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5 Factors to Use When Evaluating a Business Opportunity

Updated on January 17th, 2022

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:

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.

Miranda Marquit

Miranda Marquit

I'm Miranda and I'm a freelance financial journalist and money expert. My specialties are investing, small business/entrepreneurship and personal finance. The journey to business success and financial freedom is best undertaken with fellow travelers.

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