Ideas and opportunities need to be screened and assessed for viability once they have been identified or generated. This is not an easy task though important because it makes the difference between success and failure.
The exercise certainly helps in minimising the risks and thus the odds of failure.
Identifying and assessing business opportunities involves determining risks and rewards/ returns reflecting the following factors.
i) Personal goals and competencies of an entrepreneur.
It is important for an entrepreneur to possess competencies, knowledge, skills and abilities before starting a business where these competencies are lacking, it’s vital to develop or bring in others/managers that compliment what is already available.
ii) Length of the ‘window of opportunity’.
Opportunities do not exist forever. The entrepreneur has to assess how long this window will be opened in order to make an investment decision.
Is there a need for the product/service? It is also important to know the size of the market.
iv) Management skills.
Those businesses that require high level of capital injection, require proper management skills.
Check out whether the business has a competitive edge over other competitors e.g. potential constraints and if the industry faces existing entry barriers.
Availability and access of these resources determines whether certain opportunities can be pursued.
This refers to political, economic, geographical, legal, regulatory and also physical environment within which a business operates.
viii) Business plan
The process of examining the factors discussed above is often the initial step in developing a business plan. Investors and lenders may require these issues to be considered and set out in form of a business plan.