Recognizing Opportunity in the Entrepreneurial Process

At the heart of any entrepreneurial process is opportunity. Successful business people and investors know that a good idea is not necessarily a good opportunity. In fact, for every 100 ideas presented to investors in the form of a business plan or proposal, usually only 2 or 3 ever get funded. Over 80 percent of those rejections occur in the first few minutes; another 10 to 15 percent occur after investors have read the business plan and proposal carefully. Fewer than 10 percent attract enough attention to merit further consideration and investigation.

As an entrepreneur, it’s important to develop the ability to quickly evaluate whether serious potential exists in a business opportunity and decide how much time, effort and value to invest.

Here is a quick summary of what to initially look for when determining if a business venture is a good opportunity:

Market demand is a key ingredient in measuring opportunity

  • Does market share and growth equal 20 percent of annual growth
  • Is the customer reachable

Market structure and size

  • is the market emerging or fragmented
  • What is the revenue potential based on existing market share

Margin analysis helps differentiate an opportunity for an idea

  • Capital requirement vs the competition
  • Can we break even in 1 to 2 years?

Consider the underlying market demands as well as the value added properties of the product of service. Also up for careful scrutiny is whether the market size allows for a 20 percent or more growth potential; the economics of the business, solid gross margins (40 percent or more) and the free cash flow characteristics.

The business need not be operating perfectly. In fact, if there are some inconsistencies in existing service, some gaps in information and knowledge those can also be considered as potential to create opportunity and drive value. In the final analysis, there are many factors which when combined, will paint the total picture. But the basics as outlined above along with your professional experience and business acumen will help in bringing you to an appropriate conclusion.


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