There are many different types of business opportunities that entrepreneurs are regularly faced with. The reason why so many people are interested in pursuing business opportunities and ideas, is because they want to achieve wealth, success, and significance.
Perhaps you are evaluating business opportunities because you want to figure out a way to make more money, or you just want to feel more important, or more significant. Or, maybe you are simply ready to have something to call your own, and you’re eager to be your own boss.
It’s possible that for you, the wealth you could achieve from pursuing certain business opportunities would simply be a bonus of something greater: A sense of accomplishment and that satisfying feeling of fulfillment and achievement.
Types of business opportunities you may find yourself evaluating include starting your own business, expanding your current business, or investing in someone else’s business. You may even be thinking about buying an existing business that is currently for sale, or inventing a new product or service that you think there would be a demand for.
No matter which type of business opportunity you are considering, you must always properly assess, evaluate, and analyze any business opportunities that come your way. According to the most recent data from the U.S. Bureau of Labor Statistics, about 20% of small businesses fail in their first year, and about 50% of small businesses fail in their fifth year. So, now you understand why it’s so crucial to analyze and assess business opportunities instead of jumping right in. But how do you evaluate business opportunities properly? Below are several important tips, so be sure to read this entire article.
Evaluate Business Opportunities By Asking The Right Questions
Properly evaluating business opportunities requires that you ask all of the right questions. Don’t look at business opportunities through rose-colored glasses and assume it’s a great idea. Instead, ask yourself the hard questions.
For example, ask yourself what could go wrong. What is the downside? Have you done a proper risk assessment, and if so, what are the risks? Do you have the funds to start this business? How much will it cost? How much money could you lose?
And, even more importantly, ask yourself, Could I live with losing that much money?
Then ask yourself, Is there a sufficient market demand for this product? As well as, How long will it take to see a return on my investment? If the answer is that you might not see a profit for 5 years, then you need to ask yourself if you’re okay with that.
It’s also important to evaluate business opportunities by looking at the opportunity from other perspectives, rather than having tunnel vision. Ask yourself, What don’t I know? And ask, What don’t I see?
Critical Thinking Skills are Necessary to Evaluate Business Opportunities
Business is an intellectual sport. Whenever you’re evaluating new business opportunities, you must put aside some time to think. Whether that thinking time is done in your quiet home office, or you’re in deep thought as you stare out the window at your corporate office, this thinking time is crucial.
However, evaluating business opportunities doesn’t just require thinking. It requires critical thinking. You don’t just want to only think about how awesome this business idea is. (Many of my bad business decisions started off with a “good” idea, and a bad assumption on my part that the business would do well.) Your thinking can’t all be positive thinking about how great this opportunity is. Instead, you must engage in critical thinking. Part of critical thinking is asking yourself some of the questions mentioned in the section above.
Critical thinking, however, is also your ability to analyze the information objectively and without bias. A critical thinker will think about all of their research findings, industry data, facts, and run the numbers to see if the idea makes sense financially.Critical thinkers are good at evaluating business ideas from a logical and fact-based standpoint, rather than from an emotional or biased standpoint. Click To Tweet
Critical thinking is important, as it’s smart to analyze business opportunities from a logical, objective and fact-based standpoint, rather than from a biased or emotional standpoint.
Conduct Market Research
When evaluating a business opportunity, it’s crucial to spend the time doing proper market research. Why? Because you need to know if there’s a high enough demand in the marketplace for your product or service. How big or small is the market for your type of business?
You also need to be aware of how much competition there is. Perhaps the marketplace is already over-saturated with similar businesses, and tons of competition. Do you think you can compete? How will you stand out?
You can also research how other similar businesses in the marketplace are doing. Are they struggling, or thriving? And what are the buying patterns of consumers in this market?
Market research also involves understanding the market and its current trends, what consumers in the market are currently paying for similar services, and where there is a gap that needs to be filled.
You’ll definitely have to do a lot of other research while evaluating business opportunities as well, but market research is one of the most crucial types of research.
A Detailed Business Plan is Required
You probably shouldn’t consider any business opportunities that don’t have a well-thought out, complete business plan.
If you are considering starting your own business, your first order of business is to do your research and write out a detailed business plan.
If you think you’ll need investors to start your business, know that they’ll require a business plan from you.
If the business opportunity you’re considering involves investing in someone else’s business, you should of course take a look at the business plan, and have industry professionals you trust take a look at it as well. You want to know that the business idea is one that is likely to be sustainable and profitable, within a market where the demand is there.
Ask a Professional Business Consultant for Advice
It’s worth it to hire a business consultant with credentials. Get their input. Business consultants typically charge by the hour, and they can help you with many things. If you don’t have a business plan yet, the consultant can give you tips on how to write a compelling business plan, and what should be included in it.
If you do have a business plan that was given to you or written by you, some consultants are willing to take a look at it, and provide their expert opinion. This helps you properly evaluate the business opportunity.
Hired consultants or lawyers can also help you review any contracts that you’d have to sign in order to take on a business opportunity.
Get Opinions from Industry Experts
Whatever business idea you’re evaluating, it’s always a smart idea to get advice from industry experts or mentors. Perhaps your mentor will advise you to write down a pros and cons list, or conduct some other ‘thinking’ exercise that is helpful while evaluating the business opportunity. Or, maybe an industry expert you talk to will have valuable insight on the current needs of the marketplace.
