by Shaheen Darr

Created on: August 16, 2011   Last Updated: February 02, 2012

An evaluation of a business opportunity is important as this can lessen the chances of investing your hard earned money into something that is not as lucrative as the seller makes it sound.  According to Ryan Ellis, CEO of Broadwick Corporation the questions raised to evaluate a business opportunity can be grouped into the RAMP model which stands for Return, Advantages, Market and Potential. Many of the points raised in the model have been incorporated into the article. 

Profit: One of the most important questions you can ask yourself is how expensive it will be to start the business, if it will be profitable enough to meet all the outgoings and provide a return on your investment. Using personal savings or capital loaned by friends or family can be advantageous as there is less interest charged on it whereas borrowing a large amount of money from a private lender can put pressure on the business budget and on any assets that have been used as collateral. It is important to check out the certified business accounts using the help of a financial advisor to see if the business is really turning over an amount that it claims in order for it to be financially viable in the future. Also check out the legalities that include the terms and conditions specified in the lease or any unresolved disputes pending against the company. 

Research:  Research the market to see if the products you will be selling are in demand or if there is an opportunity to fill a gap in the market. Check out your competition and the range of products and services they are offering to assess how you can make improve yours or make them different to what your competitors are selling. A definite advantage will be having a unique product range or a service that no one else in the area is offering.  Also check out any disadvantages like a higher cost of production or market barriers such as regulations, trade restrictions or research and development expenditures that make it difficult to penetrate an existing market.  

An evaluation of a business opportunity also requires researching the market in which the products or services will be sold. The process involves checking out your customer base, their needs and requirements, the prices you will charge and how they will compare to your competitors, the quality of your products and the effectiveness of your delivery service. The state of the economy especially in the areas in which you hope to operate and the size of the market, both domestic and international, if applicable, should also be adequately researched.   

Potential: This will require a SWOT analysis of your business to evaluate its chances of success. SWOT analysis involves a scrutiny of inner strengths and weaknesses amidst the external opportunities and threats in which a business operates. Establishing a clear idea of your business goals backed by a strong marketing strategy and a knowledgeable team can help achieve the true potential of a business opportunity. This is based on the premise that sufficient research has been conducted on the product, its price and distribution, market conditions and the potential customers who will be eventually be buying your products. 

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