Evaluating Online Business Potential

Every time I have an online business idea or come across a new opportunity I analyze it using these criteria:

• Is it really any different from what is currently on the marketplace?
• What wants and needs am I fulfilling?
• Who will be buying my products or service offering?
• How strong are my competitors?
• Is the market for my idea growing or shrinking?
• Do I have the time and energy to follow through?
• How much initial capital is required?
• How am I going to raise extra funding?
• What is my maximum total loss including money, time and effort?
• What is the potential for return on my investment?
• How long is the time frame between initial investment, break even point and getting a return?
• What is my exit strategy?

I believe that one should be very careful about how they invest their time and money. Very often I see people that invest a huge sum of money when the potential for return is low and the risks are high. In this scenario it is better to leave your money earning interest in the bank. Most times, they do not even have the technological know how to produce the results online that they wish to.

The ideal online business idea or opportunity for me, offers a potential for high return, with low initial investment. It focuses on a fast growing or well established and stable marketplace and there is something unique about the proposition.

Alternatively another great form of investment is when the potential for return might not be high but the risks are low, little effort is required and the profits are almost guaranteed. I will only usually consider this type of investment if the payback is rapid and the amount of work required is low. Typically internet marketers go for this approach.

Let me give you an example based on a friends personal experience on how not to do it. One of the first online businesses he started was building outdoor websites for outdoors men and their clubs. While the market was open he failed to research the demographic. The outdoor clubs base (his customers) was declining and budgets were very low. Margins were tight and my customers were not willing to pay the prices he was asking at the drop of the hat.

Although he still is in business, the amount of effort and sheer stubbornness required was out of all proportion to the money making potential. In fact, he has shifted his business model to brokering ad space for outdoor magazines.

Your evaluation for investing in an opportunity might be different from his, based on your propensity to risk. If you have a family to support than this reduces the amount of risk that you can take on. Your age, your sex and business background all greatly influence the types of opportunities that you can examine.

Before starting a new business, bear in mind that working as an employee has many advantages to being self employed. Your hours are fixed, the return of investment of time might be less but it is certainly guaranteed, at least for the short to medium term. Starting any new business especially for the first time is risky and demands extraordinary effort before any returns are forth coming.

Related posts

• No related posts.