing his rock-picker and started producing the rock-picker himself.

In 1944, the president of an existing company read an article about a dry copier which had been invented in 1938 but never produced. He purchased the patent rights from the inventor and his company developed a line of dry office copiers based on this patent. In 1960, the company changed its name to Xerox Inc.

A patents searcher looks for old patents for products that were ahead of their time and could still be marketable today.

How To Do It

Select an area of patents you wish to search (e.g. such categories as electrical, mechanical, chemical, seeds and plants, and style design).

To start your search:

• read the Patent Office Record at the local library and ask the librarian to help you conduct a patents search using library materials--professional searchers can save you time and effort with their knowledge, skills and modern tools;
• contact university industry liaison offices which specialize in university patents and technology transfer;
• contact the federal patents office in Hull, Quebec, indicating the type of patents you are looking for.
• contact a patents attorney or agent for professional assistance (look in the Yellow Pages phone book under Patents Attorneys and Agents - Registered);
• locate a company or organization which deals with the design and marketing of patents, (e.g., Yellow Pages under Patent Development and Marketing) and ask for information about rights to patented products or services they are currently developing for clients;
• advertise for inventors to contact you in reference to their patented products and services or contact major companies which may own patents for products they are not currently producing;

Key Questions

• What area of patents most interests me?
• Which available patents have commercial value and could represent a business opportunity?
• Who are the customers for the product I am considering producing?

19. Manufacture And Market Under Licence

A person/manufacturer who has a patented product or a protected trademark may license another person to use his/her design and/or sell that product under his/her name. Such a licence may grant exclusive rights for a particular geographic area and/or a specific market, and be linked to a defined period of time. Renewal of the licence is often tied to a specified level of performance.

Alternatively, you may sell a licence to someone in another area to manufacture and/or sell a product to which you own the rights.

Some Examples

The Workhorse for wood workers was invented in Canada and the licence to manufacture and sell it was sold to Black and Decker.

Publishing is a form of manufacturing under licence. Authors create books, sell the rights for their material to publishers, and receive royalties.

A Canadian entrepreneur contacted an American manufacturer of toy soldiers and obtained the rights to manufacture the toys in Canada.

How To Do It

Decide what type of manufacturing you would like to do.

Locate a product to manufacture by:

• reading publications relating to new products in the chosen manufacturing field;
• looking for suitable products being manufactured in other countries;
• approaching companies which may have rights to products they do not currently want to manufacture;
• attending trade shows;
• contacting venture capital organizations;
• reading classified advertisements listed under Business Opportunities in newspapers and trade magazines; and advertising for inventors to submit their ideas to you.

Identify and talk with potential customers to determine their need for the product.

If you have a product and want to licence someone in another area to produce it, you can find a manufacturer by:

• contacting manufacturing associations in Canada and other countries;
• advertising in the classified sections under Business Opportunities in newspapers and magazines;
• identifying manufacturers of similar products or products which would go well together in a package with your item;
• contacting manufacturers' agents;
• displaying your products at trade shows; and
• contacting venture capital organizations.

Seek professional financial and legal advice.

Key Questions

• For what product or service could I purchase the manufacturing and/or marketing rights?
• For what product or service could I sell the manufacturing and/or marketing rights?
• Is there a market for the product?

20. Improve An Existing Product Or Service

Frequently, an existing product or service can be improved by:

• enhancing the quality;
• reducing the cost of production;
• reducing the cost to the consumer;
• improving durability;
• increasing power;
• making it larger or smaller;
• making it more convenient to use;
• making it more comprehensive; or
• updating processes, materials or technology.

Improving an item by any of these means increases its value. Improving a product or service is different than adding value. When you improve a product, you use only the idea from the previous product, but improve on it to create a completely new item. When you add value, you purchase a product to use it as a base for your additions or changes.

Some Examples

A film processing outlet improved service by processing film much faster than competing firms.

A woman writes alternative instruction manuals for computer software programs. The manuals are easier to use and understand than those enclosed with the software.

How To Do It

Select an existing product or service which interests you and analyse the strengths and weaknesses of firms which currently provide it. Identify areas which could be improved and think of ways you could provide the same product or service with the improvement added.

