Identifying and Evaluating a Business Opportunity

Discovering new business opportunities may be exciting, but not all ideas are worth the effort. A successful business largely depends on recognising and choosing the right – and meaningful – business opportunity to pursue. So how should you identify and evaluate if a business opportunity is the right fit for you?

How to identify a new business opportunity

A business opportunity arises when there is an inefficiency in the market. This may be drawn from your own personal experiences. Identify these inefficiencies and assess if you have the capabilities and potential solutions to fix them. You may also find an existing product or service in overseas markets that could potentially fill the gap in your local market.

Another source of new business ideas is your customers. Listen to them, understand what they want, where, when and how they want the product or service supplied, and at what price. Collecting and analysing this valuable information will help you identify key business opportunities to develop your product or service.

How to evaluate a business opportunity

Evaluating and identifying the risks of a potential business opportunity is an important process. You will need to assess and determine the viability of each opportunity and if your product or service has any potential marketability.

1. Customer analysis

The key to a business’ success is its customers. Determine if there is a market for your product or service. Establish where and who your customers are, what and when they want to buy and what they are willing to pay for your product or service.

2. Competitor analysis

Identify and analyse your competitors to understand the market. This is also an opportunity to identify customer needs that are not met by your competitors and for you to potentially fill this gap. Look into what they are doing (and not doing), what they are doing right, their price points and how they are attracting their customers. Your business is more likely be successful if your product or service is unique and stands out from your competitors.

3. Industry analysis

Understand the industry you are entering and assess if it provides long-term opportunities for growth and financial success. Conduct market research. Analyse industry trends and insights. Establish if the industry is growing or shrinking. You may also want to explore if it is the right time to enter the market, the size of the customer base, if there are substitute products in the market, and what the barriers to entry are.

4. Regulatory constraints

Find out if there are any regulations that affect the industry you are entering. Determine the regulatory standards that your product or service must conform to.

What are the risks involved?

Entrepreneurs will need to consider the risks that they may face when pursuing a business opportunity. These risks include how technological changes will impact their business and if there are any intellectual property issues. Other risks that need to be explored include product, market, industry and financial risks.

References

Wharton University of Pennsylvania. (2009, November 9). “How Entrepreneurs Identify New Business Opportunities”. https://knowledge.wharton.upenn.edu/podcast/knowledge-at-wharton-podcast/how-entrepreneurs-identify-new-business-opportunities/

Jesnoewski, Amanda. (2018, November 20). “Four Ways to Identify More Business Opportunities”. https://www.smartcompany.com.au/startupsmart/advice/business-planning/four-ways-to-identify-more-business-opportunities/

Popomaronis, Tom. (2020, May 11). “5 Tips for Recognising a Meaningful Business Opportunity When You See One”. https://www.stamfordadvocate.com/business/article/5-Tips-for-Recognizing-a-Meaningful-Business-15261546.php

Resnick, Nathan. (2018, June 20). “7 Ways to Identify Real, Money-making Business Opportunities”. https://www.entrepreneur.com/money-finance/7-ways-to-identify-real-money-making-business-opportunities/314543

Spencer, Jennifer. (2019, January 9). “5 Simple Ways to Identify Business Ideas that Could (Really) Change the World”. https://www.entrepreneur.com/starting-a-business/5-simple-ways-to-identify-business-ideas-that-could/325922