Most good business opportunities result from an entrepreneur being alert to possibilities. Some sources are often fruitful, including consumers and business associates. Channel members of the distribution system-retailers, wholesalers or manufacturer’s reps-are also helpful. Technically-oriented individuals often identify business opportunities when working on other projects. Each opportunity must be carefully screened and evaluated-this is the most critical element of the entrepreneurial process.
The evaluation process involves looking at-
- The creation and length of the opportunity
- Its real and perceived value
- Its risks and return.
- It’s fit with the skills and goals of the entrepreneur
- Its differential advantage in its competitive environment
- It is important to understand the cause of the opportunity, as the resulting opportunity may have a different market size and time dimension.
The market size and the length of the window of opportunity are the primarily bases for determining risks and rewards. The risks reflect the market, competition, technology, and amount of capital involved. The amount of capital forms the basis for the return and rewards. The return and reward of the present opportunity needs to be viewed in light of any possible subsequent opportunities as well. The opportunity must fit the personal skills and goals of the entrepreneur. The entrepreneur must be able to put forth the necessary time and effort required for the venture to succeed. One must believe in the opportunity enough to make the necessary sacrifices.
Opportunity analysis, or an opportunity assessment plan, should focus on the opportunity and provide the basis to make the decision, including:
- A description of the product or service
- An assessment of the opportunity
- Assessment of the entrepreneur and the team
- Specifications of all the activities and resources needed
- The source of capital to finance the initial venture
The most difficult aspect of opportunity analysis is the assessment of the opportunity.