Identify faults in existing products and services which you could eliminate in a similar product or service. Imagine various alternatives that could be tried--ask yourself "What if...?" to think of creative ways to improve existing products and services.

Talk to potential customers to find out if there is a market for the product or service you plan to offer.

Key Questions

• What products or services need improvements?
• How could I improve an existing product or service? Would this make it more marketable?
• How can I provide a product or service that is better than those which currently exist?
• Is there a market for my improved product or service?

21. Assemble A Product

There are scores of new opportunities in the growing market in packaging products for convenience . At one time when a person wished to put up two shelves, it was necessary to purchase a board, a box of two dozen screws of one size and another of two dozen screws of a second size (though you may only have need for half a dozen of each for the two shelves) and a package of a dozen shelf supports. Now any building supply store will be happy to sell you a two shelf kit, in one package containing exactly what you need, no more, no less.

People are quite willing and even happy to pay a premium for the convenience of finding all the parts packaged in one kit. Assembling these kits involves a little ingenuity and using your purchasing skills to buy parts or components in bulk and assembling them to produce the finished convenience kit/items. It can also entail providing an assembly service for parts purchased by others.

Some Examples

Kits are appearing on the scene in all fields; there are first aid kits, wilderness survival kits, wheel replacement kits for in-line skates, log home kits etc.

A mechanic offers an assembly service for customers who purchase car kits while many computer hackers offer services adding components and configuring computer systems for users.

A company formed by a recreation student brings in playground equipment kits consisting of pipes in various shapes, and assembles large custom playground structures.

How To Do It

Look for products which are made of several parts and meet one or more of these conditions:

• the assembly process is cumbersome and expensive for individuals, and there could be an interest in a central assembly service;
• the product is assembled from parts made in different locations and you are centrally located to become a convenient assembly point;
• the product needs to be assembled into its finished form before being shipped from your area to other locations;
• it is too expensive to ship the assembled product into your area as a completed unit, but the unassembled parts can be shipped less expensively and then be put together by you; (customs duties for imported components are considerably lower than those for finished products);
• the product is sold unassembled to consumers, but the average person is not willing or able to assemble it; or
• the assembled product is a bulky item which is difficult to transport, but the separate parts are easy to ship.

Analyse various products and assembly operations to find situations where you can save yourself or someone else time, effort or money by setting up your own assembly operation.

Identify and talk to potential customers for the assembled product to determine whether there is a need for the item.

Key Questions

• What product could I assemble to save someone time, effort or money?
• Is there a market for the product?
• Have potential customers stated that they would buy the product?

22. Recycle An Existing Product

When you recycle an existing product, you take a product that has come to the end of its useful condition and either rebuild it to a "like new" state or remanufacture it into another product.

Some Examples

A company retrieves alternators and starters from wrecked cars, rebuilds them and sells them as reconditioned parts.

A man reconditions non-working or unwanted household appliances and then resells them.

A company takes motors out of junked cars and remanufactures them into inboard marine motors.

A firm turns discarded tires into floor mats for workshops and garden centres.

How To Do It

Find a product which:

• wears out with use over time;
• can be rebuilt by adding new parts or re-conditioning old parts to original standards; and
• is expensive enough when new to warrant a rebuild which can then save customers money.

Find a product with components that can be used to make a different product. To identify a product with recyclable parts, look for one which:

• wears out with use over time;
• is not worth rebuilding to a "like new" condition;
• has one or more components which are still in usable condition and
• can become an inexpensive source of parts or materials which would cost more if purchased new.

Find out if the used products or parts can be obtained easily, economically and reliably.

Develop a procedure to disassemble, rebuild and reassemble the components.

Determine whether there is a market for the reconditioned or newly created products by talking to potential customers.

Key Questions

• What used product could be rebuilt or turned into a new product?
• Is there a market for the reconditioned or new item?
• Can the recycling procedure be carried out practically and efficiently?

23. Become A Supplier

A supplier produces a product or service which is then used by someone else as part of a larger product or service. A supplier may provide a single specialized part or a large number of simple parts. Sometimes there is an opportunity to become a secondary supplier when the larger producer does not want to rely on a single source of supply for critical parts.

Some Examples

A firm supplies brake harnesses to truck manufacturing plants.

