what is the best way to evaluate business opportunities essay

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How to Identify Business & Market Opportunities

• 05 Apr 2022

Although many aspiring entrepreneurs start with an idea for a new business, the question remains: Is the idea a business opportunity? In other words, does it fulfill a market need, solve a customer pain point, or improve an existing product?

Perhaps you want to assess whether your business idea is viable, or you like the concept of entrepreneurship and are searching for the right opportunity to jump in. Either way, you need to familiarize yourself with different types of business opportunities and learn to identify them.

Lessons for recognizing and acting on business and market opportunities can be gleaned from Harvard Business School Professor Clayton Christensen, who teaches the online course Disruptive Strategy .

Here are three types of business opportunities to search for, tips to identify them, and how to maintain a disruptive mindset for entrepreneurial success.

Access your free e-book today.

Types of Business Opportunities to Search For

1. jobs to be done.

At its core, entrepreneurship is the process of using available resources to fill unmet market needs. One way to identify those needs is through Christensen’s jobs to be done theory , which states that people don’t buy a product; they “hire” it to do a job.

One example Christensen outlines in Disruptive Strategy is McDonald’s milkshakes. McDonald’s executives were surprised to find milkshake sales were highest in the morning. By conducting research, they discovered customers were hiring milkshakes to do the job of keeping them occupied and full during their morning commutes.

“It allows you to reach out and grab ahold of the causal mechanism that causes customers to buy your product or service,” Christensen says in Disruptive Strategy. “If we understand the job the customer is trying to do, and then develop a product that nails this job perfectly, the probability that your innovation will be successful is improved in dramatic ways.”

This theory also expands the scope of the competitive landscape and helps you conceptualize how many choices customers have when they want to get a specific job done.

Returning to the milkshake example, customers could have hired quicker snacks like bananas or granola bars to do the same job of keeping them full and occupied during their commutes, even though they wouldn’t be considered direct competitors. In this case, the milkshake beat out competitors because its thick consistency allowed it to be consumed slowly over commutes.

2. Low-End Market Opportunities

The key to identifying market gaps is understanding the theory of disruptive innovation . This theory, also coined by Christensen, explains how companies with fewer resources can enter existing markets and disrupt incumbent businesses that own segments of them. There are two types of disruptive innovation : low-end disruption and new-market disruption.

Low-end disruption occurs when a new market entrant claims the lowest segment with a low-profit business model. Entering at the bottom of the market ensures the incumbent company isn’t financially motivated to fight back; after all, it owns the highest-profit segments.

Over time, the new entrant moves into the next highest market segment. Once again, the incumbent company is financially motivated to pull out of that segment and move into higher-profit ones. This continues until the new entrant has completely driven the incumbent company out of the market.

This method is more effective than trying to directly compete with the incumbent company for top market segments because it’s likely to defend its position.

3. New Market Opportunities

The other type of disruptive innovation is new-market disruption . It provides ample opportunity for entrepreneurial success, so it’s important to know how to identify it.

New-market disruption occurs when a company creates a new segment in an existing market. This new segment can often cater to people overserved by existing offerings, meaning they aren’t willing to pay for the latest features of the incumbent company’s products.

If you identify such an opportunity, make a product that’s less expensive and of “good enough” quality to create and capture a new market segment.

One example of new-market disruption is the transistor radio, which entered the personal entertainment market with the first model by Texas Instruments in 1954. The portable radio catered to young, non-wealthy people who were overserved by other radio offerings at the time, which were large, expensive, and designed to sit in homes like a piece of furniture. By creating a cheap, “good enough” option for listening to music, Texas Instruments paved the way for higher-quality options, such as the Sony Walkman and Apple iPod, which eventually rendered in-home radio consoles obsolete.

By identifying overserved people in any market, you can find and act on opportunities.

Related: Innovation in a Disrupted World: How to Discover New and Emerging Jobs to Be Done

3 Ways to Identify Business Opportunities

With a foundational understanding of the types of opportunities that exist, you can dive into identifying them. Here are three ways you can do so and examples to learn from.

1. Identify Your Pain Points

When searching for potential market needs, start with yourself. In your everyday life, what processes or tasks bother you? What’s the job to be done that you haven’t quite found the perfect product to fulfill?

Many successful entrepreneurial ventures began with a personal problem in the founder’s life. For instance, after Neil Blumenthal lost his prescription glasses and couldn’t afford to buy new ones, he created an eyewear company that provides inexpensive, stylish glasses: Warby Parker.

Another example is the dating app Bumble, which Whitney Wolfe Herd created after leaving an abusive relationship. The app puts women first, requiring them to make the first move in heterosexual pairings, and advocates for gender equality and sexual harassment prevention.

Starting with personal questions can help determine if others have the same pain point and if opportunities are low-end or new-market disruptions.

Related: 4 Entrepreneur Success Stories to Learn From

2. Conduct Market Research

Another way to prove whether a business idea is viable is by conducting market research . This includes using industry research to define the competitive landscape and determine your target audience, as well as interviewing or surveying people who fit your target demographics.

Observing and gathering feedback from real people enables you to consider their perspectives and gain a deeper understanding of their motivations, frustrations, fears, and desires. This can help you conceptualize whether your product addresses a job to be done and the size of the audience that could benefit from it.

Once an opportunity is identified, you can utilize design thinking to create an innovative product that fits the job to be done you uncovered through research.

3. Question Processes

You can also identify business opportunities by examining the processes and delivery methods of existing product or service offerings. Try to evaluate each process with an open mind and ask questions about how you could improve it, such as:

• Could this process be faster?
• Could this process be executed using a cheaper business model?
• Is there a more sustainable way to execute this process?
• Does this process exclude certain groups of people? If so, is there a way to make the process accessible to all?

You don’t have to reinvent the wheel to break into entrepreneurship—you just need to recognize the potential for innovation that already exists.

Leading with a Disruptive Lens

When searching for business and market opportunities, lead with a disruptive lens. Using Christensen’s jobs to be done theory, you can identify customer needs that aren’t being fulfilled, then assess them using his theory of disruptive innovation to determine if there’s a low-end or new-market entry point for your product.

Rather than directly challenge companies dominating market segments, you can identify people who are over- or underserved by existing offerings and compete on a disruptive level.

To deepen your knowledge and learn how to craft an end-to-end disruptive strategy, consider taking an online course. Disruptive Strategy uses a “learn, practice, apply” approach: Christensen teaches key concepts and frameworks, then introduces case studies and interviews featuring real business leaders. Christensen also encourages you to put those frameworks on “like a set of lenses” and apply what you’ve learned to your business.

Are you interested in crafting an innovative strategy for your business? Explore our six-week course Disruptive Strategy , one of our online entrepreneurship and innovation courses . If you aren't sure which is the right fit, download our free course flowchart to determine which best aligns with your goals.

About the Author

5 Factors to Use When Evaluating a Business Opportunity

Many of us are faced with business opportunities on a regular basis. Deciding what’s worth embracing, though, can be difficult. Whether you’re starting a new business or whether you’re trying to expand your current business with a new opportunity, it’s vital to know how to appropriately evaluate it.

As you look forward, here are some things to consider when deciding whether a business opportunity is worth embracing:

Table of Contents

1. Market Size

One of the most important factors when evaluating a business opportunity is market size. Do a little market research. Figure out if there is a market for the opportunity — and how big that market is.

Before you move forward, you want to be sure the demand is there. You don’t need to appeal to a massive market, but it does help if you understand the market. Additionally, knowing how engaged the market is and how likely they are to pay for what’s being sold can help.

2. Relationships

Does the business opportunity come with some relationships? For example, do you have an “in” that can help you leverage the opportunity? If you know someone who is technically minded, that can help you with certain aspects of the opportunity. What are your relationships with potential investors or customers? When you have more relationships, the opportunity is likely to run smoother.

3. Ability to Manage Cash Flow

Next, you need to look at the ability to manage cash flow. Is there start-up funding for the business? What about ways to keep funding the business each month. Figure out how the cash flow will be managed, and take a look at the business plan. You want to make sure that the business is likely to sustain itself after a period of time.

4. Management Skillsets

What are the skillsets of those involved? If you are evaluating your own business opportunity, you need to be honest about what you bring to the table, and what you need to make up for. When looking for a business opportunity to invest in, or expand into, look at the management. What skills do they have? Are they appropriate and diversified? Do you trust the competence of the principals to make the opportunity a success?

5. Passion and Persistence

Even if there is a bit of a talent deficit, it’s possible, in some cases, to make up for that with passion and persistence. Are you working with people who will get the job done?

Do you trust that they have the passion to make things happen? Will they approach problems with a can-do attitude in order to solve them?

When dealing with your own startup, you need to make sure you have the passion and persistence for the opportunity. Will you push through even though things get a little dark? If you’ve done your research, and you are confident in your team and your plan, then being able to push through is vital.

Sometimes You Have to Say No

Once you’re done evaluating the business opportunity, it’s time to decide whether it’s a good idea to make a move. Sometimes, the answer is no. Going through the exercise can help you make these decisions faster — before you waste too much time on “opportunities” that really aren’t.

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Prioritize Your Opportunities with This Checklist

• Doug Andrew

How to filter out the things that aren’t worth it.

How do you evaluate the myriad of business opportunities you face every day? Should you speak at that event? Author a book? Attend a strategy summit? As you face an opportunity, or as you seek the opportunities you’d like to pursue, try ranking them according to five critical factors. 1.) Will this opportunity utilize your unique talents and abilities? 2.) Will it have an impact on people? 3.) Is this an opportunity for you to grow? 4.) Is it creating value for the business? 5.) Does it create opportunities for referrals to new customers? Rank your answers to these questions on a scale of -1 to +5 (Starting with a -1 highlights that some aspects of a project are actually a net negative – such as speaking to the wrong audience or the wrong industry). Then, tally your score. An opportunity that scores a 15 or lower may not be worth considering, while a score of 20 or higher would be a clear win.

How do you evaluate a business opportunity? The world is replete with SWOT mechanisms for evaluating a prospective new product offering, as well as with opportunity assessment templates for evaluating a project against overall business goals, customer impact, strategic potential, and competitive urgency. These instruments play a vital role in acquisitions, new products and features, and even the new divisions of business you’d like to deploy.

