Dr Jeff Cornwall

I have written before about the risk of jumping too quickly into writing a full-blown business plan or even impulsively launching a business. A key skill that successful entrepreneurs learn is to more efficiently and quickly assess possible opportunities before they make extensive commitment of time and money. It allows them to weed out ideas that don’t have a good chance or working. In effect, it gives the entrepreneur a chance to fail on paper.
I have entrepreneurs examine three basic questions to assess opportunities:
1. Is there a MARKET? Examine the size of the market to make certain that you only need a small portion of the market as customers to make your business work. Make sure that they are interested in, and more importantly want and need your product or service. You don’t have time or money as an entrepreneur to educate them. Begin to get an idea of how much they will be willing to pay. Too many times this becomes a last minute guess by the entrepreneur.
2. Is there a MARGIN? Figure out the basic economics of the business. How much will the product or service sell for and how much will it cost to produce the product or offer the service? At this stage you should really look for opportunities that offer at least a 50% margin. Generally, when all is said and done this will typically result in actual profits of about 15-20% once the business plan is developed and all of the true costs are determined.
3. Is this for ME? There are many periods during the growth of the business when the entrepreneur needs a true passion to carry them through. This is not just a simple financial investment. It becomes much more personal and emotional than that. Many entrepreneurs tell us that the profit part of the business opportunity is only one of many reasons for launching their businesses. It also helps to build a business that takes advantage of your experiences, knowledge and skills.
These three basic questions should become the first thing you do when you look at an idea for a new business. If the idea passes this test, it offers real potential as a true business opportunity and should be pursued further toward a possible launch. Using opportunity assessment will help increase your success rates with business start-ups. It will also help you deal with an idea and move on if it does not seem to offer a good chance of success. That is, it helps you clean up the mental clutter of too many business ideas floating around in your head.

Red Herring has an interesting interview with Randy Haykin, who heads up Outlook Ventures, an early-stage venture capital firm. Haykin identifies what he considers to be the “hot” market spaces in technology these days. On his list:
-Digital Security (although it may be peaking right now)
-Virtual Patches for Microsoft systems (temporary fixes until Microsoft sends out the offical patch)
-Products that help manage permission and access control for IT systems in larger companies
-Software
He is not very excited about offshoring firms, however, which used to be a hot sector in technology. It does not seem to deliver the cost savings that everyone thought it would when it first became the rage.
VC activity in technology firms should continue to increase as valuations are up significantly over the past three years. What is interesting is that it is attributed in large part to better bootstrapping. Seems that VCs like to see their money spent on producing and selling rather than administrative overhead.