How to Evaluate a Business Opportunity

business school

With market opportunity analysis, you’ll learn which business strategies will help you grow, along with their potential risks. Don’t launch your next product or service without doing your homework. If a business idea does have initial merit, you should also perform a more detailed business opportunity evaluation. One such method is the RAMP model developed by Ryan P. Allis, CEO of several successful marketing software and consulting companies. To thoroughly understand what you’re getting into, perform an extensive market research project to determine the feasibility of your business. In addition to gleaning statistics of trends and current customer buying patterns, you need to know who your customers are, where they are located and what kind of competition exists in your area.


The difference between concrete and abstract construals of objects has been of central importance in person perception research (Trope, 1986; Trope and Liberman, 2003). Individuals draw different perceptions and inferences for the same information due to multi-level construals , which in turn affects their final decisions (Förster et al., 2004). Therefore, we suggest that interacting with opportunity novelty, construal level will join in shaping the opportunity evaluation process.

Identify the Need

Ultimately, there is no significance in the interactive effect of opportunity novelty and construal level on entrepreneurs’ creativity perception due to the joint effect of other factors. Meanwhile, the process of objective information from perceived by individuals to transformed into their behaviors will be influenced by many factors. Personal cognitive factors can affect how perceivers process information (Zhou et al., 2017). Individuals’ construal level, purely cognitive orientation , is one critical factor that can shape the evaluation process (Liberman and Förster, 2009; Mount et al., 2021). Construal level theory believes that people will cognitively represent (“construe”) objects at different levels ranging from concrete to abstract levels (Liberman and Trope, 2008; Trope and Liberman, 2010).

The important thing is that your business is ready to maximize its sale value. Now that you understand how to value a business on your own, you’ll want to maximize that value before you sell. There are both short- and long-term tips that can help you improve your business valuation and help you get the largest sum possible for your business.

Limitations and Future Research

These key numbers debit memo the feedback loop we need in order to know if we’re going in the wrong direction. The worst case scenario for an entrepreneur is to waste their time and priceless energy on a business that will not succeed. When you’re adding value to the world and solving real problems, it’s generally much easier to come up with a worthwhile strategy to make money. While most business owners spend tax season finding every business expense they can possibly claim in order to reduce their tax bill, that may not be the right move before you value your company and try to sell it. The main benefit of valuing a business on your own is that it saves you money. The experts we spoke to quoted different price ranges for appraisals, but a good ballpark is $5,000 or more for appraising a small business that’s worth $500,000 or less.

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Learn methods and best practices to maximise your market research portfolio. See how our clients leverage our insights, read up on mistakes to avoid and discover tips to find the right combination of research methodologies and applications. States regulate a larger number of business activities than the federal government.

Information Processing Theory

These business owners can tell you about their experiences, what you have to look forward to, and what you should avoid. Read reviews from others who have used the product or service. Search for the product online and on social media to see what people are saying about it.

But it’s not just these big brands looking into this opportunity. In fact, 42% of businesses globally said they plan to invest in robotics and automation in 2022. Don’t forget to analyse external factors that could impact your business. This includes economic situations, geopolitical events, changes in regulations, technological and scientific developments and environmental factors like climate change. Paying attention to these elements will help you assess market attractiveness and create winning strategies.

This will help you position your product towards their interests. Now, let’s examine how to analyse these factors to ignite your next growth opportunity. Is a product that Vestergaard launched in 2005, making water safe to drink in areas where clean water is not readily available and redefining beliefs around safe drinking water.

The most significant is the FTC rule requiring full disclosure of the business opportunity on a national level. The rule doesn’t require a registration, but it does require a disclosure that follows a specific format. A disclosure statement is a document that contains everything there is to know about the business opportunity and the seller’s company. It includes the promoter’s financial strength, how many operating units there are, and exactly what you’re going to be required to pay in total so there are no hidden fees.

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Tangible assets refer to all of a business’ material assets, and won’t typically have a major effect on your multiplier. However, you might get a higher multiplier if you have recently purchased new equipment. Let’s say a restaurant has just purchased a new set of fryers and stoves. That means that equipment will not have to be updated in the near future, cutting down on future costs and which can raise the current value.

And the variance explained by the first main factor was 24.98%, which does not account for 40% of the total variation (66.97%). In other words, there is no serious common method variance and will not bring a substantial impact to our study. Our study measured dependent variable (i.e., opportunity adoption) and two mediators (i.e., creativity perception and risk perception) with well-established scales. We translated all English scales into Chinese using the double-back translation method . Besides, we scored the moderator (i.e., construal level) using manual coding. After analyzing demographic data, the entrepreneur can then develop and conduct some basic research, which could range from observing customers to shopping at potential competitors.

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There must be a cash transaction between the two parties of at least $500 prior to or within six months after the licensee or franchisee starts the business venture. The studies involving human participants were reviewed and approved by Academic Committee of business school, Central University of Finance and Economics. The patients/participants provided their written informed consent to participate in this study. Once you identify an opportunity, quickly develop a value proposition, plan the commercialisation chain and estimate costs, revenues, cash flows and financing needs.

  • The final step of how to value a business is to account for business assets and liabilities that aren’t already included in the SDE.
  • The idea of raising bees at first seemed an unusual solution to the problem of employment for her unique clients.
  • When you first begin to use this opportunity filter, you may want to post the five critical factors in a visible place, as a quick reminder.
  • All tangible assets should be added into the valuation separately if you are purchasing them.
  • Construal level and two controls (i.e., the openness of Big-Five and risk propensity) were level 2 as well as other variables were level 1.
  • This will let you use what you already know works and build on your company’s strengths.

Most business opportunity ventures offer support not only through training but also through counseling from a staff of experts who offer assistance that no independent could afford. The most efficient accounting systems-perfect for that particular business-have been designed by experts in the field. Some licensors offer free computer analysis of records, and through comparison with other units can pinpoint areas of inefficiency or loss as well as profitable aspects of the business that are being neglected.

intangible assets

They help you select a location, they provide training, they offer support for the licensee’s marketing efforts, and they supply a complete start-up inventory. Our study identified several key individual-level controls to exclude their interference. First, previous research has shown that openness in Big Five Personality Traits is most clearly linked with creativity (Feist, 1998; Hammond et al., 2011). This is because individuals with high openness usually have high imaginations for the same events and are more likely to engage in divergent thinking , which may improve their creativity perception.

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