Assessing and analyzing new business opportunities

[OneStepAhead]

I think that a lot of times it is tempting for us less experienced entrepreneurs to pursue a business idea before it is well thought out. Here is a great article I came accross which briefly covers some questions to ask when anaylzing a new business venture.

I am sure some of you guys have info to add.

Assessing and analyzing new business opportunities

How do you go about analyzing a new business opportunity? I am often asked to “assess” a new business opportunity to see if it should be pursued, and over the past twenty-five years I have probably done over a hundred such assessments. Sometimes it is a brand new business venture. On other occasions it is taking an existing business in a new direction. The process can be made a lot easier and a significant amount of time saved by asking the right questions and structuring the analysis. While each situation is unique, there are several fundamental issues that are often the same.



There are usually five core questions:

· Is it a good fit for us?

· How big is the opportunity, the revenue and profit potential?

· What will it take to succeed in this business?

· How much do we need to invest, both in people and money, and over what time period?

· What are the risks and how can we affect them?



The goal is to gain insight into the questions so you can make informed business decisions. Here are four approaches that should help you with the process.



· First understand the market. Who is going to buy and under what conditions? What is their motivation and what drives their behavior? Good market knowledge is crucial!



· Only gather information on those things that are important and material, don’t waste time on the minor issues. Look for the “big numbers” with the big impact.



· A very important question is “What will it take to succeed?” Consider all aspects of the business. What is the economic model for this type of business? Where is the leverage? What is the competitive environment? The key success factors might be distribution channels, product technical performance, marketing ability, time to market, manufacturing capability, or something else. There will be a few that are critical. It is very important to identify them and then judge whether you will be able to excel in these areas.



· Test your logic – does it hang together and make sense. The analysis phase is the time to be intellectually tough, not to dream and believe you “can just do it”. Look at scenarios/probabilities/risks and “what ifs”. What can you do to change the odds?



Too often, ventures are launched or business directions are shifted without an understanding of the implications, only to incur great costs and misfortune later. A thorough assessment will bring greater clarity to the issues, improve the quality of decisions and form the basis for developing powerful strategic and execution plans.



Copyright Leon Sandler, Monmouth Group, 2002.

[rogercbryan]

Too often, ventures are launched or business directions are shifted without an understanding of the implications, only to incur great costs and misfortune later. A thorough assessment will bring greater clarity to the issues, improve the quality of decisions and form the basis for developing powerful strategic and execution plans.

This is 100% true and is often the main cause of business failure.

[BusinessAdviser]

I think this article is very informative. However, there is one big issue that seems unaddressed, or at least minimized.

One of the biggest factors to consider when providing a good or service to customers is value. This is the make-or-break for a business.

What value are we providing to our customers? Are we providing a greater value than our competitors? Is the value that we are providing easily copied, or is it a sustainable advantage?

This is so often overlooked, and it is at the crux of whether a business is successful or not.

I think that a lot of times it is tempting for us less experienced entrepreneurs to pursue a business idea before it is well thought out. Here is a great article I came accross which briefly covers some questions to ask when anaylzing a new business venture.

I am sure some of you guys have info to add.

Assessing and analyzing new business opportunities

How do you go about analyzing a new business opportunity? I am often asked to “assess” a new business opportunity to see if it should be pursued, and over the past twenty-five years I have probably done over a hundred such assessments. Sometimes it is a brand new business venture. On other occasions it is taking an existing business in a new direction. The process can be made a lot easier and a significant amount of time saved by asking the right questions and structuring the analysis. While each situation is unique, there are several fundamental issues that are often the same.



There are usually five core questions:

· Is it a good fit for us?

· How big is the opportunity, the revenue and profit potential?

· What will it take to succeed in this business?

· How much do we need to invest, both in people and money, and over what time period?

· What are the risks and how can we affect them?



The goal is to gain insight into the questions so you can make informed business decisions. Here are four approaches that should help you with the process.



· First understand the market. Who is going to buy and under what conditions? What is their motivation and what drives their behavior? Good market knowledge is crucial!



· Only gather information on those things that are important and material, don’t waste time on the minor issues. Look for the “big numbers” with the big impact.



· A very important question is “What will it take to succeed?” Consider all aspects of the business. What is the economic model for this type of business? Where is the leverage? What is the competitive environment? The key success factors might be distribution channels, product technical performance, marketing ability, time to market, manufacturing capability, or something else. There will be a few that are critical. It is very important to identify them and then judge whether you will be able to excel in these areas.



· Test your logic – does it hang together and make sense. The analysis phase is the time to be intellectually tough, not to dream and believe you “can just do it”. Look at scenarios/probabilities/risks and “what ifs”. What can you do to change the odds?



Too often, ventures are launched or business directions are shifted without an understanding of the implications, only to incur great costs and misfortune later. A thorough assessment will bring greater clarity to the issues, improve the quality of decisions and form the basis for developing powerful strategic and execution plans.



Copyright Leon Sandler, Monmouth Group, 2002.