The more advice and opinions you get from business experts and industry experts, the more insight you’ll have into the business opportunity in front of you.
Think Outside the Box
How you think about your business, and how you execute your ideas, that’s what increases the odds of success. Intel is very valuable, as is thinking outside the box.
In the tough work of business, there are winners and losers. Contrary to popular belief, those who work the hardest and hustle the most, don’t always make the most money or succeed the most.
Those who take the time to think outside the box, however, are more likely to succeed. An example of thinking outside the box is thinking about a gap in the marketplace, where there is a demand. This is often referred to as a ‘blue ocean’ market, where there aren’t any competitors, as it’s a current gap in the market, but the demand is there. If you pursue ‘blue ocean’ business opportunities with no competition but tons of demand, you have a higher chance of success.
Financial Assessment: Is There a Less Expensive Opportunity to Consider Instead?
I want you to imagine that you’re evaluating a business opportunity in the restaurant industry, because you’re interested in this industry. Let’s say you’re thinking of opening a restaurant. But you know it’ll be expensive. This is not a cheap business opportunity. You have to think of the cost of the real estate, the labor, the cost of the food, the wait staff, etc.
Think about how much it will cost to open and run a restaurant. Let’s say you figured out that it’ll cost at least $400,000, and you have an investor willing to put in $150,000. You’ve realized that because of how pricey the initial investment is, it will take you at least 5 years to make back your investment. You might not start making a profit for 6 or 7 years. And in this competitive industry, the likelihood of failing is quite high. If things don’t go well, you could lose over half a million dollars.
After evaluating this business opportunity, you’ve realized your restaurant would have to do very well, even to just break even and make back your investment.
Don’t jump into anything without running the numbers. Do your break even analysis. The restaurant industry is extremely competitive.
Is there a less expensive business opportunity in this industry? How can you start a business that would cost less, in this industry that you’re interested in? Why not sell a food-related product instead? If you were thinking of opening an Indian restaurant, you could sell a related product instead. Consider selling delicious Indian cooking sauces instead.
Do You Know How to Pitch to Investors?
There’s a high likelihood that your business opportunity will be too expensive for you to take on by yourself. That means you need investors. But do you know how to pitch to investors?
Knowing how to pitch to investors is one of the skills you need to have if you want to pursue a business opportunity.
The first thing you’ll need to do is prepare a sales pitch. This typically includes memorizing a speech and creating a compelling power-point presentation. However, before you prepare your pitch, understand that your pitch should focus on the benefits for the investors. What’s in it for them? Investors only want to provide you with funding and invest in your business idea, because they want a return on their investment. It’s your job to explain how and when they’ll get their return on investment.
Your pitch should preemptively answer the questions you know your investors will need answered before they’ll feel comfortable investing. After hearing your pitch, the investor should now have more trust in your and your business idea, less doubts about it, and feel more confident in their investment. doubts, fears, and questions about whether or not they can trust you.
Be sure to rehearse your pitch and practice it again and again, before your investor meeting.
Knowing and Understanding Your Niche Market
It’s always important to invest in what you know, so if you’re considering investing in a new business opportunity, do you know the market quite well? Do you understand the market needs for this particular niche, and do you understand the industry?
If you aren’t knowledgeable in this particular industry, or you aren’t passionate about it, the business opportunity might not be right for you.
What Skills Do You Need to Have in Order for the Business to be a Success?
In order for a business to succeed, you need certain skills. So, when evaluating a business opportunity or idea, you should also evaluate whether you possess these crucial skills, or whether you could acquire them. These skills include sales and closing skills, marketing skills, industry knowledge, and business acumen.
If you don’t possess some of these skills, can you take a course to learn them? Or, do you have a potential business partner who does possess these skills? These are important things to think about.
Evaluating whether or not you have the right skills needed for the business plan to work, is part of what’s called a “self-analysis”. Reviewing your skills (including sales skills, people skills, marketing skills and special skills that align with the business model) is an important step. Other things to consider while doing a self-analysis, is considering whether or not you’re willing to put in the amount of funds, time, and effort needed to increase the odds of success.
If You Lack the Required Knowledge or Skills, Invest in Yourself First
You might not be ready to pursue certain business opportunities if you lack the required knowledge or skills. Before you can safely pursue these business opportunities that seem over your head, you must invest in yourself by learning the things you need to know.
Investing in yourself could be deciding to learn the required skills by taking an online course, or reading a business-related book written by a business expert.
Gain Knowledge by Reading Books on Business to Set Yourself Up for Success
Great business people are always learning. Business-related books can help you gain more knowledge, and books can also help you learn the skills you need to reach your goals. After reading these books, you’ll feel more confident in your pursuit of business opportunities, and it’ll be much safer for you to pursue them.
The right books will help set you up for success. You should ensure that the book you buy was written by a successful business professional, who recently pursued business opportunities and succeeded.
Think of how much crucial business-related knowledge you can gain, simply from buying a book that costs $10 or $20?
I recently published a book called Unlock It: The Master Key to Wealth, Success, and Significance. You’ll learn a lot about business in this book. What you’ll learn includes how to grow your business to grow rich, how to think critically by focusing on what you don’t know, how to hire the right people for your business, and how to unlock your business’s highest potential in terms of success and wealth.
Order my book Unlock It: The Master Key to Wealth, Success, and Significance here. Start reading about business so that you can pursue only the best business opportunities that have the highest chance of success.