Introduction and Factors to consider when evaluating a business opportunity

Introduction and Factors to consider when evaluating a business opportunity

Introduction to Business Opportunity

A good business plan is not necessarily a business opportunity. A business idea becomes a business opportunity if it is viable i.e. it can be developed into a successful/profitable business enterprise
A business opportunity is a favourable chance that an entrepreneur accepts for investment. It exists where there is a gap to be filled in the needs of the market.
​Examples of such gaps include;

1. In availability of products-
   This is where goods and services needed by the consumers are not available at all in the market.
2. Poor quality products-
   A business opportunity exists if one offers better quality goods and services than those of the existing businesses.
3. Insufficient quantities-
   This is where the goods supplied are not enough to meet the demand/need of the consumers.
4. Un-affordable prices-
   A business opportunity exists where one would charge affordable prices.
5. Poor services-
   A business opportunity exists where customers are not served well.

​A business opportunity is a favourable chance that an entrepreneur accepts for investment. It exists where there is a gap to be filled in the needs of the market. 

​Evaluating a business opportunity

​This means assessing whether the identified opportunity is viable or not. This helps in arriving at the best decision concerning the business idea to implement
Evaluation should be done carefully, systematically and without emotions. Evaluation is necessary even where there is only one business idea. This will help in avoiding starting a business that cannot succeed.

​Factors to consider when evaluating a business opportunity

​​The following are the factors to consider when evaluating a business opportunity.

a. Personal consideration

​These are the abilities and expectations of an entrepreneur. They include the following;

1. Objectives- The entrepreneur should evaluate the business idea to find out whether it is in line with his/her objectives.
2. Skills- Where a business requires certain specialized skills and those skills are lacking the idea may be dropped.
3. Commitments- Where the business is likely to interfere with the entrepreneurs other commitments it may fail.
4. Interest- It is necessary to check whether the intended business will interest the entrepreneur or not. If the entrepreneur will not enjoy running the business, the idea should be dropped.

b. Business consideration

These are external factors that are likely to affect the operations of the business and they include;

1. Availability of market for the product-
   An entrepreneur should assess the availability of customers before starting a business. Customers exist where there is a gap/niche in the market.
2. Technology-
   The business should be evaluated in terms of whether there is an appropriate technology that can be used in production. Factors to be looked into include;
   1. Appropriateness of the technology
   2. The cost of the technology
   3. The possibility of the business suffering in case the technology becomes outdated/obsolete.
3. Availability of raw materials and other resources-
   The raw materials and resources required should be within the reach and affordable to the entrepreneur.
4. Government policy-
   An entrepreneur should consider the requirements of the government before starting a business e.g. the government may require certain businesses to be located in certain areas only.
5. Amount of capital required-
   The capital required to run and maintain the business should be considered i.e. the source of capital.
6. Profitability of the business-
   Within a certain duration of time.
7. The break-even period-
   How long the business can take to support itself.
8. Possibility of expansion 
   i.e. the potential for growth of the business.
9. Impact of the business operations on the environments; 
   some businesses lead to environmental degradation and should be located in appropriate places/effect on community and environmental health.
10. Security-
    Availability of security should be considered.
11. Level of competition-
    This will help determine whether the business will survive or not.
12. The risks that the business will face.