How to Evaluate a Small-Business Opportunity

Published: July 4, 2012

Evaluating small-business opportunities can save you time, money and headaches down the road. Small-business owner Jason Geno took more than a year to plan before launching his consulting firm, Human Capital Initiatives (HCI), which now generates over $1 million annually.

Take a Planned Approach

“From the first day I decided to start my own business, I took a planned approach to investigating various business options,” says Geno, whose firm advises public agencies and mid-sized companies on operational efficiency.

Seek Guidance from Experts

Lang Glotfelty, chairman of the San Antonio chapter of SCORE, advises entrepreneurs to spend at least six months evaluating their business idea. Glotfelty, who has started seven businesses himself, emphasizes the importance of thorough research and mentorship through programs like SCORE, sponsored by the SBA.

Key Factors to Consider

1. Consider Your Background and Interests

Focus on fields where you have experience and genuine interest.

  • Your passion will help sustain you through the early, intensive years.
  • Familiarity with the field makes operations smoother.
  • Leverage your existing network and industry contacts.

2. Identify a Market Need

Geno identified a lack of consulting services for mid-sized companies and filled the gap. To identify your market:

3. Determine the Right Location

Depending on your business type:

  • Retail businesses need high-traffic areas.
  • Service businesses may operate from home or remotely but still need easy access to clients.

4. Run the Numbers

Planning financially is key. Glotfelty recommends:

  • Outlining a 12-month financial plan: costs, projected income, and break-even point.
  • Identifying funding sources such as savings, bank loans, or personal credit.

Final Thoughts

Evaluating a small-business idea thoroughly increases your chances of success. Consider your interests, assess market needs, choose the right location, and build a realistic financial plan.

What are your favorite methods for evaluating business opportunities?

About the Author

Julie Bawden-Davis is a Southern California-based writer and freelancer since 1985. She has contributed to Entrepreneur, Better Homes & Gardens, Family Circle, and more. Find her work at Contently.com.

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