• DA Doug Andrew is the founder of Live Abundant, a company that educates on topics of health, wealth, and life fulfillment. He is the author of multiple books that include The Last Chance Millionaire, Millionaire by Thirty, (co-authored with sons Emron and Aaron) and Entitlement Abolition .

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Identifying and Evaluating Opportunities

Leading provider of teaching materials for management education

This module explores how entrepreneurs generate and develop ideas to create new business models and viable business plans.

6 Topics in This Module

Evaluating opportunities.

Entrepreneurship Reading: Recognizing and Shaping Opportunities provides an overview of the process entrepreneurs use to get and develop the ideas that they formalize and refine in their business plans. The supplemental case Dinr: My First Start-Up (A) has students examine a decision-making process of starting a new, innovative company and evaluate the market opportunities and risks.  

Developing Business Plans

Entrepreneurship Reading: Developing Business Plans and Pitching Opportunities explains how to translate a business model into a compelling business plan and pitch.  Harvard ManageMentor: Business Plan Development is an online course that guides students through each part of a business plan. William A. Sahlman’s note, “Some Thoughts on Business Plans,” is unusually broad, providing analysis and guidance. Some of the core ideas in the note are distilled in the alternative HBR article, “How to Write a Great Business Plan.” The article is brief enough to be paired with the case How Venture Capitalists Evaluate Potential Venture Opportunities as a one-night homework assignment. The case is unusual in its gathering of perspectives from several venture capitalists.

2 hours, 6 minutes

Modeling a Business

"Business Model Analysis for Entrepreneurs" gives students additional background for understanding business plans. The note divides business decisions and tradeoffs into four groups—revenue sources, key expenses, investment size, and critical success factors—and systematically examines all four, clarifying discussion with case examples and briefly introducing analytic techniques.

Shaping Business Plans

In the main case, Pack-iTS , a group of six university students create a business plan to decide whether they should proceed with Pack-iTS, an entrepreneurial venture offering healthy lunch preparation and delivery that would serve some of the elementary schools in London, Ontario. In the alternative case, Norgan Theatre , students are asked to write a cohesive and comprehensive business plan for a municipally owned movie theater in a small town.

Refining a Business Plan

This topic explores how entrepreneurs refine their business plans at more advanced stages. Primedic-Providing Primary Care in Mexico examines a struggling healthcare startup that is contemplating how to change its business model as it is about to exhaust its first round of venture capital funding. Zipcar: Refining the Business Model explains numerous iterations of a plan for a car-sharing venture.

Analyzing Alternative Business Models

This topic puts more emphasis on financing options, specifically on understanding the advantages and disadvantages of various financing sources. In the case, 1366 Technologies: Scaling the Venture, students will consider the unique sets of financing challenges faced by startups in sectors such as clean energy, as well as the potential business models available that may facilitate further growth. "When One Business Model Isn't Enough" examines an exceptional and thought-provoking situation in which one company has adopted multiple business models to achieve competitive advantage. The article asks whether entrepreneurial firms could follow this example.

About this module

Identifying and evaluating entrepreneurial opportunities requires both creative and analytical skills. This module focuses on the early stages of planning and development, beginning with the question, “Where do entrepreneurs get their business ideas?” The module then examines the steps needed to formally assess, plan, and communicate the transformation of the original inspiration into a functioning enterprise.

Learning Objectives

Explore how entrepreneurs generate ideas for new businesses 

Understand how entrepreneurs shape opportunities by developing their ideas into business plans

Understand the various parts of a business plan

Learn how to write and pitch a business plan

Recognize the need to refine a business plan as a business grows and circumstances change 

Related Modules

Entrepreneurial Finance

This module provides an overview of entrepreneurial finance, including materials on the sources of financing, how venture capitalists assess and value startups, and how deals are structured.

Managing and Harvesting Growth

This module centers on the concerns of more established entrepreneurs. Some evaluate the opportunity to build further, through franchising, global expansion, or other means. Others consider how to harvest what they’ve grown.

Managing the Early-Stage Venture

This module focuses on early-stage ventures, starting with ideation, moving on through the initial development of a small business, and continuing to somewhat larger businesses to explore issues of risk management.

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How to Evaluate a Business Opportunity

Last Updated: January 27, 2023 References

This article was co-authored by Helena Ronis and by wikiHow staff writer, Jennifer Mueller, JD . Helena Ronis is Co-founder and CEO of AllFactors, a unified web analytics software to drive company's marketing and business growth. She has worked in product and marketing in the tech industry for over 8 years, and studied Digital Marketing & Analytics at the MIT Sloan School of Management Executive Program. There are 9 references cited in this article, which can be found at the bottom of the page. This article has been viewed 22,403 times.

Business opportunities come in many varieties, but they all have one thing in common: they're asking you to pay a sum of money for the potential to make more. This might mean you're buying an existing business outright, opening a franchise of an existing brand, or gaining use of trademarked sales and marketing materials. Regardless of the shape the business opportunity takes, research it thoroughly before you commit and don't expect to "get rich quick." Most business opportunities require a lot of work if you want to succeed. [1] X Research source

Market Analysis

• For example, if the business opportunity involves providing medical billing services, your likely consumers would be doctors and other healthcare providers.
• If you're selling retail products, search online to figure out who buys those products most often. For example, if the opportunity involves selling "athleisure" apparel such as yoga pants, you could search the brand to see the types of people on social media who are wearing that type of clothing.

• For example, if you're looking at buying a restaurant franchise, you might ask how many people in your community ate that type of food and how often they ate it. You might also find out how many times per week they ate out or got take-out or delivery rather than cooking meals at home.
• What you find out from your conversations should give you a general idea if your business is likely to take hold in your area. If you determine that it's not, you might want to start looking at different opportunities.

• If you're looking at an MLM opportunity, pay close attention to your friends and family, since they will likely be your first customers. If there are already a handful of people in your circles selling the same product or service, it's probably a better idea for you to choose something else.

• You might also look up the brand itself and see what's being said about it in news and industry publications.

Product Evaluation

• If the product or service isn't something you'd use yourself, talk to people who would and get their impressions of it. For example, if you're looking at a medical billing opportunity but you aren't a healthcare provider, talk to someone who is.

• Reviews can also help you manage expectations of the product or service if you do ultimately take advantage of the business opportunity. It's just as important to know what the product can't do as it is to know what it can.

• You may have already learned some information about the company when you were doing your market analysis, but at this stage, you're more interested in the reputation the company has for delivering a quality product and solid customer support.
• If the company has changed its branding, find out why. Often, when a company changes its branding, it's to get away from bad publicity surrounding poor quality products or even a lawsuit.

• For example, if you're thinking about buying a franchise, you might stop by the locations of several other franchises to see how things operate. Simply observe for a few minutes before you ask to speak to the owner or reveal that you're thinking about buying into the franchise yourself.

Budget and Finances

• For example, if you want to start a medical billing business, you might need to buy a new computer or other electronic equipment before you can get set up.
• The person or company selling the business opportunity will tell you exactly how much you need to pay them. In addition to that, they'll typically also tell you what other equipment, space, inventory, or other things you need to have in place before you can start. Some of these things you might already have, but others you'll need to buy.
• Ask your local small business association what sort of licenses you'll need to start your business. [11] X Research source Cities typically require you to have a business permit if you're operating a brick-and-mortar store, but you might need one even if your business is completely online.

• If you don't have enough money available to invest immediately, figure out how much you'll have to put aside each month to meet your goal. Even if you can't start now, you might be able to swing it in a few months.

• For example, if you're looking at buying a franchise, you'll likely be spending 60-80 hours a week at the business to get it off the ground before you ever see a profit.
• MLM opportunities, such as selling cosmetics or health products, typically don't require much of a time investment. However, you're unlikely to make a lot of money with these opportunities and may end up spending more than you make on products. [14] X Trustworthy Source Federal Trade Commission Website with up-to-date information for consumers from the Federal Trade Commisson Go to source

• Your local small business association likely has templates you can use for your budget and cost projections that will help you keep your information organized and make sure you don't miss any important details.

• In general, assume that you'll be working for several months before you'll start to turn a profit. Be wary of people selling business opportunities that claim you'll be able to turn a profit in the first month or "quit your day job" after only a few weeks.
• People selling business opportunities typically show you "success stories." Ask for statistics relating to the average person who invested in that particular business opportunity to get a better idea of how the opportunity could work for you.

Risk Assessment

• If the seller of the business opportunity tries to rush you into making a decision or tells you that you don't have to read the disclosure documents, consider this a red flag.
• Sellers of business opportunities usually won't make any claims or guarantees about how much money you'll make. But if they do, they have to provide additional documentation so you understand what the seller is basing those claims on.

• If the company won't release financial reports to you, that could be a red flag. Do some research on your own to see what you can find out about the company. Public documents available online often tell you a lot about a company's stability.
• Have an accountant or business attorney look over the financial reports for you if you're not comfortable analyzing these on your own. And even if you think you've got a pretty good handle on them, it still doesn't hurt to get an expert opinion before you jump on the opportunity.

• Many attorneys provide a free initial consultation. Beyond that, they're often willing to look over contracts and paperwork and offer advice for a flat fee. It's worth the cost for the peace of mind you'll get knowing that you had someone in your corner looking out for you.

• If you're working with restricted products or services, you might also need to get additional licenses or permits that you wouldn't need otherwise. An attorney can help you with this.

• It's relatively simple to set up and maintain an LLC. Although you can get an attorney to draft the paperwork for you, this usually isn't necessary. Your state's secretary of state likely has forms available online that you can download and fill out yourself.

