evaluating business
opportunities
(From an article by Norm
Brodsky, Inc., July, 99, p.29)
- Opportunities
- The world is filled with great business
opportunities and none of them guarantee success.
- Spotting the opportunities is easy. What's
hard is developing the discipline and stamina to stay focused
on the single opportunity that you've chosen until it's turned
into an established business that can stand on its own.
- Focus
- Phase one
is to develop a single specific business. Focus is needed here
to not consider 10 different business ideas at the same time,
looking for the most promising. That's the wrong question. Here's
what to ask yourself:
- Which business do I like the most?
- Which one fits in best with what I want
to do with my life?
- Select the single idea that, for whatever
reason, strikes you as more appealing than the others.
- Phase two
is to thoroughly the promising opportunity you like the best
by researching it. Here's how:
- Arrange to spend time working in the industry.
- Find out everything you can about the
current industry players and how the business really works. Get
information from trade associations, talking to people in related
businesses, and interviewing customers.
- Commitment
- Any business is a long-term commitment.
Plan to give it your full attention for at least five years.
- We're not talking about neglecting the
rest of your life, but at work you need to be totally dedicated
to the path you've chosen until the company is firmly established,
and that takes a long time.
- Is it viable?
- Enjoyment in the long-term is vital, but
viability is needed or else your commitment is futile. If you
can't answer the following questions, which are crucial if you're
moving forward, then it's generally because you're not focusing
on the one specific opportunity and pushing the others out of
your mind:
- Do you have the resources and skills you
need to be successful in your business?
- Is it reasonable to think that the business
will get you to where you want to go?
- Build a customer base
- The biggest challenge comes once you've
started as you soon discover there are more opportunities available--both
from inside and outside the business. These tempt you to lose
your focus, and with it, your best shot at success.
- Unless you focus first on building a customer
base, you don't have a business. Any business must sustain itself
on a base of customers that provide an internally-generated cash
flow and profit to make the business viable. Ask these questions:
- What kind of customers will give you such
a base?
- How can you draw them in?
- Relentlessly focus on this customer base.
This isn't easy and doesn't come naturally to most people.
- Opportunities are always there, but if
they move you away from your focus, they tie up capital, waste
your money in the wrong areas, and take your time away from doing
the one thing that makes a business successful: building the
customer base.
- The two limiting resources are time and
money. Don't waste either.
- What if your approach isn't working?
- Don't wear blinders. Focus shouldn't make
you rigid. Sometimes your information, such as inability to get
information out of the people in the industry, limit your ability
to know basic things such as how to go after the customers and
how much to charge.
- Try using competitive prices first and
add value by giving better service. If this doesn't work, then
you've got the wrong approach. Maybe people won't switch vendors
or buy because of service or improved technology. So think about
lowering your price.
- Lowering prices is tricky. You must be
able to do it while still making the business viable.
- Remember that profit = gross income -
expenses. So you either need to increase income or decrease expenses
in a timely enough manner to maintain cash flow while the business
is growing.
- Expenses relate to each item sold. You
need to be able to calculate a per item expense. Then you have
the possibility of thinking up creative ways to decrease this
by considering every area of expense for ways to do it cheaper.
- Increase income by increasing customers
or raising prices.
- If you're not getting enough leads to
customers, then perhaps your selling strategy is wrong. Where
are the customers? If they're at trade shows, go there, but see
what the results are. Maybe you need to cold call.
- Be both focused and flexible. Don't be
distracted by the opportunities yet don't be so focused that
you ignore signs of trouble.
- A business idea almost never works exactly
as you though it would when you started out.
- You have to figure out how to make it
work by watching, listening, asking questions, experimenting,
making changes, refining your concept, and constantly developing
your customer base.
Copyright
2001, Robert I. Winer, M.D.
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