What Makes A Great Business Opportunity? 6 factors to define a great business opportunity
We know that opportunities start as ideas and that they can be cultivated through several different processes, but the critical question is
“What makes a great business opportunity?”
After all the thinking, searching, and analysis, how do you separate opportunities that have a real, actionable value from those that simply don’t make the cut?
A great opportunity:
- Solves a problem for a customer
- Exists in a strategic space that isn’t too crowded
- Can be executed in a strategic space where you can maintain a competitive advantage
- Has a reasonable potential to help you achieve your goals
- Fills a critical customer need that may or may not be obvious to them
- Is not obvious to others who don’t have your background, experience, or insight
- Does not exist independently of you, the entrepreneur
Let’s take a closer look at what makes a business opportunity great.
01. It solves problems for customers
This may seem obvious, but in practice, it’s not.
The word “problem” indicates a negative emotion, but that’s not necessarily the case.
Customer problems fall into two broad categories—
- resolving pain
- and creating delight
Really great products do both at the same time.
Products that do neither have little potential for success.
Customers buy benefits, not features
All the flashy features in the world will not help if they don’t provide concrete benefits for the customer.
This is why it’s so critical for entrepreneurs to think in terms of solving customers’ problems.
Pain and delight are extreme emotions, and these are the sorts of emotions that cause customers to adopt new products.
Incremental improvements and flashy features without benefits are unlikely to sway potential customers.
The smartphone market is littered with new entrants that ultimately failed due to the overzealous adding of features without tangible benefits.
In 2005, ESPN, the Entertainment and Sports Programming Network, decided that what the smartphone users of the day were missing was an ESPN-branded phone.
In the days before apps were the established standard, the ESPN phone could receive up-to-the-minute sports alerts and was truly a cut above other phones for the sports enthusiast when it came to sports news and scores.
The phone flopped and was discontinued nine months later after reaching 30,000 customers—well below the 500,000 ESPN needed to break even on their investment.
While the sports alerts feature certainly did provide enthusiasts with the benefit of very current news and scores, the phone fell short of consumer expectations in nearly every other way. The high price tag, cut-rate hardware, and restrictive contract failed to impress.
Furthermore, ESPN committed to the release of this phone while simultaneously offering sports news and scores through services available from Verizon, Sprint, and other wireless carriers.
In the end, the phone did not do enough to solve the problems faced by its prospective customers, and it also failed to thrill.
ESPN relied on brand recognition and a high-powered marketing campaign to pick up the slack in their value proposition—never a good idea.
02. It exists in a strategic space that isn’t too crowded
It’s no secret that new ventures are entering a business landscape that is already crowded with established competitors.
This means that the best way for new ventures to survive is to carve out a niche that they can dominate rather than compete as a small fish in a big pond.
The space that your business occupies can’t be written on a scrap of paper and pulled out of a hat.
You must position yourself strategically.
What this means is that while passion about your business is a necessary prerequisite for success, it isn’t enough.
Just because you’re passionate about fitness does not mean that your gym will be successful.
There are a lot of gyms out there –> what sets yours apart?
03. It maintains a competitive advantage
Competitive advantage is what makes your business better at doing whatever it is you do than your rivals in the same space.
It is important to know that if your business opportunity can’t be executed strategically in a manner that allows you to maintain a competitive advantage, then it isn’t a great business opportunity.
04. It has a reasonable potential to help you achieve your goals
Successful entrepreneurs don’t start new ventures because they believe it’s good for their health, and they don’t start new ventures to get rich.
When it comes to moneymaking potential, starting your own business is one of the worst ways to become independently wealthy in the short term.
In fact, once your business clears the startup stage and begins courting investors, remember that professional investors tend to shy away from entrepreneurs who are looking to get rich from their business.
Obviously you want to benefit financially from your successful business.
However, the road to startup wealth is long and extremely uncertain.
If your primary goal is to get rich fast, this isn’t the path for you.
The stories you’ve read about tech “unicorns” that exploded into high growth and profitability are the extreme exception to the rule.
Investors look for talent, passion, and proof that your business can win.
When assessing a business opportunity, consider the ways in which it has the potential to achieve your goals.
Of course, there are no guarantees, but if a business opportunity isn’t likely to help you achieve your personal goals, then why would you follow through with it at all?
05. It is not obvious to others
The unique blend of experience, insight, and passion that each entrepreneur brings to the table—his or her entrepreneurial thumbprint—is a key decider in what makes a business opportunity great for that person and not for another.
If a problem exists that a customer is aware of, then the idea of solving that problem is an obvious one, along with some ideas about how to solve it.
Remember that ideas are not opportunities.
An entrepreneur with the right background, experience, and talent may see an executable solution to a problem.
Because of his or her unique thumbprint, this executable solution might be a good business opportunity.
Others who are looking at the same problem may not see an opportunity so easily, if at all.
- What about the problems that customers may not be aware of?
- What about the problems that customers may not be aware of?
A great example is the story of the iPod.
iPods solved a number of problems for consumers that they hadn’t even realized were problems. The ability to keep a library of songs right on your device, to make custom playlists, and to deliver via download instead of making a trip to the store made products the iPod a clear winner over traditional CD players.
The consumers who purchased iPods didn’t have a burning need to replace their CD players. They were responding to the ways in which new technology provided a superior solution to how they wanted to experience music.
06. It doesn’t exist independently of the entrepreneur
In the same way that great opportunities are not obvious to others, great opportunities do not exist independently of the entrepreneur.
The ability to develop the idea into a business opportunity and to see the ways in which it provides value and can be executed (and ultimately is executed) are completely reliant on the entrepreneur and his or her entrepreneurial thumbprint.
A popular misconception is that opportunities are like cars—plop anyone with a license in the driver’s seat and the vehicle will get to its destination.
Nothing could be further from the truth!
Some Considerations About Business Opportunities
With the number of buzzwords and conflicting information that gets thrown around regarding the sources of business opportunities and how to cultivate them, it is worth looking at the answers to common questions concerning the nature of opportunities.
Should I be looking for opportunities in growth industries?
If your passion and skill set take you there, then yes. What makes the opportunity valuable is its ability to be executed, to provide value to customers, and to be accomplished in a strategic manner, all within the context of your entrepreneurial thumbprint.
In that respect, the type of industry isn’t as crucial to the value of the opportunity. Seeking opportunity in a “hot” industry just to be in a hot industry will do more harm than good, especially if that industry is at odds with your entrepreneurial thumbprint.
What about established markets that are dominated by entrenched competitors?
Keep in mind that new ventures can almost never compete on price. A new market entrant simply can’t tackle an entrenched competitor head-on. If there is a strategic position that your venture can occupy that allows you to compete indirectly with existing market players, then the opportunity might not be a bad one.
Should I be looking for “disruptive” opportunities?
“Disruption” is a buzzword that is popular in tech startups from Silicon Valley. The term originated from Harvard Business School professor Clayton Christensen in the late ’90s.3 He defined the concept of “disruptive innovation” as a principle whereby entrenched market players could be unseated by smaller rivals who offered simpler or less costly solutions.
The popularity of the term’s use to sell Silicon Valley tech startups to investors has eroded the meaning of the term to the point that it is irrelevant to entrepreneurs at large. Don’t get me wrong—disruptive technologies are a real thing and have a profound effect on shaping industries over the long term. However, disruption is not a strategy, and it shouldn’t be a major consideration when assessing a business opportunity.