Factors to consider when evaluating viable business opportunities

  

Date Posted: 4/17/2012 8:13:15 AM

Posted By: sashoo  Membership Level: Silver  Total Points: 382

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WHAT IS A BUSINESS OPPORTUNITY?
A business opportunity can be defined as a sound business idea which forms the basis upon which an entrepreneur makes a firm investment decision.

FACTORS TO CONSIDER WHEN EVALUATING VIABLE BUSINESS OPPORTUNITIES
An entrepreneur needs to determine whether the business idea they have in mind is viable or not. When evaluating the viability of the business opportunity, the following factors need to be taken into consideration:

• Potential for growth:
An opportunity is said to be viable, when it has the ability to grow and expand.

• Infrastructure:
Easy access to infrastructure such as roads, water, electricity, telephone and postal services among others enables business enterprises easily make orders for goods and deliver them hence reducing operating expenses. With low operating expenses, profits can be maximized.

• Market for the goods and services:
An entrepreneur has to access potential and actual market for the goods and services he would like to sell. There must be a clearly defined market if the opportunity is to be considered.

• Rewarding to the investor:
The opportunity should be rewarding to the investor (cost-benefit consideration). He should consider the expected returns against the expected cost to ensure that the benefits outweigh the cost.

• Price structure:
One has to put into consideration the price-structure of the goods and services he would like to offer. Goods and services, which are subjected to constant inflation, are likely to change in terms of price.

• Competition and Competitive advantage:
Competition is regarded as a threat to business of similar kinds operating in a similar location. Although competition is a threat, it is healthy in the sense that it goes along the way in controlling price of goods offered. It is crucial for entrepreneurs to consider opportunities where competition is not high as this will enable them to get reasonable market

share. They should venture where competitive advantage is.

• Incentives:
Offered by the government and Non-Governmental Organizations, incentives are legitimate business opportunities to exploit as they save on costs. E.g. duty free importation of sugar and maize, tax waivers, e.t.c.

• Legal Consideration:
The new idea should be in line with the legal regulatory framework e.g. an idea to sell drugs may not be viable because it is illegal.

• Financial viability:
The assessment of financial viability is of significant importance when looking at the viability of the business. Capital investment requirements, break even analysis, cash flow projections, profitability of the business have to be analyzed. This is because they determine the sustenance of the business in the market-mix.

• Personnel, Training and Management:
Before starting a business, it is necessary to make an assessment of the required personnel training and management. Look at the ability, cost of hiring and training human resource. Management efficiency will enable the business to succeed.

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