Expert Q&A

• Although this article includes franchises as possible business opportunities, franchises differ in that they receive more support from the parent company and are also more strictly controlled by the parent company. [22] X Research source Thanks Helpful 0 Not Helpful 0
• Be honest with yourself about your experience and abilities. If the business opportunity would require you to do things that you're not comfortable with, such as cold-calling potential clients, it might not be the right fit. [23] X Research source Thanks Helpful 0 Not Helpful 0

• This article primarily discusses evaluating a business opportunity in the US, although the same considerations generally apply in other countries. Thanks Helpful 0 Not Helpful 0

You Might Also Like

• ↑ https://www.entrepreneur.com/article/42940
• ↑ https://knowledge.wharton.upenn.edu/article/how-entrepreneurs-identify-new-business-opportunities/
• ↑ https://www.investopedia.com/financial-edge/0412/5-essential-steps-to-evaluating-your-business-idea.aspx
• ↑ https://www.consumer.ftc.gov/articles/0172-bogus-business-opportunities
• ↑ https://www.sba.gov/blog/how-evaluate-newer-franchise-opportunities
• ↑ Helena Ronis. Business Advisor. Expert Interview. 23 January 2019.
• ↑ https://www.consumer.ftc.gov/articles/0065-multi-level-marketing-businesses-and-pyramid-schemes
• ↑ https://www.smallbusiness.wa.gov.au/business-advice/financial-management/budgets-and-forecasts
• ↑ https://www.insightssuccess.com/7-steps-to-starting-your-cbd-business-in-2020/

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How to Write a Business Essay: an Ultimate Guide

Table of Contents

Writing an essay can be boring. A lot of essays are basically the same thing over and over again. You write an introduction, then you write your supporting paragraphs, and then you create a conclusion. Overall, the process is not a lot of fun, and you can often feel as though you are simply going through the motions for the sake of churning out extra work. But since you have to write an essay, it’s worth considering the many ways that you can make the process faster and easier. In this ultimate guide, we’ll discuss the best way to write a business essay so you can get through the process faster and with relatively little trouble.

It might seem obvious, but the first thing you need to do when you write an essay is to read the essay question. You need to be sure you understand each part of the essay question and how the parts of the question work together. You would be surprised how many students only glance at the question and then write a paper that only partially addresses the assignment. You don’t want to lose points because part of your paper isn’t on topic. If you find any parts of the paper that you don’t understand or that require explanation, be sure to contact your instructor for clarification before you start writing.

Read the essay rubric

These days, most essays have a grading rubric included with the question. A grading rubric is like a cheat sheet for writing your essay. When you review the essay rubric, you’ll see exactly how your instructor will grade your paper and what your instructor will be looking for. When you write your paper, you will therefore know exactly what to include and how to write about it in order to maximize your points—and you’ll also see what you can spend less time on because it won’t contribute to your overall grade.

Make friends with your library

Many students automatically turn to search engines like Google in order to research their papers, but this is not the most effective way to find high-quality business sources for your paper. Instead, take advantage of your library’s databases. Your college or university library will likely have dedicated business databases that collect high-quality academic articles on business topics. Using these resources in your paper will make your essay stronger and more effective, and it will put your paper on a solid academic footing.

Compile your sources before you write

Many students use the start-and-stop method to write their papers, composing a sentence or two and then stopping to look up more information in order to keep going. This, however, is an inefficient way to work. A better way is to read through your research sources before you start and copy into a separate file a series of quotations and facts that you might use in your paper, creating in-text citations and reference list entries for each before you start. Doing so will make sure that you don’t have to stop for research and have a ready bank of pre-cited material to work with as you write.

Outline before you write

Outlining is an important skill that will both save you time and improve the quality of your essay. Take time before you write to lay out your paper from beginning to end. Start with your thesis statement and carefully lay out the body paragraphs with a topic sentence, supporting details (including research, quotes, and citations ), and a closing paragraph . Plan your transitions to link paragraphs together. Any amount of outlining can be helpful, but the more effort that you put into outlining at this stage, the easier it will be to write your paper, and the less likely it will be that you get stuck in a tangent that goes nowhere or meander into a point that requires you to change your thesis and revise you whole essay.

Remember to revise and proofread

When you finish the draft of your paper, you aren’t done yet. The first draft is rarely the finished product. You should always set aside time to read your work back and to make revisions to make it clearer. You also need to carefully proofread for mechanical grammar, punctuation, and syntax issues to ensure that your paper is as close to perfect as possible. You don’t want to leave points on the table because your paper had easy to fix minor spelling or grammar errors.

Consider professional writing help

Another great way to get your paper done quickly is to seek out custom professional help from an essay writing service with academic experts. An online writing company such as this can create business papers for college students and deliver them fast. When you utilize professional writing assistance, you can receive a custom-written essay that can serve as a great model to help you understand how a professional would approach your business topic and organize and develop an essay to address your assignment. Using a model such as this can save you time and effort as you work on your own paper, allowing you to focus on the learning process more than the mechanics of academic essay writing.

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5 Essential Steps To Evaluating Your Business Idea

Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.

There's no doubt that America and other industrialized countries are small-business-friendly right now. In a year where elections around the world will play a key role in how economies continue to recover, there is at least one subject that most people agree on and that's small businesses. Politicians believe that small business is the key to economic growth and countries like the United States are passing legislation to make it easier for small businesses to thrive.

Robert Litan, economist from the Kauffman Foundation, the largest foundation in the world dedicated to the growth of small businesses, estimates that in order to add one percentage point to the United States' gross domestic product, or GDP, it would take 30 to 60 "home run" $1 billion companies.

Your business idea a home run idea? Being a successful small business owner doesn't require your company to be a $1 billion company, but entrepreneurs like to think big. National Federation of Independent Business Education Foundation (NFIB) estimates that only 40% of all small businesses are profitable and another 30% merely break even. These statistics prove that even with all of the incentives, it's difficult to turn your business in to one of those home run companies. Experts agree that you can improve your odds of success with careful preparation.

Identify the Need

What is the mission of your business? What is the need in the marketplace that you're filling and is it something that will appeal to a large portion of the population? Have you ever received a survey from a company asking you what you think of a product and if you would be likely to purchase the product and for how much?

This is the first step in market analysis . Don't just conduct an Internet survey. Go to a mall or other place where there are a lot of people and ask them to evaluate your idea.

How is your business different than others in the marketplace ? If you have competitors, what will make somebody come to your business instead of your competitor? Successful businesses have a USP or unique selling point that is used as the cornerstone of the business. The more you blend in the more you directly compete with others.

Avoiding the head to head competition, especially for a brand new business, is well advised.

Specifically, how big is your market? Does it include both males and females and people of all races and religions? How fast is the market growing or contracting?

If you design a product or service that only appeals to a small niche market, it will be difficult to gain enough market share to sustain a profitable business. It will also take a significant amount of advertising funds to find the people that comprise the niche market.

Based on your market analysis, how much of a market share do your competitors currently hold? What is left over for you or what is your strategy for taking share from them? Your business may have broad market appeal, but if the market is already saturated, the battle to gain customers may be too expensive.

Startups trying to manufacture new automobiles have found it exceedingly difficult to take market share from existing car companies. Evaluate whether that's a battle worth fighting and if you have the funds to fight it.

How much will it take to open your business? If you have family obligations, you'll probably have to pay yourself, adding additional costs to your budget. How will you get the money? Recently, Washington passed the JOBS Act, a law that made crowdfunding legal . This may provide a way for small businesses to gain funding without the use of banks or venture capital, but even with all of the recent legislation, businesses are finding it difficult to secure funding.

As an entrepreneur, your dream is likely centered around being one of those $1 billion or more businesses, but remember that many businesses fail and that's largely due to poor planning. Before investing a large amount of money in your business idea, create a plan and make sure that your idea is something that customers would be excited about purchasing. There are plenty of great opportunities waiting for a small business owner who follows a business startup system.

Top 6 Reasons New Businesses Fail

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Six Proven Methods to Evaluate a Business Opportunity

As a serial Entrepreneur, I’m regularly evaluating a new business opportunity.

Whether these ideas involve launching a new company or adding a new product line to an existing company, I tend to evaluate the opportunity based on six specific criteria.

Criteria #1: Can I clearly define the market and direct my advertising efforts to target the prospects with laser-like precision ?

One of my companies is rolling out a product designed specifically for Certified Public Accountants.   It solves a real problem and is, in fact, a very good product at a fair price.   That’s great.   But, I’m far more concerned with and excited by the fact that we know exactly who our customer is.  We know exactly how to reach them.   We know how to talk to them so that our message will resonate and we know when precisely they’ll most welcome our message.

Most business and product ideas are vague and it’s a classic mistake of new entrepreneurs to think that their great product should appeal to everyone.    Even worse, it’s easy to assume that great products sell themselves.   I assure you, that doesn’t happen.

Great products can languish while mediocre products become blockbusters so long as the mediocre product has a clearly defined audience who is easily reachable through measurable advertising.

Criteria #2: Does the idea solve a real problem ?

In 2010 alone it’s estimated that venture capitalists dumped $1.67 billion into social media companies. I don’t have any major objection to social media companies, but I have a hard time seeing how most of these companies solve any real problem.

Let’s look at one example from earlier this year. Color, a mobile photo sharing app, raised $41 million in venture money before launching. Okay. Color might be a cool little app, but it’s a big stretch to say it solves a real problem or makes people’s lives better, which, by the way, explains why they have no clear strategy to make money.

When you’re adding value to the world and solving real problems, it’s generally much easier to come up with a worthwhile strategy to make money.

This all reminds me of 1999 and the ‘dot com bubble’. I was there in the trenches and made several huge mistakes which ultimately cost me everything I’d accumulated up until that point. It was a humbling learning experience for me, but a great reminder that as an entrepreneur my primary objective is to create value by solving real problems.

Get a better understanding of how to make 7-figures on your own with the Early to Rise University course on Advanced Selling.

Criteria #3: Is it scalable ?

As a child with entrepreneurial inclinations, I looked around for things I could sell or services I could provide.  Not knowing where to start, I went for the low hanging fruit by trading my time for money.  Kool-aid stands, paper routes, selling little crystals from a broken chandelier to my classmates ($.10 each or 3 for $.25).

I did okay as a kid by being a little creative and working my butt off.   But, everything changed for me at about 19years old when I came to understand scalability.  Trading your time for money is a devil’s bargain . It is the easiest way to bring in income, but in the end it is still a job.

The ability to scale means you have obvious leverage.  You don’t have to do all the work and when you do, you’re efforts are multiplied significantly.  That’s one of the things I like most about the publishing business. It takes about the same amount of energy to communicate with 10 people as it does 1,000,000.

