8 Ways to Identify Market Opportunities for Business Growth

The foundation for any entrepreneurial venture is a market/product fit or match. We consider the two sides of this concept, although we must recognize that each is relative to the other. Startups trying to manufacture new automobiles have found it exceedingly difficult to take market share from existing car companies. Evaluate whether that’s a battle worth fighting and if you have the funds to fight it. This article primarily discusses evaluating a business opportunity in the US, although the same considerations generally apply in other countries. If the business opportunity would require you to do things that you’re not comfortable with, such as cold-calling potential clients, it might not be the right fit.

As such, focusing on novelty characteristic, we add to the literature on outcomes of novelty by further clarifying how opportunity novelty affects opportunity adoption decisions. Based on the above manipulation, we utilized the in-group design method to test the four hypotheses. Specifically, 80 Chinese college students were required to imagine that they were the CEOs of a high-tech start-up company within the laboratory environment. After evaluation was complete, participants were asked to describe their thoughts during the evaluation of entrepreneurial opportunities. Meanwhile, they needed to record their opportunity adoption intention, the personal propensity of risk aversion, and openness through well-established scales.

How to Conduct a Market Opportunity Analysis

Is there financial strength and strong credit behind the business opportunity? Can the licensor-seller give you an escrow agreement to deliver a building, equipment, leasehold improvements, inventory, etc., as the unit is made ready for your use? Check out the bank references given by the licensor-seller; discuss the company’s financial strength with the appropriate managers. If you’re considering a more recently established business opportunity, you should check out the parent company’s history to evaluate its success and longevity in its particular field of operation.

All applicants must be at least 18 years of age, proficient in English, and committed to learning and engaging with fellow participants throughout the program. In this case, the milkshake beat out competitors because its thick consistency allowed it to be consumed slowly over commutes. Gain new insights and knowledge from leading faculty and industry experts. HBR Learning’s online leadership training helps you hone your skills with courses like Decision Making. Companies seek equity financing from investors to finance short or long-term needs by selling an ownership stake in the form of shares. Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator.

Usually, individuals with high-level construals will form relatively abstract, coherent, and superordinate mental representations of events, focusing on why one performs them . In contrast, individuals with low-level construal will form relatively concrete and contextualized mental representations of events, focusing on how one performs them . However, literature on the effect of construal level on the evaluation process is still scarce.

Consumer Sources of Opportunity

It means thoroughly researching potential pursuits, asking detailed questions, and verifying information. Whether you start your own business, buy an existing business, or purchase a franchise, researching the industry, your target market, and examining the economic and funding options are all part of performing due diligence. If your company hasa product pricing team, work closely with them to determine the willingness to pay and devise a monetization strategy for the new feature. Only by properly evaluating the state of one’s portfolio is this possible.

Using a variety of analyses will help your business gain a holistic view of opportunities and create long-term strategic business plans. Organisations that use consumer segmentation to tailor their narratives, marketing and products will sell more effectively. Line of limited-edition ice cream flavours that celebrate traditional cuisine.

Behavioural variables pinpoint purchase decision motivations including price, convenience, durability, design and sustainability. Is an open or fluid market system with temporary positions made up of independent short-term workers. In these examples, we can see the alignment of supply and demand. The entrepreneurial opportunity happens in providing a platform to assist in connecting the supply and demand. Why do half or more of new small businesses no longer exist after the first five years?

Your university reference librarian can tell you what public accounting they have available and which resources would best fit your research question and area of focus for your idea. By developing our critical thinking skills, we can make better decisions, solve problems more effectively, and communicate our ideas more clearly and persuasively. Conduct a comprehensive financial analysis, including the total cost of development, revenue streams, and the expected return on investment based on the agreed-upon monetization strategy. For instance, let us say that a portfolio shows an annual return of 10%. However, the market benchmark we are using has only risen by 8% for the same year. That means that group of assets has outperformed its industry by 2%.

Tip 5: Prioritize opportunities

Therefore, entrepreneurs and investors should be aware of their construal levels and consciously adjust them when evaluating opportunity novelty. For example, they should use a high-level construal to reduce their perceptions of risk and then increase the possibility of adopting novel opportunities in a business environment where novelty actions have to occur. Opportunity evaluation is essentially a process of judgment based on cognition (Shepherd et al., 2007; Wood and McKelvie, 2015). According to information processing theory, opportunity evaluation is strongly affected by how entrepreneurs interpret information . In summary, our results emphasize the usefulness of applying CLT to the opportunity evaluation process and may provide new perspectives for intervention techniques during opportunity novelty evaluation. Against this backdrop, our paper, based on information processing theory and CLT, explores the cognitive evaluation process from opportunity novelty to opportunity adoption across an experimental method.