Secondary suppliers of specialized integrated circuit chips are needed by computer manufacturers, to avoid supply shortages when single suppliers have production or labour problems.

A woman provides an editing and proofreading service to help consultants in various industries produce professional project reports.

How To Do It

Ask your current employer for the rights to supply a component for the product being manufactured.

Contact purchasing agents who work for manufacturing companies. Ask them about their supply needs, trying to identify supplies which are difficult to obtain, too expensive or come from a single source which may be at risk.

Look for request-for-supply notices in newspapers or trade journals.

Read trade journals to discover supply problems for particular industries.

Have your name added to mailing lists of public purchasing agencies which are required to advertise publicly for tenders on supplies.

Read publications which explain how to sell products and services to specialized organizations such as the military or governments.

Identify a product or service you can offer and analyse the range of producing organizations which could use it as part of their process.

Key Questions

• What products or services could I supply?
• Could these products or services by used as a component by another producer?
• Is there a market for these products or services?

24. Replace Imports

Import replacement means replacing a product or service that is currently being imported into Canada with a similar item that is produced locally.

Some Examples

A line of farming irrigation equipment was imported from Europe. A firm began making similar equipment as an import replacement in the local market.

Propellers for ultra-light planes were imported from the United States. A Canadian company began manufacturing the propellers to replace the imported parts.

How To Do It

Identify a product or service which is imported into Canada and which you could produce locally. To find such a product or service:

• examine import publications and importer's catalogues;
• contact purchasing agents to identify goods which are purchased by local industries;
• examine the products around you to find out where they are made; and

Determine your areas of expertise, and then analyse imported products related to your talents to find out which could be produced locally.

Find out which imported products within your fields of expertise are too expensive because of shipping costs or tariffs. Determine whether you could produce replacement goods locally, and lower the cost to customers.

Identify and talk to potential customers of the product or service you are considering to determine whether there is a market for a locally produced item. Investigate this thoroughly, as potential customers may continue to buy the imported item if the local item differs in some way -- for example, in quality, colour or construction.

Key Questions

• What imported product could I replace by producing it locally?
• Have potential customers said they would buy a locally made product?
• Have I thoroughly researched the product or service I am considering, to make sure it equals or surpasses the standards set by the imported article?

25. Cater To Discarded Markets

Catering to discarded markets means entering areas left behind by other companies which:

• have become so large they cannot, or do not, wish to handle small orders;
• are competing at the leading edge of a technology and have decided not to service markets based on older technologies; or
• are expanding into different markets so quickly that they are unable to service all of them properly.

Some Examples

Large airlines which cannot afford to service small communities have left a discarded market for small commuter carriers to pick up.

Obtaining parts for antique cars, tractors, boats and other equipment is difficult for hobbyists and collectors with interests in those areas, since the original manufacturers often no longer supply these. Other companies sometimes move in to service these discarded markets.

After a period of time when milk was available only in cardboard cartons or plastic containers, some dairies have now returned to supplying milk in bottles. They are addressing a discarded market--people who still prefer bottled milk.

How To Do It

Identify areas of technology into which many companies are moving, then analyse the markets left behind as a result.

Locate companies which have changed their products or services, then find out whether some customers still require services or products of the previous type.

Identify products which become obsolete quickly but remain useful for a much longer period of time. Look for servicing opportunities which have been dropped or overlooked by these companies as they continually focus on the newest models to arrive in the market.

Look for industries which have taken a new direction to appear up to date, then analyse the opportunities created by the move away from the previous way of operating.

Talk with potential customers to find out if they would buy the product or service you are considering.

Key Questions

• What industries or companies have recently made major changes as a result of new technology, products or approaches to business?
• Which of these changes may have resulted in previous markets being discarded or left behind?
• What other discarded markets do I know of?
• How many potential customers have indicated there is still a need for the discarded services or products I have in mind?

26. Target A Small Part Of A Large Market (Niche Marketing)

Sometimes it is possible to enter a large-volume market, with the goal of servicing just a small piece of it. This can succeed only when the market is so large that a small portion of it will be profitable.

Some Examples

The fast food industry is large and still growing rapidly. A woman opened a small fish restaurant in a suburban neighbourhood and succeeded despite major fast-food chains operating in the same area.

A small brewery opened with the intention of serving only a small percentage of the market. It was successful and did not pose a threat to major breweries.

