Evaluating a business opportunity

This means assessing whether the identified opportunity is viable or not. This helps in arriving at the best decision concerning the business idea to implement Evaluation should be done carefully, systematically and without emotions.


Evaluation is necessary even where there is only one business idea. This will help in avoiding starting a business that cannot succeed.

Factors to consider when evaluating a business opportunity

The following are the factors to consider when evaluating a business opportunity.

a. Personal consideration

These are the abilities and expectations of an
entrepreneur. They include the following;

• Objectives

The entrepreneur should evaluate the business idea to find out whether it is in line with his/her objectives.

• Skills

Where a business requires certain specialized skills and those skills are lacking the idea may be dropped.

• Commitments

Where the business is likely to interfere with the entrepreneurs other commitments it may fail.

• Interest

It is necessary to check whether the intended business will interest the entrepreneur or not.

If the entrepreneur will not enjoy running the business, the idea should be dropped.

b. Business consideration

These are external factors that are likely to
affect the operations of the business and they include;

i. Availability of market for the product

An entrepreneur should assess the availability of customers before starting a business. Customers exist where there is a
gap/nich in the market.

ii. Technology

The business should be evaluated in terms of whether there is an appropriate technology that can be used in production. Factors to be looked into include;

a. -Appropriateness of the technology

b. -The cost of the technology

c. -The possibility of the business suffering in case the technology becomes outdated/obsolete.

iii. Availability of raw materials and other resources

The raw materials and resources required should be within the reach and affordable to the
entrepreneur.

iv. Government policy

An entrepreneur should consider the requirements
of the government before starting a business e.g. the government may require certain businesses to be located in certain areas only.

v. Amount of capital required

The capital required to run and maintain
the business should be considered i.e the source of capital.

vi. Profitability of the business

Within a certain duration of time.

vii. The break-even period

How long the business can take to support
itself.

viii. Possibility of expansion
i.e. the potential for growth of the business.

ix. Impact of the business operations on the environments;

some businesses operations on the environments; some businesses lead to environmental degradation and should be located in appropriate

x. Security

Availability of security should be considered.

xi. Level of competition

This will help determine whether the business will survive or not.

xii. The risks that the business will face

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