According to “Identifying and Exploiting the Right Entrepreneurial Opportunity for You” by Howard H. Stevenson and Shirley M. Spence, correctly assessing an opportunity involves two different analyses:
1) Business Analysis
2) Personal Analysis
The reasoning is that accounting for business and personal factors will prevent us from rushing into pursuing a flawed business or creating a business that isn’t personally fulfilling.
Here, I will summarize the frameworks that lead both analyses.
Business Analysis
“Realness” of the opportunity: An idea or identified opportunity could be a great product or project but not necessarily a business. Here is where scalability, profitability, saleability, and superiority matter.
Some questions we can use to analyze this area are:
- Can you see what needs to happen to make this idea a reality?
- Is this a real business or company? Or is it more a one-time project or an unscalable product?
- Are customers identifiable and reachable?
- Does the product/service deliver superior value compared to similar in-market solutions?
- Is the economic model viable? In other words, is the potential profit good enough to justify building and maintaining an organization around it?
- Does it open up options? Is it expandable (e.g., platform versus simple technology)?
Durability of Opportunity: This section evaluates if this opportunity can survive over time. Here is where the capacity to protect, evolve, differentiate, and adapt matter.
Some questions we can use to analyze this area are:
- Will we be able to develop distinctive competencies?
- Can we build entry barriers?
- Can we identify and surmount regulatory compliance issues?
- Can we identify and address stakeholder goals and needs?
- Can we anticipate and respond to internal and external changes?
Marshaling the Resources: This section evaluates if this opportunity gives us a margin to access and manage resources that keep the business running in unfavorable conditions in its different development stages.
Some questions we can use to analyze this area are:
- Can I obtain the missing resources? Where?
- Can we determine and choose between minimum and optimal resource levels?
- Are the economics sufficiently clear for a good budget?
- Can we define required margins of safety?
- Can we identify and access critical resources?
Managing the Venture: This section assesses if the opportunity allows good performance and resource tracking that gives us margin to make corrections. It also includes supervising and protecting “soft” resources such as business culture and reputation.
Some questions we can use to analyze this area are:
- Will we be able to monitor and manage critical resources?
- Can we measure business performance as well as results?
- Will we be able to make mid-course corrections as needed?
Harvesting the Venture: This section assesses if the opportunity allows us to withdraw profits from it and, if so, when. There’s a big difference between getting your capital stuck for years instead of months.
Some questions we can use to analyze this area are:
- Am I planning to sell part of the business? If so, to whom?
- Are there realistic mechanisms for harvesting?
- Can the venture be structured properly to aid harvest?
- Can we understand what conditions will trigger or preclude harvesting?
Personal Analysis
Goals: We must ask ourselves what is more meaningful to us and our values. If an idea or opportunity conflicts with our vision for the future, maybe we should look elsewhere. Every career change must point us in the direction we want to go.
Capabilities: We must know our skills and capabilities to find complementary partners and be ready to evolve with the business. Most likely, as the business grows, we will move from doing it all to a more managerial role. We must know what roles suit us best to keep our work meaningful.
Lifestyle: We must consider the demands of the business and potential uncertainty and only proceed if it aligns with the life we want. Considering the worst-case scenario proves to be the best way to assess our willingness and readiness to assume the sacrifices.
Relationships: We must know our willingness to trade time with our loved ones to pursue our venture. Our loved ones should also be aware of the implications and let us know what they think.