Look for businesses that can be systemized, grown through good marketing and with large enough target markets that the whole exercise proves worth the effort.

Criteria #4:  Is there a special advantage I can leverage ?

People are often surprised that I’m not a competitive person.   I don’t care if you’re better at something than I am.  I do, however, care deeply about outcomes and objectives.  For whatever reason, there are certain things I want to see happen and the fact is, I prefer to take shortcuts to reach those objectives.

I ALWAYS look for ways to gain a special advantage in any new opportunity and you should too.  Here’s an example of one relating to the CPA product I described earlier:

I would never consider adding this product to the existing business if I didn’t have a special advantage up my sleeve.   In this case, we happen to have a very close relationship with a pair of high ranking, well respected university professors who are already in this space.

These folks are at the top of their game with all the credibility in the market we could hope for. Leveraging their massive credibility and expertise makes this particular opportunity so easy it really does feel like cheating.

When evaluating your opportunity ask yourself these questions :

-How can I leverage my current customer base to support this new opportunity?

-Do I know anyone who has unique expertise that I can leverage to make this a home run?

Criteria #5: Does it fit within my core objectives ?

After losing everything in 2000 my primary objective was to rebuild and add to my wealth . I started a marketing company built around generating leads online. The business grew quickly from there and branched off into software development where we created and marketed our own products.

The products we made were good and they solved problems, but the only reason I launched them was because I thought they could put lots of money in my pockets. There’s nothing wrong with making money. In fact, there’s a lot RIGHT about making money and, at the time, building and launching these new products helped to support my primary objective: rebuild and add to my wealth.

Today, however, there is no way I could pursue projects like that simply because my core objectives are fundamentally different then they were back then.   Making money is important to me, but I have other objectives that override that one all the time.

Before I launch any new business or product I ask myself if this product fits within the vision I have for my life.   Is this how I want to spend my time?  Does this get me closer to my medium and long term objectives?

Criteria #6: Can I build an immediate feedback loop by defining and watching key numbers ?

I’ll probably never be the guy that comes up with an idea that changes the world or builds a business that revolutionizes anything.   That’s the downside of Criteria #6. Fortunately, the upside makes up for it.

Our time is the most valuable asset we have. The worst case scenario for an entrepreneur is to waste their time and priceless energy on a business that will not succeed.

How do you know if an opportunity will be successful ?

Start with the five criteria above to select the businesses you start or opportunities you pursue and you’ll dramatically increase your odds of success. Add to this a good feedback loop and you’ll know quickly and with relatively low risk whether the business will succeed.

A couple of weeks ago I was in Lithuania speaking at our annual Leadership & Entrepreneurship camp designed for university students from all over the world. As part of the sessions, we had the students pick individual business ideas and break into teams to actually work out how they would implement the ideas.

One of their tasks was to define some key numbers in their businesses that would help them understand the relative health of the business at a moment’s notice. These key numbers create the feedback loop we need in order to know if we’re going in the wrong direction.

In most businesses developing a feedback loop is pretty straight forward.  I like to identify some key numbers in the business and watch those numbers every day. As the business grows the numbers your watching will likely change, but that’s not the point.

Most entrepreneurs don’t bother establishing key numbers for their business or, if they do, often focus on things that are too far away from the objectives of the business to make much of a difference.

For instance, many businesses will know how many new customers they have or what their revenue was for last month, but they’d be better served to focus on cost per customer acquisition and Customer life-time value.

Using these six criteria, we were able to better evaluate the business ideas put forward by the students at our camp. And more importantly, once the students understood these criteria, they were better able to create an action plan for taking their ideas to market.

No matter if you already have an established business or if you are simply on the verge of creating one, set aside some time to run your idea through these six evaluation steps. Each one will help you refine and improve your plan.

Matthew Smith is the CEO at Stansberry Research as well as partner in Early To Rise, and long time serial Entrepreneur.

Effective Business Evaluation: A Comprehensive Guide

At its core, business evaluation involves a systematic assessment of various aspects of a company’s operations, financial health, and market presence. It encompasses the collection and analysis of data from multiple sources, enabling decision-makers to gain a comprehensive view of their organization. The benefits of business evaluation are multi-fold, ranging from enhanced operational efficiency and optimized resource allocation to the identification of potential risks and the formulation of effective growth strategies. By harnessing the insights derived from business evaluation, companies can position themselves for long-term success in an ever-evolving business landscape.

Business evaluation stands as a pivotal practice that enables companies to navigate the complex challenges of today’s business world. It provides a structured framework for critically analyzing a company’s performance and making well-informed decisions based on tangible data and insights. As markets evolve, consumer behaviors shift, and technologies advance, businesses must adapt and evolve to remain competitive. Business evaluation equips leaders with the tools they need to understand their current position, identify areas for improvement, and capitalize on emerging opportunities.

Essential Data Collection and Analysis

Importance of accurate data for evaluation.

Accurate and reliable data serve as the bedrock upon which informed decisions are built. Whether it’s assessing financial performance, gauging operational efficiency, or identifying market trends, the quality of data directly impacts the validity of evaluation outcomes. Inaccurate or outdated data can lead to flawed conclusions and misguided strategies, potentially hindering a company’s growth trajectory. Therefore, meticulous attention to data accuracy, validity, and relevance is paramount in ensuring the effectiveness of the evaluation process.

Types of Data: Financial, Operational, Market

Successful business evaluation necessitates the collection and analysis of a diverse range of data. Financial data, including income statements, balance sheets, and cash flow statements, offer insights into a company’s fiscal health and profitability. Operational data delves into the efficiency and effectiveness of internal processes, shedding light on potential bottlenecks and areas for improvement. Market data, encompassing customer behavior, competitive landscape, and industry trends, provides a holistic view of the external forces shaping a business’s environment. By combining these different data streams, decision-makers can develop a comprehensive understanding of their organization’s strengths and vulnerabilities.

Analyzing Financial Health

The financial health of a business serves as a critical barometer of its overall well-being and potential for growth. This section delves into the key concepts and methods involved in assessing a company’s financial performance, equipping you with the tools to dissect financial statements, interpret key ratios, and draw meaningful conclusions.

Key Financial Ratios

Financial ratios are fundamental tools that enable decision-makers to gain insights into various aspects of a company’s financial health. Liquidity ratios, such as the current ratio and quick ratio, assess a company’s ability to meet short-term obligations. Solvency ratios, including the debt-to-equity ratio and interest coverage ratio, shed light on the company’s long-term financial stability and its capacity to manage debt. Profitability ratios, such as gross profit margin and net profit margin, provide insights into the company’s ability to generate profits from its operations. Efficiency ratios, including inventory turnover and receivables turnover, gauge the effectiveness of resource utilization.

Evaluating Liquidity, Solvency, and Profitability

Liquidity ratios help determine a company’s ability to cover its short-term liabilities, ensuring smooth day-to-day operations and financial stability. Solvency ratios, on the other hand, provide insights into the company’s capacity to manage long-term debt and meet its obligations over time. These ratios play a pivotal role in evaluating the company’s financial risk and its ability to weather economic downturns. Profitability ratios reveal how efficiently the company generates profits relative to its revenue and costs, indicating its potential for sustained growth and value creation.

Operational Efficiency

Operational efficiency is a critical driver of a company’s success and competitive advantage. This section explores the essential components of operational evaluation, guiding you through the process of identifying bottlenecks, optimizing workflows, and enhancing overall efficiency to propel your business forward.

Process Bottlenecks and Inefficiencies

Every business consists of a complex web of processes, from production and supply chain management to customer service and administrative tasks. Identifying bottlenecks and inefficiencies within these processes is key to streamlining operations and maximizing productivity. Bottlenecks, where resources are constrained and processes slow down, can hinder timely delivery and customer satisfaction. Uncovering these bottlenecks requires a thorough examination of workflows, resource allocation, and potential chokepoints.

Operational Improvements and Overall Performance

Efficiency improvements in specific operational areas have a cascading effect on the overall performance of the company. Optimizing processes not only enhances productivity but also reduces costs, shortens lead times, and improves the quality of products or services. Moreover, streamlined operations free up valuable resources that can be redirected toward innovation and growth initiatives. By connecting operational improvements to broader business goals, you create a virtuous cycle of continuous enhancement.

SWOT Analysis for Strategic Insights

A SWOT analysis stands as a powerful tool for gaining a comprehensive understanding of your business’s internal strengths, weaknesses, as well as external opportunities and threats. This section will guide you through the process of conducting a SWOT analysis, enabling you to unearth valuable insights that can shape your strategic decisions and pave the way for growth.

Exploring Internal Strengths and Weaknesses

Internal factors form the core of a SWOT analysis, encompassing the strengths and weaknesses inherent to your organization. Strengths are the attributes and capabilities that give your business a competitive edge – it could be a strong brand, a dedicated workforce, or proprietary technology. Conversely, weaknesses are areas where your business may lag – perhaps limited resources, outdated processes, or a lack of expertise. Identifying these internal factors provides a clear picture of your company’s current standing and where it can improve.

Identifying External Opportunities and Threats

External factors involve the opportunities and threats presented by the broader business environment. Opportunities are trends, market shifts, or emerging technologies that you can capitalize on to propel your business forward. Threats, on the other hand, encompass external forces like competition, regulatory changes, or economic fluctuations that could potentially hinder your progress. By identifying these external factors, you gain a holistic view of the challenges and possibilities that lie ahead.

Informed Decision-Making and Continuous Improvement

The insights derived from a comprehensive business evaluation serve as a compass that guides decision-makers through the complex landscape of choices and possibilities. When faced with critical decisions such as resource allocation, expansion strategies, or new product launches, the data-driven insights from evaluation provide a solid foundation upon which to build informed choices. By minimizing guesswork and relying on objective analysis, decision-makers can enhance the likelihood of positive outcomes and mitigate potential risks.