• You’ll know you’re getting a legitimate financial statement because CPAs will not stamp a statement that hasn’t been properly audited and certified.
• Review the potential and the pitfalls inherent in the business to make an informed decision and increase your chances of success.
• Opportunity evaluation is essentially a process of judgment based on cognition (Shepherd et al., 2007; Wood and McKelvie, 2015).
• Nevertheless, due to Missouri’s positive economic climate, Joe’s business-specific multiplier is a little higher than the industry standard, at around 2.0.
• But it’s not just these big brands looking into this opportunity.

One example of new-market disruption is the transistor radio, which entered the personal entertainment market with the first model by Texas Instruments in 1954. The portable radio catered to young, non-wealthy people who were overserved by other radio offerings at the time, which were large, expensive, and designed to sit in homes like a piece of furniture. By creating a cheap, “good enough” option for listening to music, Texas Instruments paved the way for higher-quality options, such as the Sony Walkman and Apple iPod, which eventually rendered in-home radio consoles obsolete. This method is more effective than trying to directly compete with the incumbent company for top market segments because it’s likely to defend its position. One example Christensen outlines in Disruptive Strategy is McDonald’s milkshakes. McDonald’s executives were surprised to find milkshake sales were highest in the morning.

The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest. The data sets generated for this study are available upon request to the corresponding author. But this research will help you stay resilient amidst volatility.

If the business is highly dependent on you or another owner, it cannot be easily transferred to new ownership and the business’ valuation will suffer. If you’re selling a business in an industry or area that is expected to grow in the near future, the SDE multiple will be higher. SDE gives you a better idea of the business’ true profit potential by calculating what the business’ earnings would be with a new buyer. This is done by adding back in expenses listed on your tax return that aren’t necessary to run your business.

How to Research a Business Opportunity

Also, work on getting all of your key contracts locked up for as long as possible. If you have important contracts coming up for renegotiation in the next year, then try to get them extended or renegotiated now. I’ve seen deals fall apart because important contracts were put up for bid during the sales process and the seller thought it would be easy to extend. Although hiring an appraiser can be expensive, there are certain advantages to doing so. The main advantage is that a professional appraiser will audit the business’ financials to make sure they are correct.

Absolute returns measure the total loss and profit an investment has generated. Meanwhile, relative ones compare performance to a benchmark, like one of the previously discussed market indexes. Notably, they recommended ElderCare expand its referral business to include retirement homes, in-home care, and other social services. Most entrepreneurs don’t bother establishing key numbers for their business or, if they do, often focus on things that are too far away from the objectives of the business to make much of a difference. In most businesses developing a feedback loop is pretty straight forward. I like to identify some key numbers in the business and watch those numbers every day.

Although it does not have a very high multiplier, the real estate value actually makes the investment a pretty good one. The availability of seller financing also has an impact on the sales price multiplier. In nearly 80% of cases, a business has some kind of seller financing option available to the buyer. This is typically around 30% to 60% of the overall business value or purchase price. If a small business doesn’t offer seller financing, it will take longer to sell and its value is typically decreased. The factors we’ve covered above are a list of the most common things that can affect the SDE multiplier.

• It is a crucial step in the product development process and when considering investments in significant initiatives such as launching a completely new product or vertical.
• It will estimate the value of your business based on your industry, current sales, and current profit.
• Each opportunity should be coupled with a business objective and should align with your product strategy.
• That’s one of the things I like most about the publishing business.
• The licensor or seller of a business opportunity declares that it will secure or assist the buyer in finding a suitable location or provide the product to the purchaser-licensee.

Another example is when an entrepreneur intentionally starts a venture knowing that there is a short-term timeline for success, with the expectation that new technology will replace the gap that the venture originally filled. Most entrepreneurs are not big risk-takers but understand that there are no guarantees in starting a new business venture. Instead, entrepreneurs tend to take calculated business risks based on the best research they can gather.

In my case, if an opportunity requires me to grow, I will rank it a 5. For leaders and organizations who have more capabilities than opportunities, the challenge is scouting enough of the right opportunities to fill their plate in an optimized way. For them, this instrument becomes an opportunity optimizer to evaluate and select the highest-ranking initiatives to pursue. To summarize, there are five basic questions that you should ask as you evaluate an opportunity. New ventures generally begin with a hypothesis that this potential is real, but the first order of business is always to validate this assumption, and usually to revise the hypothesis on the basis of facts and evidence. Crowdfunding is the use of small amounts of capital from a large number of people to raise money or fund a business.