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How to Evaluate a Business Opportunity – 4 Important Things to Consider



A Business Opportunity is a viable venture that exists and is yet to be employed. When evaluating a business opportunity, a number of things have to be put into consideration and these things can be summarized with the acronym “RAMP” which stands for: R – Return on Capital A – Advantage M – Market P – Potentials 1. R – ... Continue Reading

A Business Opportunity is a viable venture that exists and is yet to be employed. When evaluating a business opportunity, a number of things have to be put into consideration and these things can be summarized with the acronym “RAMP” which stands for:

R – Return on Capital

A – Advantage

M – Market

P – Potentials

1. R – Return on Capital

Return on Capital can also be termed Return on Investment (ROI), or Return on Equity. This equity is the money put in by the owner(s) or shareholders and the return on this money can also be called profit. Considerations under this ROI include but are not limited to:

– Existing strategy for material acquisition (What are the strategies and methods available or existing for acquiring materials needed for production? It is important to take into the consideration how materials can be acquired)

– Profitability (Is the business profitable? Every business exists to make profit even though that need to make profit may be secondary rather than primary depending on the entrepreneur)

– Time required to break-even (At most, how long should it take to break-even? Break-even point is the point of any financial activity at which expenditure equals income or the value of an investment equals its cost, with the result that there is neither a profit or loss. Initially, most businesses will likely experience an imbalance between the amount of money spent and the amount of money received back as returns or income. How long it takes for a business venture to break-even and begin to experience more profit and income than loss and expenditure is an important consideration likewise.)

– Investment fund needed (How much money is needed to start? Of course, before considering a business opportunity as viable and entering into it, you must be quite abreast of the facts as regards how much money is needed to start compared to the ROI the business is capable of yielding.)

2. A – Advantage

When evaluating a business opportunity by considering the advantage, you are simply putting into consideration the following:

– Cost structure (What constitutes the cost of undertaking the business venture? The cost structure advantage should measured on not just monetary terms but also in terms of invaluable resources such as time. All businesses do not cost the same to start and undertake.)

– Barrier to entry (What market blocks serve as obstacles to entering the business? Barriers to entry could be the environment which may be quite unsuitable for the type of business. The lesser the barriers to entry, the more viable the business opportunity.)

– Intellectual property of the product or idea (Is the product idea or concept protected by law? This intellectual property could be in the form of patents, copyrights and trademarks employed by other businesses to reserve the rights to the idea and its use to themselves legally.)

– Distribution channel (How can the products or services be made accessible and available to the consumers and customers? This is also an important question to ask in evaluating business opportunities)

How to Evaluate A Business Opportunity
Evaluating A Business Opportunity

3. M – Market

The market can be described simply in terms of the following:

– The need (What are the needs of potential consumers and customers of the products and services of the business? The need for a better way to package sachet water for easier and better consumption perhaps incorporating a straw in the packaging could turn out to be a viable business opportunity. It’s all about the market demand. Study the demand and discover the needs.)

– Targeted customers (Who will the business’ potential customers be? It is important to consider the most likely consumers of the product and their population in the area or environment when evaluating a business opportunity. Target should be focused on a specific group of customers depending on factors like age group and gender for business success.)

– Pricing (How have prices of potential competitors’ products and services affected the response of customers? Pricing strategies are important considerations in business because they determine how customers respond.)

4. P – Potentials

One very important consideration likewise when evaluating a business opportunity is the potential the business has for growth and progress. This consideration involves:

– Risk (What are the risks that will have to be taken or borne in this business venture? Entrepreneurs are risk takers and bearers, so it is important to consider the risks involved and whether you are willing and ready to bear them.

– Team (What kind of team needs to be assembled for the business succeed? Can the business succeed and survive as a one-man business? Even if it may at the start, will it be able to when the time comes for expansion?)

– Timing (What is the best time to venture into the business, produce more and sell more? In life and even in business, timing is everything. Studies have proven that in Nigeria, chickens and turkeys sell most during Christmas and rams sell most during the Ramadan.)

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2 Comments

  • Lucy Cox

    Hi, this is not a standard request – apologies. Please could you tell me which image library you bought the image above of the man looking at a laptop. I want to use it but cannot find it in any image library but lots of sites use it so it must exist somewhere. Thanks

    1. Hi, I didn’t buy the image. I only got it from someone who bought it. If you want it, I could send it to you or you could simply save it from this page.