Business evaluation is not a one-time event, but rather an ongoing practice that fuels continuous improvement. As markets evolve, consumer preferences shift, and technologies advance, businesses that remain stagnant risk falling behind. Embracing a culture of ongoing evaluation enables companies to adapt swiftly to changing circumstances, capitalize on emerging opportunities, and address evolving challenges proactively. By regularly assessing performance, identifying areas for enhancement, and fine-tuning strategies, businesses position themselves for sustained growth and resilience.

Key TakeAway

Harnessing the power of business evaluation.

The knowledge acquired through business evaluation is not meant to reside within spreadsheets and reports; it is meant to inform action. By translating evaluation insights into strategic initiatives, you can harness your company’s strengths, address its weaknesses, and seize the opportunities that lie on the horizon. Whether it’s optimizing operations, exploring new markets, or refining customer experiences, the data-driven approach derived from evaluation serves as the bedrock of strategic success.

The business landscape is a dynamic arena, subject to shifts and transformations. To thrive in this environment, businesses must embrace the ethos of continuous improvement. Ongoing business evaluation becomes the cornerstone of this philosophy, enabling you to stay nimble, responsive, and attuned to emerging trends and challenges. Just as a ship’s captain adjusts the sails to navigate changing winds, so too must businesses adapt their strategies based on the insights garnered from constant evaluation.

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How To Evaluate A Business Idea: A Step-by-Step Guide

Analyzing competition: a key aspect of evaluating your business ideas, assessing the feasibility of the idea, evaluating potential for growth, potential for diversification, expanding into new markets, understand the potential for partnerships, conducting a risk assessment, developing a business plan, your idea 💡 can change the world 🌎, let's make it a reality, ignite your vision, gain momentum, sustain and innovate, comparisons.

3 ways to evaluate new business ideas and grow your company

• An evaluation process helps develop innovation programs that align with long-term organizational goals.
• Selecting and pursuing the best innovative ideas requires the input of everyone in the leadership team.
• Starting with an innovation blueprint can create a framework to move from idea to reality.

Nothing propels a company more quickly than innovation , and nothing stifles it more quickly than a "that's how we've always done it" attitude.

News startup Axios is an excellent example of a company breaking barriers and thinking outside the box. The company is making a big bet that other companies will pay to learn how to write like Axios reporters. The new communications platform, AxiosHQ, launched in February and enables companies to send Axios-style, just-the-facts internal newsletters. Its cost? At least $10,000 annually. It remains to be seen whether executives will be willing to invest that kind of money, but it's a fascinating proposition.

What does it take for organizations to vet, approve and develop similarly innovative ideas? The answer is not simple, and it varies from company to company. Innovation efforts get plenty of lip service, but it's much harder to perfect a process for selecting and implementing top ideas.

No magic wand for innovation

In the same way that data-driven decisions run many aspects of an organization, leaders need to use data to create a rubric for vetting innovative ideas. This enforces discipline and keeps everyone on the same page.

Without an evaluation process, innovation programs become short-sighted and may fall out of alignment with long-term organizational goals. Having an organized process also removes emotion from decision-making to keep project focus and dollar spend as data-driven as possible.

For innovation to succeed, leaders also have to be aligned around critical factors. This forms a living rubric that can be adapted throughout the organization as business needs shift and evolve. Generally, some sort of innovation leader — a chief innovation officer, a chief strategy officer or a business unit leader — will lead this team to ensure the process runs smoothly and stays on track.

When we developed our rubric at Coplex, we struggled to find a technical solution that was flexible enough while still enabling us to manage our ideas. We ended up building one ourselves. We now use this tool to drive the underlying engine of our entire idea management process, and it works because effective innovation strategy always starts at the top. Bring your entire leadership team together from the beginning of the process to discuss priorities and foster conversations about ideas, outlining your concrete vision along the way.

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Here are three ways to evaluate your innovation ideas and create a framework to make them a strategic reality:

1. Create an innovation blueprint

Before you begin to gather ideas from your team, you have to first come up with a blueprint — such as Google's Eight Pillars of Innovation — that defines the initiative's overall structure. This helps put up guardrails around the problem spaces the organization is willing to play in and, more importantly, which problem spaces are off-limits.

An innovation blueprint consists of three distinct components: statement, antithesis, and thesis. Your statement defines your company's ambitions and outlines why you believe in what you're doing, why now is the best time to do it and what makes you the best candidate for the job. From here, develop an antithesis that defines the problems, business models, and core technologies you don't intend to address. Why? It removes distractions and keeps the focus on priorities. Finally, create a thesis that gives you a clear lens into how you'll invest in problem spaces, business models, and technologies to create the change you want to see.

2. Define innovation themes

Once you've developed a solid blueprint, it's time to identify the themes of problem spaces you intend to solve. This step will define the categories in which your innovation ideas should fall while clearly outlining how your solutions could come into play.

Think of this as similar to how the National Association of Engineers (NAE) outlines the many challenges left to overcome in its field. In its report on the grand challenges of engineering , NAE defines themes (e.g., joy, sustainability, health, and security) as areas ripe for innovation and abundant with opportunity.

The core reason for taking this approach? It allows you to consider potential ways to innovate beyond what the organization had imagined before — and to set goals with those parameters in mind.

3. Map measurement criteria back to a rubric

Once you've defined your innovation themes, it's time to develop the criteria you'll use to measure your success. Global design firm IDEO made it a goal to quantify innovation by looking at its clients' internal team dynamics as well as other companies focused on innovation. The firm identified six areas key to innovation and then sent its survey, coined "Creative Difference," to larger organizations to understand how team members were performing when it came to innovation. Once the survey was complete, IDEO sent results with tangible innovation metrics and recommendations on how to follow and meet them moving forward.

As you define how you measure innovation and create your unique rubric, keep in mind that you aren't limited to traditional metrics. Feel comfortable being creative and innovative as you decide on those! It's possible to measure everything from societal impact and economic value to organizational scale and new market discovery.

The process of pursuing innovative ideas requires much more than a quick brainstorming session or selecting an appealing idea from a list. By creating an underlying philosophy and structure governing the prioritization of ideas that flow through an organization, you can retain control over your innovation program's outcomes instead of leaving anything to chance.

Watch: Watch Tony Robbins bring someone to tears in a one-on-one motivational session

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5 Steps to Evaluating Business Opportunities

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Whether you're starting a small business from scratch or purchasing an existing company or franchise, you need to take steps to evaluate the business’s potential and your abilities to make it work. Your investigation must be thorough, analyzing the risks and benefits of the opportunity. The evaluation of business requires financial, product and human resource analysis. Review the potential and the pitfalls inherent in the business to make an informed decision and increase your chances of success.

Self-Analysis

According to the Arkansas Small Business Development Center, most small businesses fail because of poor management and the owner’s inability to manage resources. Before you even start researching the feasibility of your idea and the market you plan on entering, evaluate your own talents, desires and goals. Consider your willingness to take risks as well as the amount of time and energy you’ll need to make the business a success. Review your financial, personnel and marketing skills as well to ensure you have the necessary background to make a success of your new venture.

Financial Components

After learning about the investment required to purchase the existing business or franchise or the start-up costs you’ll need initially, evaluate your own resources. Part of a financial assessment includes the amount you have in personal savings to add to the initial investment. Banks typically require entrepreneurs to come up with a portion of the investment to show good faith and willingness to take a risk with the lender. Assess the financing available through the seller, investors and lenders when evaluating your chances of succeeding.

Market Research

To thoroughly understand what you’re getting into, perform an extensive market research project to determine the feasibility of your business. In addition to gleaning statistics of trends and current customer buying patterns, you need to know who your customers are, where they are located and what kind of competition exists in your area. Consider market research your first steps in opportunity analysis that help you understand exactly how you will sell products or services to a specific market.

Risk Assessment

A complete evaluation of a business opportunity includes a risk assessment. An honest appraisal of the potential risks inherent in your new business can help you prepare for possible problems and decide whether the risks are worth the investment. Details you need to consider in the risk assessment process include factors that could negatively affect your business, such as the general state of the economy, weather events and your competition's competitiveness. Internal considerations should include your own health, the level of credit available to you and the number and type of employees you’ll need to hire to run the business efficiently.

Finally, evaluate the amount of support you expect to receive from your family and the community. You’ll most likely spend an inordinate amount of time in the initial stages of opening your new business, which could affect your family relationships. Opportunity evaluation requires professional and personal considerations. Outside hobbies and commitments may need to be curtailed for some time. Attitudes and cultural preferences in your community can impact your ability to grow and sustain your business. Evaluate your standing on all these fronts to ensure you’ve got the necessary support to be successful.

• Investopedia: 5 Essential Steps To Evaluating Your Business Idea
• Forbes: Shark Tank Roundtable - How To Evaluate Your Business

Linda Ray is an award-winning journalist with more than 20 years reporting experience. She's covered business for newspapers and magazines, including the "Greenville News," "Success Magazine" and "American City Business Journals." Ray holds a journalism degree and teaches writing, career development and an FDIC course called "Money Smart."

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• 4 How to Buy a Wendy's Franchise

5.2 Researching Potential Business Opportunities

Learning objectives.

By the end of this section, you will be able to:

• Describe opportunity screening
• Identify common sources of research data
• Explain how to research and verify business opportunities
• Identify industry and consumer sources of opportunities

In order to discover how reasonable your business idea is, you need to research many aspects of the concept. Opportunity screening is the process by which entrepreneurs evaluate innovative product ideas, strategies, and marketing trends. Focusing on the viability of financial resources, the skills of the entrepreneurial team, and the competition, this screening helps determine the potential for success in pursuing the idea and can help refine planning.

Common Sources of Research Data

As you embark on researching whether your idea is viable, a good place to start is with the sources recommended by the US Small Business Administration . These include US Census data (https://www.census.gov/academy), which provides insight into the population in your market area, such as the metropolitan statistical area data, as well as statistics on the economy and trade. For most entrepreneurs, research will also include asking potential customers, specifically your target customers, questions about products they like and don’t like, how a product or service could be improved, how the customer buying experience could be improved, and even where customers might go to purchase products and services instead of your business.

Small business marketers can use several no-cost or low-cost methods, including surveys, questionnaires, focus groups, and in-depth interviews. Of course, you do not need to be an expert in these areas. Business assistance is available to you from the Small Business Administration, the Service Corps of Retired Executives (SCORE) , and your local Small Business Development Center. You may also have a local college or university business department that provides assistance to local area businesses.