Several software companies have realized profits by serving a small part of the computer market by offering specialized products to limited segments of the market.

How To Do It

Identify large-volume markets by examining economic reports, trade association figures and marketing studies.

Select a market in which you feel you could capture a small percentage.

Develop a plan that will allow you to compete effectively. Seek to gain an advantage through your location, type of facility, personal reputation, level of service, selection of goods, price, business concept or advertising.

Avoid highly competitive markets in which large organizations are battling for each single percentage point.

Talk with potential customers to find out whether they would buy the product or service you want to provide.

Key Questions

• What high-volume markets exist?
• Which would be the most suitable for a small operator to enter?
• What product or service could I offer to gain a small percentage of a large-volume market?
• What potential customers have said they would buy the product or service I want to provide?

27. Add Value To Existing Products

You add value when you buy an existing product or service and then add materials, processing or services to create a more valuable end product. You then resell the product in its changed form. Value may be added by:

• putting the product through an additional process;
• combining the product with other products;
• offering the product as part of a larger package of services;
• removing something to change the use of the product; or
• increasing levels of service.

Some Examples

A student who operated a home painting business expanded the operation by buying furniture then painting and reselling it.

A businessman bought irrigation pipes, rolled them into oval shapes, screwed fittings onto them and marketed them as sailboat masts.

A car service centre telephones every client to check on the quality of recent repair work and promote additional services.

How To Do It

Find an existing product or service and think of an additional process, material or service that could be added to create a new product. For example, a product or service may be more successful if an additional element such as packaging or distribution is added.

Identify a process or service which you could provide, then look for types of existing products or services which could be used as a base for your desired operation. For example, if you can provide a packaging service, look for products which would become more valuable if packaged.

Find an existing product which could be changed into a different or improved product by adding or subtracting one or more elements. If additional elements are required, locate a source for these and develop a method of adding them. Conversely, if elements must be subtracted, find a workable way of doing so.

Find a client group which has needs that are not being met by existing products and services. Make the required changes to existing goods to adapt them.

Find a product which does not work well, or is not well-accepted by a client group because of its inadequacies. Then improve it by adding or altering elements.

Talk with potential customers to find out whether there is a market for the product or service you are considering.

Key Questions

• For every product or service I am aware of, what can I add to make it more marketable before reselling it?
• What products or services could I provide which would add value to an existing product?
• What products or services can I think of which would benefit by adding, subtracting or altering elements?
• Who has indicated they would purchase the product or service I want to provide?

28. Substitute Materials In Existing Products

An existing product can sometimes be improved by changing the material from which it was made. This can easily alter the product's characteristics, making it lighter, stronger, more flexible, cheaper to produce and/or more environmentally sound. Products with different characteristics appeal to different target markets.

Some Examples

A company substituted plastic for metal in fishing lures. The lures are now less expensive to produce, lighter in weight and easier to keep shiny.

A plastics manufacturer makes plastic buckets for grain elevators. These are an improvement over the metalbuckets previously used, because they are stronger, do not dent and do not corrode.

How To Do It

Examine products to see where they might be improved or appeal to a different market through the use of substitute materials.

Consider any material which you have in good supply, analysing its characteristics to determine which products use similar materials and might benefit from a substitution.

Find production processes which are inefficient due to the materials currently used. Find ways to improve the process by replacing the inadequate materials. For example, materials may be inadequate if they are too expensive, too difficult to work with. unsafe, in short supply, or consumed in the process. Look for substitute materials which are cheaper, easier to work with, safer, in greater supply or re-usable.

Talk with potential customers to determine whether they would purchase the improved item you want to provide.

Key Questions

• What products can I think of which could be improved by substituting one or more materials?
• What materials do I have which could be substituted for an inferior material currently used in a product?
• What customers have stated they would purchase the improved product?

29. Find Uses For Waste Material

Sometimes uses can be found for waste materials --by-products, left-over materials or other resources discarded by individuals or companies. These materials can often be obtained free or at a very low cost and then processed to produce useful goods.

Some Examples

An American company buys older mainframe computers from corporations, salvages the precious metals and alloys, and recycles them for other products.

A businessman purchases infested lumber, peels the logs into thin strips, compresses them and sells the products as decorative wall panels.

