Feature Story

 

Oportunities vs Ideas

 

By T. Craig Bott

President & CEO Grow Utah Ventures

 

Discovering the difference between a good business idea and a solid business opportunity can make all the difference between creating a successful business and having a water cooler war story. Distinguishing between ideas and real opportunities is the fundamental challenge facing every entrepreneur. Entrepreneurs who can correctly sniff out the real opportunities are the ones who will build successful businesses and create real value.

For these entrepreneurs it is not so much a hunt for that one golden idea but is instead a constant process of sifting and sorting through a range of prospective opportunities. Leading entrepreneurs have learned to do this as systematically as possible. They employ a variety of filters, from the coarsest down to the finest, to quickly eliminate most opportunities to find the few that possess real value.

Identifying real opportunities requires a systematic consideration of key characteristics and relying on a decision-making discipline that not all entrepreneurs have but which can be learned.

 

Opportunities Are Revealed, Not Created

It is important to understand that business opportunities surface virtually without assistance from anyone. They are revealed by circumstances and not created. They lie waiting to be discovered and pursued by the observant entrepreneur.

Such things as market conditions, advances in technology and changing customer demands create opportunities that will exist until change occurs and the opportunity is lost.

Some opportunities, even some with great potential value, are never really discovered nor fully exploited. Some are simply passed over and others are never given the resources needed to nurture them into anything of value.

But those who learn to discover opportunities early on in their lifecycle where there is sufficient time to mature them and cultivate the opportunity before competitors step in, win the entrepreneurial game. In fact, the earlier an opportunity is discovered, the less resource it generally requires to advance it to a stage where value is created for the customer and the entrepreneur.

The entrepreneur who develops and hones the skills to detect opportunities early in their life cycle will be much more successful in creating business value.

 

Characteristics of Entrepreneurial Opportunities

The very best opportunities reflect a common set of characteristics. It is this set of characteristics that most distinguishes an opportunity from simply an idea.

Each year, Inc. magazine reports on these characteristics. Consider some findings from their recent report:

$10 million sales: Entrepreneurial opportunities generally serve markets that are smaller, regional or even local in nature where services can be customized to meet unique customer demands.

200 percent growth: Targeted business opportunities offer the potential for growth of 200 percent or more.

10 to 25 percent margin: These opportunities are profitable, strong and attractive.

$10,000 to $40,000 launch cost: These opportunities are not expensive to pursue. These entrepreneurs carefully manage their costs and preserve their cash for what really matters — sales.

 

Finding the Best Business Opportunities

So where do entrepreneurs find the best business opportunities? For the most part, they find them in the environment in which they currently work, live or have an interest. Consider again these facts from the Inc. 500:

>> 47 percent of business opportunities were discovered in work-related activities. That means that while on the job the entrepreneur saw an opportunity related to what he or she was currently doing and chased it.

>> 15 percent of the opportunities were discovered by making an improvement on what someone else had already done.

>> 11 percent came from noticing an unfilled niche in the consumer market place.

>> Markets that are undergoing significant change create opportunities for the quick response and flexibility an entrepreneur can bring to meeting market needs, beating out even well-established businesses.

>> Markets that lend themselves to selling directly to the customers create opportunities for the entrepreneur who has the personal ability and drive to build customer relationships and make the sale.

 

Shaping Your Own Opportunities

Trying to find that one unique business opportunity that no one has yet discovered is pretty much a wasted effort. There simply are very few truly unique opportunities that no one else has considered. The fact is that most entrepreneurial success is achieved simply by taking an existing business concept, building on it, and converting it to a new opportunity.

Entrepreneurs can shape their own opportunities and increase their value by doing some of the following:

 

Opportunity in Execution: There is often an untapped wealth of opportunity in simply doing things better than the rest. Call it customer service or building customer loyalty, but the fact is that business opportunities can and are created solely on the basis of superior execution even in the face of significant competition.

 

Copying Another's Business Model: Copying another's ideas and even their business model may in fact be the best and smartest way to launch a business. Many entrepreneurs have achieved success by simply taking another's basic business model and making minor improvements in content or execution.

A good exercise for any entrepreneur is to take a marginal business model and consider how to make it better — provide a better service, higher quality, more customization, longer life, or make it easier to purchase. By doing so, new opportunities will surface.

 

Apply Technology: Consider what happens to the business model when technology is applied, or newer more advanced processes and workflows are employed. Often such improvements significantly enhance the business to a degree that a higher price can be charged, costs can be reduced, or more customers served — all resulting in a more viable business model.

 

Deciding Which Opportunity to Pursue

After considering all of these opportunities, the entrepreneur must decide which one to pursue. This is a time to be strictly objective. Entrepreneurs need to take on the mindset of a financial investor. Investors consider hundreds of businesses before making an investment decision and they learn to do so objectively and with discipline. Entrepreneurs must do the same, as they too are about to make a sizeable investment of time, energy and resources.

The factors to consider most at this point are highly personal to each entrepreneur but should definitely include the following:

 

Probability of Success and Size of Payoff: It will generally take the same energy and time to pursue a good opportunity as one with little likelihood of success and a low payoff. Choose those opportunities that have the highest probability for success and will yield the greatest personal payoff.

The probability of success for any opportunity and the size of the final payoff must be estimated early on by the entrepreneur and considered carefully in making the final decision.

 

Resources Required: Each opportunity requires critical resources in order to be developed. These resources certainly include money, but also time and specific skill sets. The amount of required resources is often a factor of the complexity of the business opportunity.

The entrepreneur must carefully consider the amount of resources that are at readily at hand and let this reality check force a focus on those opportunities that more closely match available resources. It is better to pursue an opportunity that you have the resources for than to spend precious time and energy trying to raise additional resources to pursue what you might feel is a grander opportunity.

 

Timing Is Everything: There is a time frame associated with each opportunity — a ticking clock that meters out the life cycle of the opportunity. It is possible for the entrepreneur to pursue an opportunity too soon before market needs have been defined or before customer segments arise. It is just as possible to pursue an opportunity too late, long after competition has arisen, or customer needs have changed.

Pursuing even an opportunity of great value out of sync with this timing will result in failure regardless of its overall merits.

 

Evident Fatal Flaw: One final consideration is making sure the opportunity is not marred by a "fatal flaw" — some element that predicts failure such as overly entrenched competitors, current vendors or suppliers who are better positioned to meet customer needs, or an entity in the supply chain that is better able to offer the solution.

If such is discovered, the wise entrepreneur will walk away from the opportunity instead of blindly moving forward feeling that their drive and passion alone will be enough to succeed.

 

Conclusion

There are countless opportunities entrepreneurs can pursue — many with tremendous potential. Entrepreneurs who can set their emotions aside and carefully work through their evaluation are more likely to select the very best and achieve the ultimate success they are seeking.

 

Launch - Summer 2008

 

 

For the full "digital magazine" version of Spring 2008, visit: www.nxtbook.com/nxtbooks/growutah/launch_2008summer/