Link to Learning

The Small Business Administration website and SCORE website are rich resources of information for entrepreneurs.

You will likely begin with secondary research —that is, data that are already available through some published source. There may be articles, research reports, or reliable Internet sources where you can research information about your industry, products, and customers. If you have the funds, you can also purchase research reports from firms that specialize in gathering research on certain topics or products. Secondary research has the advantage of being quickly available. However, secondary research often is not specific enough to provide all the details you need to know about your idea. For example, secondary research (this is research that has been developed from primary sources that is almost as useful as primary, direct research) might report how often consumers purchase shampoo, where they purchase shampoo, and what brands of shampoo they purchase. But if you want to understand the details of how people shampoo—for example, whether they shampoo then repeat, use a separate conditioner, or use a combination shampoo/conditioner product—then you would want to conduct primary research. Primary research is needed when secondary research does not address the questions you want to explore while investigating your business idea.

Primary research gathers data that do not yet exist. The information is specific to the business, product, or consumer. It takes time and money to obtain primary data. Some of the methods used to gather primary research data include developing a survey questionnaire, using secret shoppers, or using focus groups. Survey questionnaires can be simple, such as a customer comment card included on a receipt, or extensive, including dozens of detailed questions. Secret shoppers can be used by hiring a shopping service or using friends, family members, and even your customers. One local small business owner gave a friend gift certificates that could be used at his ice cream business in exchange for the friend reporting back on product quality, service, and other key issues.

Researching and Verifying the Entrepreneurial Opportunity

Whether you start your own business, buy an existing business, or purchase a franchise, researching the industry, your target market, and examining the economic and funding options are all part of performing due diligence. Due diligence is the process of taking reasonable steps to verify that your decisions are based on well-researched and accurate information. It means thoroughly researching potential pursuits, asking detailed questions, and verifying information.

Different industries have different meanings for due diligence. For example, in the legal industry, due diligence involves understanding the terms of a transaction and contract. In business finance, due diligence refers to raising capital or the work involved in merger and acquisition transactions. In the entrepreneurship field, research is necessary to verify whether the idea is really an opportunity, considering the entire process of starting the venture and funding the venture.

One of the more common questions entrepreneurs must ask is whether now is a good time to start a business. This question of timing is addressed in the investigation to determine whether the idea is merely interesting or fits the criteria of being an entrepreneurial opportunity .

An idea can move to a recognized opportunity when the following criteria are met. Figure 5.4 shows these three factors:

• Significant market demand
• Significant market structure and size
• Significant margins and resources to support the venture’s success

Significant market demand means that the idea has value by providing a solution to a problem that the target market is willing to purchase. This value can result from a new product or service that fills an unmet need, a lower price, improved benefits, or greater financial or emotional value. This value can also result from capitalizing on “nonconsumption.” For example, in the 1980s, the Disney Corporation realized that it was losing an opportunity to entice visitors to come to their theme parks from 9 p.m. to 9 a.m. when they were closed. So the company started having “school nights” when schools and students could use the parks at a discount.

Significant market structure and size involve growth potential and drivers of demand for the product or service. Barriers to entry are manageable, meaning that entering the industry or creating a new industry is not exceptionally difficult. If the industry already exists, there must be room within the industry for your venture to gain market share by providing a value that creates a competitive advantage.

Significant margins and resources involve the potential for achieving profit margins at a high-enough level that the work of starting the venture (including the entrepreneur’s time and energy) is worth the risks involved. If the operating costs are too high and the profit margin is too low, it is important to analyze whether the idea is truly feasible. Significant margins also include the capital requirements—how much money is needed to start the venture—as well as the technical requirements, the complexity of the distribution system, and similar resources.

Determining whether an idea has significant market demand, significant market structure and size, and significant margins and resources to support the venture’s success represents the most basic concerns when screening a business idea as an entrepreneurial opportunity.

Keep in mind that these three criteria are based partially on creating a for-profit venture. If your entrepreneurial venture is focused on solving a societal problem, you want to know that the identified problem is realistic and that there is a need for solving it. In a for-profit venture, significant market structure and margins relate to the expectation that the venture will have significant sales with significant profit margins to sustain and grow. There are also examples of profitable entrepreneurial ventures, like YouTube , that did not have any sales, but there was still an expectation that harvesting or selling YouTube would result in a significant profit for the entrepreneurial team. You can read more about Google ’s purchase of YouTube at https://www.theringer.com/2016/10/10/16042354/google-youtube-acquisition-10-years-tech-deals-69fdbe1c8a06.

After confirming that a business idea is an entrepreneurial opportunity, the entrepreneur should ask more detailed questions in the next phase of screening the business. Here are some examples:

• Would other people value your product or service?
• Does your product or service solve a significant problem?
• Is the market for the product definable/specific?
• Does the market have unique needs or expectations that align with your entrepreneurial opportunity?
• Is the timing right to start the venture?
• Are there infrastructure or supporting resources that need to be commercialized or created prior to your launch of the venture?
• What resources are needed to start the venture?
• What is the competitive advantage your venture offers within the industry and is this competitive advantage sustainable?
• What is the timeline between starting the venture and the first sale?
• How long before the venture becomes profitable and do you have the resources to support this timeline?

A good starting point in your opportunity screening research is to begin learning about the demographics of the market you are targeting (your target market). Demographics are statistical factors of a population, such as race, age, and gender.

The government collects census data demographics, 14 which can provide a snapshot of the population in your city or town. Census data include the total population, a breakdown of the population by age, gender, race, and income, and some other useful data.

The US Census website and your local chamber of commerce can help you learn more about the demographics of your target market or region.

For example, if you were considering opening a new ice cream store with unique flavors preferred by children, census data could tell you the number of children living in the area, the ratio of boys to girls, their ages, and the general income levels of the families in town. The census data would help you determine the size of the market and potential target market, local market growth, income levels, and key demographics that might fit the potential customer profile. Of course, there is other information you might want to collect, such as the percentage of the population that had lactose intolerance. If you found that a significant portion of your market was lactose intolerant, this could be your identified opportunity: You could create a lactose-free ice cream store or expand with a variety of lactose-free flavors. The census data also help identify where to locate your entrepreneurial venture. For example, if your lactose-free ice cream was expensive because of the necessary ingredients, you would not want to open your store in a low-income area.

There is a vast amount of data and information available through the Internet that can support your success in making informed decisions as you explore the feasibility of opening a successful venture. Or you can purchase more detailed consumer data through providers such as Claritas Research , which gathers information on demographics, consumer lifestyles, attitudes, and behaviors (https://claritas360.claritas.com/mybestsegments/?ID=70). For many small business startups that cannot afford sophisticated research data, the entrepreneur will probably have to rely on census data along with information that the local economic development council is able to provide.

Work It Out

T-shirt startup.

Create your own t-shirt line to target your classmates.

• What would be the theme?
• How much would you charge?
• Where would you sell the shirts?
• What are the expected sales of the business?
• What are the resources needed to get started?

After analyzing demographic data, the entrepreneur can then develop and conduct some basic research, which could range from observing customers to shopping at potential competitors. Entrepreneurs can also uncover business opportunities by asking questions of, and listening to, their customers, if they are working within the industry or looking for new entrepreneurial opportunities with a similar target market. Sometimes an easy and inexpensive customer survey can uncover problems and opportunities. Entrepreneurs can also gather information using their social media accounts and customer sales records.

For example, imagine a men’s clothing store in Denver that maintained a detailed customer database that they used primarily to order the colors and sizes their customers were most likely to purchase. A marketing consultant begins researching customer data and finds a number of former customers who had not shopped at the store for a year or more. The consultant uncovers some lapses in service that had cost the store thousands of dollars in sales. Store management, working with the information from the consultant, develops a direct marketing campaign that helps bring back former customers and adds new customers, resulting in a substantial sales increase.

The lesson here is that research is important at all stages of the business—before you start your business and consistently thereafter. Markets change as new people move in or out of an area, styles and preferences change over time, and new technology can radically impact what customers want to buy. We all know of businesses like Blockbuster or Xerox that ignored evolving technology, to the detriment of their success. Constantly tracking changes in the external environment and competitive arena is an ongoing activity that supports the continued success of the venture.

A popular tool for market analysis is a product from Claritas Research called Potential Rating Index for Zip Markets (PRIZM) , which characterizes census data according to certain lifestyle traits, even down to the neighborhood level. As an example, let’s see how PRIZM can help us better understand the consumer market of a small town in Massachusetts. Oxford, Massachusetts (zip code 01540), has a population of 11,653, with slightly more half being female; a median income of $70,444; and a median age of 42.3 years. PRIZM data give us a better understanding of consumers than census data do in Oxford by examining the five dominant lifestyle segments from within PRIZM’s sixty-six segments. The PRIZM segments are based on socioeconomic rank determined by characteristics such as income, education, occupation, and home value. A thorough analysis of available data could suggest the most likely products and sources consumers in this zip code market would likely purchase.

Entrepreneurs might also obtain data from economic development agencies, the local chamber of commerce, the state small business development center, or industry associations. Of course, lots of data can be found with a good search on your computer. Your university reference librarian can tell you what resources they have available and which resources would best fit your research question(s) and area of focus for your idea.

Entrepreneur In Action

Elon musk’s spacex.

There have been many instances in which products have been promised but fail in their implementation. Space travel—think Elon Musk ’s venture SpaceX ( Figure 5.5 )—is an example of a bold concept that is still in the feasibility phase. Is it even possible to send humans to Mars? This is an extreme but interesting example for considering product feasibility.

Another application of the SpaceX technology is to develop satellite-based Internet access that can provide service to billions of people who do not already have Internet service. 15 However, the project will require new satellite networks, and it may take twenty years to fully develop.

• What short-term and long-term considerations are necessary in the project?
• As the concept will take twenty years of satellite development, how can technological changes be incorporated into the development of the idea?
• Given the description of an entrepreneurial opportunity, does this idea fit that definition?

