Nov 222008

There are dozens of companies out there both home based and brick & mortar I have seen people get involved with lately that realistically have absolutely no future at all. I hate seeing motivated and entrepreneurial people wasting their time, money and effort. Here are some tips in evaluating business opportunities created by the College of Business at Harvard:

1st) Evaluate the company. Is it a rock solid business? Has it with stood the test of time? Statistically 90% of business’ fail in their 1st year. Out of the 10% that made it, 80% of those fail within 5 years, and then of that 20%, 80% fall apart within ten years! Lots of statistics I know, but they are necessary when evaluating an opportunities longevity. Also, does the company have the capital and infrastructure to grow for years to come?

2nd) The Need in the Market Place. This is an area where I think people get lost. They are presented an opportunity to make what appears to be great money and then shown a product that is not fulfilling a need. Ask yourself is what you are offering a luxury item or is it a “NOW purchase” that will help consumers with a situations they are presently experiencing? Also, is it a recession proof product or service, or is it at the mercy of the economy?

3rd) The Product. How useful is it? How easily can the concept be replicated? I see company after company starting up, promoting people join and a few months later an almost identical company pops up and offers something very similar. Is the product or service something that can be replicated by changing a few simple components and will soon be offered in retail stores? And do you even see enough value in this product or service to even consider it a business opportunity? Please do not let people sell you on your dream, if you believe in the product/service you have a much higher chance at becoming successful.

4th) The Compensation. Obviously if you went to work for an entire week and then payday came and there was no check you wouldn’t stick around, right? I have looked into many opportunities over the past 3 years and have been told “You can make hundreds of thousands of dollars in residual income in the first 1-2 years.” This is nonsense. If it sounds too good to be true it probably is! There is a difference between residual income and passive income. Quick definition: Residual income– is compensation you receive for doing something one time and getting paid over and over again. (EX: Insurance, a service that is sold one time and as long as it stays on the books the agents continues to get paid.) Passive Income– Income you receive for other peoples efforts, if someone in your organization makes a sale you get a piece and as long as they continue to sell you continue to earn.

Once an item is purchased there is typically no more compensation. Wouldn’t it be nice if when a realtor sold a house they got paid every time the customer opened the door? Absolutely, but they don’t they get a one time commission and their broker gets an override (passive income).

5th) Timing. This is the most important area in my opinion. How many other companies are able to do what you do or duplicate what you do? Is it the right marketplace and the right time for your company? I like what a mentor of mine Anthony Teegarden says, “It isn’t enough to be in the right place at the right time, you must also be the right person.” Look at the market penetration and where the company is projected to go. Know that when a product of service reaches 2% market penetration that is what is called critical mass and it then become self evident and explodes into the market. That statistic is from the book “The Tipping Point” you should check it out!

This is a criteria Harvard Business College came up with and I think they know what they are talking about. So before you jump into a opportunity that isn’t going to deliver on its promises please, please evaluate it properly.

Have a profitable day!

Reblog this post [with Zemanta]