Six Criteria for Assessing New Business Opportunities

Carrying out an assessment of the viability of a new project can make a difference between its success and failure.

One of the dilemmas entrepreneurs face is defining a new product, or defining what is actually new or unique in an idea. A new idea may involve inventing a new product, or simply repackaging and modifying an existing product and passing it off as new. For instance, Microsoft Word markets each version of the software as new, though it possesses only minor improvements. To survive, firms are constantly looking for new markets and opportunities to exploit to increase their profits. Firms use an opportunity analysis plan to assess the viability of new opportunities.

Opportunity and Competition

To assess the viability of a new opportunity, identify and list all the competitive products and competitive companies in the product's market space. Compare the new opportunity with at least three competitive products that are most similar in filling in the identified market need.

Market and Opportunity

The next stage involves analyzing the size and characteristics of the market, such as how fast new entrants enter the market. Collect market data for at least three years so that the trend is apparent for the whole industry and overall market. On the basis of your findings, you should be able to determine whether the size and characteristics of the market warrant the effort needed to implement the new opportunity.

Team Assessment

At least one person in the team implementing the opportunity needs to have experience in the industry area of the new idea. This is one characteristic that correlates to the probability of success of the venture. Such persons must be excited by the new opportunity and be committed to it until is realized.

Financial Assessment

The next step involves estimating the capital requirements of implementing the new opportunity. If the idea cannot be self-financed, then you must identify alternative sources of capital. Note that most entrepreneurs tend to underestimate both the costs and time it takes to implement an opportunity by about 30 percent. The proposed opportunity should also contribute to the company's financial well-being if implemented.

Compatibility Assessment

You should also evaluate the compatibility of the new product's production requirements with the existing plant, machinery and personnel. If you cannot integrate the new opportunity into existing manufacturing processes, then consider more costs such as buying new plant and equipment.

Synergy Assessment

The new opportunity should have synergy with existing management capabilities and marketing strategies. For example, General Electric would have a less difficult time adding a new lighting device to its line than Proctor & Gamble. Sales staff should be easily transferred to the new product. You should also be able to sell the new product through existing distribution channels.

References

• "Entrepreneurship, 7th Edition"; Michael P. Peters, et al.; 2008
• 113 Industries: Opportunity Assessment
• Joe Ellers: Identifying and Assessing New Business Opportunities
• Link.com; Financial Analysis of Commercial Training Simulation Service (CTSS) Contracts; Stephen I. Robertson
• U.S. Department of Energy: BestPractices StudyChemicals BestPractices Plant-Wide Assessment Case Study