What should you do if your idea does not fit these criteria—significant market demand, market structure and size, and margins and resources—and your passion to develop the idea into an opportunity and new venture is still strong? This is also part of the entrepreneurial process. You, as the lead entrepreneur, are charged with the task of identifying the obstacles to turning your idea into an opportunity and what actions are necessary to overcome these. This could mean adjusting the idea, adding new features, or even removing some features. Adding new features should focus on increasing the value or benefit offered by the product or service, or creating a tighter alignment with the needs of the target market. Removing features could decrease the production costs or even the complexity in using the product.

As part of your research to verify whether your idea is truly an entrepreneurial opportunity, researching your state’s laws and regulations is essential. Conduct an Internet search for your state’s business regulations applicable to your business. You will need to comply with these laws, as well as purchase any licenses and permits necessary for your business. You should also check with your local or county government for additional local regulations, including zoning and signage laws. Remember that laws vary by state, so what is legal in one state may not be legal in another, or there might be stricter regulations. For emerging industries, the regulations and laws can fluctuate as industries evolve. This is especially true for emerging industries such as the sale and distribution of medical marijuana.

Are You Ready?

Getting a license or permit to start a business.

When starting a business, be sure that you have all the required licenses and permits, keeping in mind that you may need licenses from federal, state, county, and local government agencies. You can start with the SBA website at https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits#section-header-0. Another helpful resource is Fundera , an online financial resource that provides information about obtaining business licenses in all fifty states and links to essential government organizations for each state: https://www.fundera.com/blog/business-license. And try nav.com as well: https://www.nav.com/blog/266-business-licensing-by-state-5008/.

States regulate a larger number of business activities than the federal government. Business activities that are regulated locally include auctions, construction, dry cleaning, farming, plumbing, restaurants, retail, and vending.

• Select a business in a regulated industry and research what would be needed to start the venture in a specific locale.

Many estimates indicate that half of all new businesses will no longer exist within the first five years, but good research can help you avoid your business becoming a statistic. 16 On the surface, this fact can be daunting. However, there are many reasons why a business no longer exists that can reflect a positive outcome, such as the sale of a business or a merger with another business. Another example is when an entrepreneur intentionally starts a venture knowing that there is a short-term timeline for success, with the expectation that new technology will replace the gap that the venture originally filled. Most entrepreneurs are not big risk-takers but understand that there are no guarantees in starting a new business venture. Instead, entrepreneurs tend to take calculated business risks based on the best research they can gather. At some point, however, the entrepreneur recognizes that despite all the good research they have gathered, they still need to take a leap of faith when starting their new venture.

What Can You Do?

Why small businesses fail.

Why do half or more of new small businesses no longer exist after the first five years? In many cases, it is failure of the business. The Small Business Institute at Thomas College in Maine has cited factors in Table 5.1 as the most common reasons for small business failures. Many business development agencies have compiled similar lists.

• Given the preceding reasons for small business failure, what can be done to head off such failure?
• Why is it necessary to assemble a team of professional advisors to address financial, personnel, legal, accounting, and other business issues?
• Why is it vital to identify suppliers and personnel to be able to provide a product or service?
• What factors are important when considering whether a product should be manufactured internally or outsourced to a third party?

Let us analyze, as an example, opportunity recognition displayed by a company called Sweet Beginnings . Eddie Griffin , Kevin Greenwood , and Tiffany Chen were all residents of Chicago who were seeking jobs and a fresh start on life after serving time in prison. They wanted a chance to rebuild their lives and the ability to support themselves financially. Unfortunately, the odds were against them in their North Lawndale community: There was a 40 percent unemployment rate, 57 percent of residents had criminal histories, the average annual income was only $25,000, and the area was known for drugs, sex workers, and gangs. Statistically, they were destined to return to the criminal justice system.

But fate intervened in the form of Brenda Palms Barber , who knew all of these statistics. Palms Barber was the Executive Director of the North Lawndale Employment Network (LEN). When employers refused to hire Griffin, Greenwood, and Chen, whom she had coached, she researched what it would take to open various businesses, including a temp agency, a landscaping company, and a delivery service, with the intent to offer employment to LEN clients. A recommendation from a board member’s connection led her to consider, of all things, raising bees. It was not until she learned that the ins and outs of the apiary profession are passed on by word of mouth that she felt it was ideal for her clients who often faced learning challenges due to limited academic experience.

In 2005, Palms Barber founded Sweet Beginnings, a social enterprise that employs former inmates and teaches them job skills by running an apiary business directly in the heart of North Lawndale. The Sweet Beginnings brand, Bee Love (shown in Figure 5.6 ), sells honey and honey-infused skincare products in airports, hotels, and supermarkets, including Whole Foods . Palms Barber recognized that the skills her potential employees learned in the streets were transferrable to running and managing the business. 17 , 18 , 19

Palms Barber also realized that a product gap existed between customer needs and products offered. She identified the niche market of customers who wanted all-natural skin care products and liked the idea of purchasing them from a social enterprise. Bee Love positioned itself for success as an appealing, high-end natural product to environmentally conscious consumers willing to pay a premium for it.

Palms Barber recognized an opportunity when she identified the societal problem of employment for people who had experienced incarceration. In seeking solutions to this problem, she encountered roadblocks from employers’ resistance to hiring ex-prison inmates. She then researched other possible solutions including business startups. The idea of raising bees at first seemed an unusual solution to the problem of employment for her unique clients. In her due diligence, she identified a gap between customer preferences for all-natural skin care products and currently available offerings. Combining these ideas resulted in the opening of Bee Love. The fits between the clientele of ex-inmates, apiary, and skin care products supported the opening of this unique venture. Exploring the gaps was part of the process of finding the right solution and realizing that the idea of starting a business to support ex-inmates was an actual opportunity worth developing into a new venture.

Industry Sources of Opportunity

Your research process should include learning everything you can about the industry you plan to enter. This will help you to identify opportunities. An excellent source for industry information is the business reference section of your college library. Industry averages are available in reference books and can also be found at Dun & Bradstreet/Hoovers (http://www.hoovers.com/industry-analysis.html). The industry analysis contains important information including a brief description of the industry and its characteristics, the competitive landscape, along with products, operations, and technology.

Industry sources reveal knowledge about a specific industry from the perspective of identifying unmet needs or areas for improvement within that industry. For example, Airbnb reshaped the hotel industry by connecting travelers with property owners, so that the travelers could rent the property when the owner was not using it. As Airbnb has grown, the company has made improvements to their offerings in meeting the needs of the traveler’s demand based on property location and in categorizing the supply (the homeowner’s property) for increased efficiency, meeting the needs of both the property owner and the traveler. Researching specific industries from supply and demand perspectives, and noticing unused supplies, as we saw in the Airbnb example, also applies to other industries, such as a sandwich shop. What happens to the unsold bread at the end of the day when there is an excess supply? For Stacy Madison and her pita sandwich food cart, unsold bread presented an opportunity to create pita chips by turning an oversupply into sliced and seasoned pita chips. 20

Almost every industry is worth investigating from the perspective of identifying unused resources or extra resources that could be restructured for what are known as a shared economy or a gig economy . A shared economy considers that there are times when an asset in not in use. This down time when the asset is not in use provides an opening for someone else to use that asset, like Airbnb. Other companies, like Uber , Lyft , DoorDash , and Postmates , support the gig economy in aligning a person’s choices for when they want to work with the flow of the work demand. A gig economy is an open or fluid market system with temporary positions made up of independent short-term workers. In these examples, we can see the alignment of supply and demand. The entrepreneurial opportunity happens in providing a platform to assist in connecting the supply and demand.

The tech sector, for example, is continually adapting to change. Items such as 3D printers and mobile devices are making the technology landscape expand. As new products come to market, the need for applications and increased efficiency abound. Several other industries are experiencing growth, including health care and nutrition. According to Global Market Insights (2019), the clinical nutrition market will exceed $87,530.7 million dollars by 2025. 21 This same source reported that this industry was valued at over $10,562.7 million in 2018, a significant increase over the previous seven years. Drivers in this industry include sedentary lifestyles and related health issues, such as obesity. The result of these societal changes is an increase in clinical nutrition products and home healthcare services. According to business management author, professor, and corporate consultant, Peter Drucker , entrepreneurs excel at finding and developing potential business opportunities created by social, technological, and cultural changes.

Consumer Sources of Opportunity

Consumer sources of opportunities relate to changes in our society, such as new habits or behaviors brought about by exposure to new information. For example, most people feel the pressure related to having less free or unrestricted time. Figure 5.7 tracks the average number of hours worked by country per worker per year.

The International Labour Organization and Bureau of Labor Statistics report that most people in the United States work more than forty hours per week, work significantly more hours per year than workers in many other countries, and are vastly more productive than they were half a century ago. 22

Another consideration is tracking where our time is spent during commuting. The average commute time in major cities in the United States is twenty-six minutes, ranging from thirty-eight minutes in New York City to the shortest commute time of twenty minutes in Buffalo, New York. 23 When we add in commute times, work hours, and other required activities like sleeping and eating, we find that people struggle to find time for relaxation and personal activities. This large trend leads to recognizing that our working population in the United States and other countries would value novel approaches to completing tasks and making life simpler. For instance, several businesses have looked at making life easier and saving the consumer time, such as Amazon ’s One-Click-Checkout, grocery delivery, and product recommendations. Other examples include mobile businesses like pet grooming that come to your home, or diaper delivery services that pick up used diapers, wash and dry them, and return clean diapers to your home. Understanding consumer needs and problems opens the possibility of creating a business that addresses those needs or problems.

Another consumer trend is the demand for affordable housing. One solution involves offering more affordable “tiny homes” that make home ownership more accessible ( Figure 5.8 ). 24 As one entrepreneurial opportunity materializes into a new product, spin-off ideas may also arise. The tiny home concept attracted the attention of groups that assist homeless veterans. The Veterans Community Project in Kansas City, has developed a community of forty-nine tiny homes for homeless veterans and the project is so successful that more than 500 cities around the country are building tiny home housing projects for veterans there. 25

Vestergaard

Vestergaard has a mission to prevent diseases, especially for vulnerable populations around the world, and to contribute to a healthier and more sustainable planet through good actions.

