Factors to consider when evaluating viable business opportunities

  

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

Posted By: sashoo  Membership Level: Gold  Total Points: 3952

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.

Responses

SimonMburu
Membership Level: Gold    Total Points: 4203
Another emerging consideration when evaluating a business opportunity is the Social Corporate Responsibility of the business. Nowadays almost every business take part in projects of its adjacent community, this plays an important role in building the relationship between the business and the public.i.e a good public relation. When establishing a business, an entrepreneur needs to choose wisely which activity his or her business is going to participate in. This is because some of these activities could bring negative effects to the business if not properly selected. Some of these activities include charity funding, sponsoring of local projects like football clubs among others.
17 Apr 2012 @ 11:50

sashoo
Membership Level: Gold    Total Points: 3952
@Simon,
Corporate Social Responsibility (CSR), is not only fit for much more established businesses, but also for those that wreck in huge profits. For instance, Equity Bank, Mumias Sugar, KCB, Co-operative Bank and many more established companies that fall in this category. These established businesses even offer scholarship projects to schools and universities.

But for starting-up businesses or for new entrepreneurs, venturing into such projects would drain them off financially, because they are just starting up and many would want to pay off their capital financing debt.

However, when they eventually establish themselves, then they can venture into such charities as well,without feeling the strain. But before this, other projects might as well cause bankruptcy.
17 Apr 2012 @ 11:37

Post Reply/Response

- Use proper grammar, spelling and family friendly language.

Next: The role played by entrepreneurship in economic development
Previous: Sources of business finance
Return to Resources
Post New Resource

More Resources

The roles of a teacher in a school as a societal outgrowth
Importance of radioactive isotopes in biological studies
Ways in which kenyan communities interacted in the pre-colonial period.
Reasons why managers may be reluctant to delegate
The gas laws in chemistry