Everyone has business ideas they would like to come to reality, which is good, but people ignore a very important pre-requisite to starting a business which is the evaluation stage.
Most businesses fail because they did not carry out evaluation and feasibility studies for the business idea.
In this article, we will be talking about how to evaluate business opportunities and ideas in Nigeria.
To successfully evaluate a business idea, you have to consider factors affecting the business idea you want to engage in. Here are some pointers to go about;
1. Finance Options
The first thing to consider without doubt in evaluating business opportunities and ideas is the method to finance your potential business ideas. Is your business going to be financed solely by you? Are you going to need a loan?
These are questions to be asked before going about evaluation. It is appropriate to also find out what your business idea would cost in realization, existing business could be considered as case studies.
2. Consider Social-cultural and Political Factors
In evaluating business opportunities and ideas, one has to consider social and economic factors that would affect such business idea or that affects already existing related businesses.
Government policy is one thing to look out for, there are some businesses that the government tax differently based on their nature and laws affecting the nature of their businesses. The government also place price floors and ceilings on some goods and services, price ceiling and floor are imaginary bars set by the government which must not be crossed.
Crossing these bars would attract a fine or consequence of some sort. It is advised to ensure that government policies favor your business idea before embarking on it.
Also Read: 7 Great Ways To Boost Your Business Revenue
There are also social-cultural factors that affect businesses. Social-cultural factors refer to the beliefs of people in your proposed geographic environment that would affect your business. A typical example would be sale of alcoholic drinks in northern jihadist states.
Starting such business in such places would not be a good idea as it counters the general belief of people in the area. So, it is good to ensure that both social-cultural and political factors favor your business idea.
3. Existing Competition and Market Entry Strategy
Most new businesses already have existing businesses of the same nature which would pose as competition. It is important therefore to evaluate your business ideas and opportunities and come up with a market entry strategy.
A market entry strategy is a kind of ploy to employ when starting a business to give your business reputation a boost with customers. There are different market entry strategies; you can increase quality or quantity, you can offer a sense of differentiation in the sense that you add something new and unique that would increase the value the customers would gain from your product or service.
The most trusted form of market entry strategy has to be “market penetration” which means you set you selling price below the market price (price your competitors are selling at) till you gain ground, then you increase price.
Successful entrepreneurs have claims to have just broken even in their first few years of business, so do not be scared, you will get to making profit once your customers base is large and your goodwill is considerably good.
4. Proximity to Supply and Demand
This refers to closeness of your business location to your suppliers and customers. As trivial as this may seem, they have great financial implications. Transportation cost building up overtime will have a great impact on your net profit as it is an important expense.
Also, there is the time and stock-out implication, having your suppliers far from you would mean your products would take longer time to get to you and could result in having no goods to sell (stock-out) which could in turn lead to loss of good reputation and customers.
Furthermore, Proximity to customers should also be considered, establishing your business far away from your target market will not only keep your business stunted but eventually kill it.
So, in essence establish your business near both your suppliers and customers. They are two important factors to consider in evaluating business ideas and opportunities, they have a very important role in determining the success or failure of a business.
5. Employ a Consultant
Another way to evaluate business opportunities and ideas is to employ the services of a professional. There are people who specialize in feasibility studies for potential business ideas and opportunities. Such professionals would help carry out different types of feasibility studies and tell you whether your idea is viable or not.
Some of the feasibility studies they will undertake will be technical feasibility, economic feasibility, financial feasibility etc. They would also help you with a projected statement of revenue and expenditure for you to have an idea of the financial implications of starting your business idea.
These consultants practically will do everything we have been talking about in this article for you and of course at a fee. The plus on the side is that they can help you write a business plan to obtain loan from banks if such is needed.
These are some of the ways you can evaluate business opportunities and ideas in Nigeria to ensure they don’t fail after you start up the business.