LifeStraw is a product that Vestergaard launched in 2005, making water safe to drink in areas where clean water is not readily available and redefining beliefs around safe drinking water. LifeStraw uses a combination of a hollow fiber membrane, a filtration process, and in some products, a second filtration process to remove chemicals like chlorine, lead, and pesticides.

• Apply the concepts of supply and demand in describing LifeStraw from the perspective of an entrepreneurial opportunity.
• What are three drivers that support the creation of LifeStraw?
• 14 United States Census Bureau. https://www.census.gov/
• 15 Aaron Pressman. “Elon Musk’s SpaceX May Fuel $1 Trillion Space Business Boom.” Fortune . October 12, 2017. http://fortune.com/2017/10/12/elon-musk-spacex-morgan-stanley/
• 16 US Small Business Administration Office of Advocacy. Frequently Asked Questions about Small Business . August 2018. https://www.sba.gov/sites/default/files/advocacy/Frequently-Asked-Questions-Small-Business-2018.pdf
• 17 “Sweet Beginnings.” North Lawndale Employment Network . n.d. https://www.nlen.org/sweetbeginnings
• 18 BeeLove. www.beelovebuzz.com
• 19 Leigh Buchanan. “Finding Jobs for Ex-Offenders.” Inc. May 2011. https://www.inc.com/magazine/20110501/social-entrepreneurs-finding-jobs-for-ex-offenders.html
• 20 “Stacy’s Pita Chips: Stacy Madison.” How I Built This with Guy Raz . National Public Radio (NPR). May 27, 2019. https://www.npr.org/2019/05/24/726755480/stacys-pita-chips-stacy-madison
• 21 Global Market Insights. “The Clinical Nutrition Market to Surpass $87,530.7 Million by 2025: Global Market Insights, Inc.” Cision PR Newswire . March 5, 2019. https://www.prnewswire.com/news-releases/the-clinical-nutrition-market-to-surpass-87-530-7-million-by-2025-global-market-insights-inc-300806622.html
• 22 G.E. Miller. “The US Is the Most Overworked Developed Nation in the World.” 20SomethingFinance . January 2, 2018. https://20somethingfinance.com/american-hours-worked-productivity-vacation/
• 23 Jeff Desjardins. “Visualizing the Average Commute Time in US States and Cities.” Visual Capitalist . April 1, 2018. https://www.visualcapitalist.com/average-commute-u-s-states-cities/
• 24 Linda Federico-O’Murchu. “Tiny Houses: A Big Idea to End Homelessness.” NBC News . February 26, 2014. https://www.nbcnews.com/business/real-estate/tiny-houses-big-idea-end-homelessness-n39316
• 25 Lauren Stewart. “Community Is Building Tiny Homes for Homeless Veterans in 500 Different Cities.” Do You Remember? 2018. https://doyouremember.com/87151/community-builds-tiny-homes-for-homeless-veterans

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• Authors: Michael Laverty, Chris Littel
• Publisher/website: OpenStax
• Book title: Entrepreneurship
• Publication date: Jan 16, 2020
• Location: Houston, Texas
• Book URL: https://openstax.org/books/entrepreneurship/pages/1-introduction
• Section URL: https://openstax.org/books/entrepreneurship/pages/5-2-researching-potential-business-opportunities

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Evaluating an Opportunity

What is an opportunity for entrepreneurship.

Thinking about it somewhat abstractly, we see that entrepreneurial action begins with recognizing or identifying the potential for people to change their behavior — to do something they are currently not doing or to do something differently than they are currently doing it. The entrepreneur recognizes that, given the chance, some set of people would prefer to do things differently if given the chance. The entrepreneur then envisions a new product or service as the enabler for that new behavior and so establishes a new form of consumption. If a team is right about the potential for this new form of consumption, then they must ask whether this opportunity can be exploited by an entrepreneurial venture, which involves understanding alternatives or competition and financial sustainability, and whether it is an opportunity that can be exploited by them, which involves understanding the skills, expertise, and experience necessary to capitalize of the venture. We capture the fundamental questions in our five-sided figure.

The foundation for any entrepreneurial venture is a market/product fit or match. We consider the two sides of this concept, although we must recognize that each is relative to the other.

What is a market need?

A market need is the potential for a change in consumption . This concept covers everything from unmet clinical needs, challenges facing corporations, social problems, etc. to the desires for entertainment and social interaction among young people. The potential for a change in consumption may always have been there, such as the existence of disease conditions, or they may come about because of changing circumstances, such as increasing wealth creates the desire to have specialty coffee drinks brewed for us individually. To understand a market need is to understand a (currently) unfilled desire or potential.

 New ventures generally begin with a hypothesis that this potential is real, but the first order of business is always to validate this assumption, and usually to revise the hypothesis on the basis of facts and evidence.

What is a feasible solution?

Many entrepreneurs make the mistake of beginning with a product concept. We use the term feasible solution to keep the entrepreneur’s focus on the need itself. In this way, the entrepreneur will try to understand what will be required to offer a compelling solution that will actually spur the change in consumption required. This discipline will minimize that chance of creating a product concept that misses the mark or fails to take into account critical dimensions of the need or possible inhibitors to adoption.

If an entrepreneurial team validates that they have identified a potential market/product fit , and so have a possible basis for a venture, three other questions must be answered.

What is the competition (the customer’s alternatives)?

Competition is the universe of alternatives that the potential customer has. Entrepreneurs often make the mistake of thinking of competition as other companies (often other start-ups) that have the same product idea as they do. But competition must be considered from the customers perspective. What are the full set of alternatives that the customer has. And in many cases, the most compelling alternative is to do nothing.

Do we have the right team?

If a team has a viable idea, they can only capitalize on it if they can execute well in all of the key areas needed to make a venture successful. This requires the right skills, expertise, and experience, and also drive, motivation, and persistence.

Is the venture financially sustainable?

The basic question here is: Will someone pay us enough so that we can create, sustain, and grow our venture? The fundamental question is usually: Will our intended customers pay enough for our product or service? But sometimes there are other sources of revenue. If there seems to be a positive answer to this question, then the entrepreneur can ask about the sources of funding necessary to launch and establish the venture. The question will be whether the chance of success is high enough and the potential pay-off large enough to attract investment.

It is helpful to think of the evaluation step as continually asking the question of whether the opportunity is worth investing in. You are actually constructing and then continually revising an “investment prospectus.”

To summarize, there are five basic questions that you should ask as you evaluate an opportunity.

1.    Is there a need in the market ?

• Hypothesis: market problem and potential customers
• Evidence and detail
• Preliminary sizing

2.    Is there a feasible solution ?

• Parameters of acceptable solution
• Proposed solution
• Technical feasibility

3.    What is the competition? Is there a basis for sustainable competitive advantage ? (Is there a “winner-take-all” first mover scenario?)

• Hypothesis of competitive advantage and value
• Uniqueness and protection
• Likely responses

4.    Can a team be assembled that can execute a commercialization plan?

• What skills, experiences, relationships are required to launch the venture successfully?
• How can the necessary team be assembled?

5.    Is the risk / reward profile sufficiently attractive to merit investment of capital?

• Describe 3 – 4 scenarios: assumptions & projected financial performance
• What is the likelihood of the various scenarios and what is the basis for these judgments?

If you can answer all of these questions affirmatively, then you have persuaded yourself that this opportunity is worth investing in. This is the first step toward being able to convince others, whether they be prospective customers, employees, partners or providers of capital.

The considerations in this discussion are generic in the sense that they are meant to apply regardless of the industry of focus. while high level principles apply across all industries, it is certainly debatable whether a methodology can be created that applies equally to all industries. To address some concerns in this area, we have added some thoughts about some specific industries and important differences between them.

How to Evaluate A Business Opportunity

You need to know how to evaluate a business opportunity if you’re looking into starting your own business.

A business opportunity is an occasion where an entrepreneur has the chance to offer a product or service to a market. The opportunity may be in the form of a new business venture, or it could be an opportunity to expand an existing business. 

A business opportunity is also defined as a specific plan or scheme that offers the chance to start a business. It can be an attractive proposition for someone who is looking for a way to break into self-employment or for those who are tired of their current job.

What Is Evaluation Of Opportunity?

An evaluation of opportunity is the process of assessing whether or not a particular opportunity is worth pursuing. This includes evaluating the potential for income, the cost of getting started, the amount of time required to be successful, and the risks associated with the opportunity. It is important to consider all of these factors when deciding whether or not to pursue a particular opportunity.

How To Evaluate A Business Opportunity

When evaluating a business opportunity, there are many factors to consider. Here are some tips on how to best go about it: 

• What is the business opportunity ? Make sure you understand exactly what is being offered and what is required of you.
• Is the timing right? It’s important to evaluate a business opportunity when you have the time and resources to commit to it.
• Do your research! Learn as much as you can about the opportunity, the industry it’s in, and your potential competitors.
• Gauge the potential success of the business opportunity. How likely is it to be successful? What are the risks involved?
• Use a checklist! Having a checklist can help make the evaluation process more manageable and ensure you don’t forget anything important.
• Talk to others who have been in a similar situation. Get their feedback and advice before moving forward.
• Consider the risks and benefits. Weigh the positives and negatives of taking this opportunity before deciding.

What Type Of Business Is This? 

The type of business you’re considering will affect your evaluation. For example, if you’re looking at a business opportunity in the restaurant industry, you’ll need to consider things like location and licensing requirements. If you’re looking at an online business opportunity, you’ll need to consider the potential for growth and how much money you can expect to make.

How Likely Is It That This Business Will Be Successful? 

The potential for success is one of the most important factors to consider when evaluating a business opportunity. You’ll need to consider things like the industry, the competition, and the target market. 

When you’re evaluating a business opportunity, it’s important to weigh all of these factors carefully. If the pros outweigh the cons, then this may be a good opportunity for you. But if the cons are too risky or the potential profits aren’t worth the investment, then it’s best to move on.

When evaluating an opportunity, it is important to do your research . This includes making sure that the opportunity is legitimate, that you are interested in it, and that it is right for you at this stage of your career. Taking all of these factors into account will help you to make the best decision for your future.

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