It can seem hard to tell the difference between those business opportunities that are truly great…
…and those that are just passing fancies.
Luckily, to do so we just need to ask ourselves two questions.
Before I share what they are, let’s go through some examples of the kinds of “great ideas” that often arise for more mature businesses:
Traditional services business – web design and IT consultants in particular – contemplating building and selling software.
Restaurateurs seeking to package and market their own line of branded food products.
Retailers – like flooring or boutique apparel stores – building ecommerce sites.
Firms with work processes expertise – like lawyers that are good at attracting new clients – selling that know-how to other law firms.
On the surface, all of these “adjacent” opportunity pursuits seem worthwhile.
They build on business assets and trade secrets, leverage existing organizational resources, and diversify revenues.
But…a lot of proof is needed before always-scarce entrepreneurial time and resources is committed to their pursuit.
The answers to these two “Opportunity Acid Test” questions can provide that proof:
Question #1. Is the opportunity one in which our business can truly be best-in-class?
Question #2. Only if the answer to the above is yes, are the competitive and market dynamics for this opportunity favorable, again for our business?
These questions first look inward at the real strengths of a business and its people.
And outward in their evaluation of the market and industry landscape in which that business competes.
The inward test is performed by listing the business’ key strengths, such as:
Marketing: Is the company’s brand well-respected and known?
Sales: How good is its marketing-to-sales to conversion?
Operations: Does it consistently deliver high quality at competitive cost?
Financial: Is the business balance sheet strong and is our cash flow predictable?
In listing these strengths, what often arises are not-so-obvious insights as to the likelihood of successfully pursuing the considered opportunity and perhaps more valuably…
…“aha” moments as to other, more appropriate opportunities to pursue.
If and only if our business passes this internal test, do we look outward, with questions including:
Market. How big is the market for the opportunity? How expensive will it be to pursue?
Customer. Who are its target customers? How pressing is their need? How hard are they to reach?
Competition. In our global age, this is by far the most important question – and not coincidentally the one that most entrepreneurs and executives do the worst job in asking and evaluating – how strong and formidable is our competition?
What advantages – first-to-market, brand, relationship, cost structure, etc. – does our competition have that we will need match and overcome?
As we honestly ask and answer these competitive questions, very often discouragement can set in.
And actually converting on an opportunity and attaining real business success (versus just talking about it!) can seem very, very hard.
But this sad feeling is actually a good thing.
Because it is only through systematically working through this “discouragement phase” do we learn if we have an opportunity worth pursuing or if it is just a passing fancy.
If it is the latter, then let’s just move on.
But if it’s an actual opportunity, then the internal and external challenges that present themselves will embolden us to roll up our sleeves and go for it.
For sure, pursuing any new business opportunity is hard.
But hard should never be confused with impossible.
And never should we underestimate our ability to work hard and win.
Especially when the opportunity is right.