Business opportunities analysis

For a comprehensive analysis, it is good to have a general understanding of how to classify business opportunities. Generally, most business opportunities fall into several categories.

  • Franchising. When you use existing business name and model to start a new business. It can be fast food, a coffee shop or a phone repair service. You pay franchiser for the instructions to start a new business, the name and some support.
  • New distribution channel. It can be a new distribution channel or new market. You can come up with an idea how to sell a product in a different way. Sometime you may need to change the product, packaging or invent a new delivery model.
  • Reselling. This is usually related to reselling existing product or services. For example, when a company wants to start offering service or product in different geographical location. In this case you can start a business as a reseller or a representative.
  • Partnership. Different types of partnerships for existing or new business or startup usually based on sweat equity or similar agreements. It can happen when you bring to the table new types of skills or help with business development or technical implementation
  • Investment. When you invest money into existing or new business in exchange for the stake in the business.

Once you found a good idea to launch a business, you need to analyze multiple factors before making a decision to pursue this opportunity. Below are some of the points that you need to pay attention to.

  1. Your interests and goals. Is this opportunity aligned with your long term goals? Are you interested in this domain in the long run? Are you interested only in earning money? If the answer to the first two questions is yes, you should prioritize this idea.
  2. Required resources. The truth is most startups and small businesses fail. One of the reasons is that we often overestimate our resources, such as money, time, and energy. You need to carefully plan your resources before you decide to pursue any business opportunity. According to Reid Hoffman, it is good to have smaller bets with a high-risk rewards ratio. If the project can be done without significant upfront investments, but at the same time it can yield a high return, then it is worth paying attention to it. If you need to sell your house to start a small business, then you should probably think twice about it.
  3. Market fit. If this is a new product or service, you should try to estimate the demand for it. The easiest way is to ask your friends and family or publish a poll online. Sometimes, it is hard to forecast it, but if you know there is interest ahead of time, then it definitely adds more points to this idea.
  4. Timeframe. According to startup researchers (see “The Lean Startup” by Eric Ries) it is better to fail fast. On the other hand, it takes time to build a quality product. Often times, you need to spend at least a year to build a product and get traction. In addition to this, it takes time to become an expert in the industry, if this is a new domain for you.

Failure analysis. It is very useful to think in advance what would happen if the project fails. Some types of projects, for example in the crypto domain, have higher failure rate. On the other hand, if the project fails but you still can get something out of it, then it might be still a winning situation. For example, if you are going to start a consulting business that will also help you establish connections with influential people. It can be considered a success even if you don’t earn a lot of money but connect with people that can help you later in your career.

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