An entrepreneur contacted a chicken processing plant which discarded large volumes of chicken feet and asked to take them away. He froze the feet, then sold and shipped them to China where they were cooked, combined with sauces, packaged and exported back to Canada as a dim sum delicacy.

A diesel generating plant uses its exhaust to heat an adjacent greenhouse that is able to grow vegetables in the winter to meet local market demand.

How To Do It

To find waste materials which can be reused:

• take inventory of all products discarded from your existing business venture;
• identify obsolete products which, although no longer used by a business or industry, remain in storage; and
• observe materials collected by recycling companies, local waste product dumps, demolition specialists and junk pick-up services.

Read trade publications to identify byproducts which are causing problems for processing and manufacturing plants.

Read technology magazines to discover new processes which use waste products as a source of materials.

Contact the recycling hotline (604-360-3030 or 1-800-667-4321). Analyse the value of waste products to other producers. Consider whether these waste products may be used in their original form, as parts, or as material in a recycled form.

Develop new uses for existing materials to create a more-valuable end product.

Study ways in which waste products are recycled in other parts of the world, and develop similar systems in your area.

Talk to potential customers to determine whether they would buy your product.

Key Questions

• What waste materials are available to me?
• Which of these waste materials could be used to produce something useful and saleable?
• Is there a market for the end product I am considering? Have potential customers said they would buy it?

30. Combine Components

Often it is possible to combine two or more component businesses to create something with a new look. This works best when the new business/product is unique and more marketable than the separate businesses/items alone.

Items which can be combined include products, services, people, businesses and assets.

Some Examples

A sun tanning parlour and a beauty salon were joined together in the same facility to offer an expanded range of services. Business improved for both parts.

Sales of cranberry juice were dramatically increased by combining it with other fruit juices to create a new range of drinks. Ice tea was flavoured and bottled to create new successful beverage product lines.

Several tradespeople combined their services to offer a comprehensive home maintenance and repair service.

How To Do It

Start with a business, idea or product that interests you and ask what could be combined with it to create something unique.

Look for consumer groups which have needs that could be served by combining two or more existing products or services.

Experiment with various combinations to see what would fit together. Use lists of types of businesses (such as the index for the Yellow Sections in your telephone directory) and imagine the results of different combinations among the topics listed.

Talk with potential customers to find out whether there is a market for the combination of products or services you want to offer.

Key Questions

• What products, services or other items could be combined to create a new opportunity?
• What suitable combinations could I handle?
• How many potential customers have indicated that there is a need for the end product I am considering?

31. Package Or Unpackage Existing Products

Opportunities exist to package, repackage or unpackage existing products. Commodities sold in bulk may be packaged (called "breaking bulk"), while items traditionally sold in packages may be offered in bulk. Alternatively, items already supplied in a packaged form may be repackaged to make them more attractive, more convenient, reusable, easier to use, easier to preserve, or biodegradable.

Some Examples

Strawberries are bought in bulk, sorted into smaller amounts, and packaged in attractive boxes for resale.

A company buys quantities of steak and lobster tails, packages them together as steak and lobster dinners, and sells them to food stores as gourmet meals.

A company buys salmon and packages it for passengers on airlines.

A company identifies food sold in packages and offers these products in bulk with no packaging.

How To Do It

Look for a product that is poorly packaged and think of improvements.

Find a product which is normally sold without a package and devise a package that would increase its sales.

Locate a product that can be purchased in bulk quantities and repackaged into smaller amounts.

Find two or more separate products that consumers usually buy or use at the same time. Then plan a package which combines the items, and offer them for sale as a single unit.

Look for products which are usually packaged, and consider whether you could sell them in bulk, to lower the price or address the environmental concerns of consumers.

Talk to potential customers to find out whether they would buy the alternatively packaged product.

Key Questions

• What products or commodities could be packaged, repackaged or unpackaged so that they would sell better?
• What alternative markets exist for products currently offered just one way? Could packaged goods be unpackaged?
• Could unpackaged goods be packaged?
• What markets exist for the product whose packaging I am considering changing?

This concludes our introductory episode of the Canada Business audio workshop series, for further information on anything discussed in this episode please contact the Canada Business service centre near you by calling 1-888-576-4444.

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