How do you identify a new business opportunity? Or decide which among several has the best chance for success?
With any new business idea, Amit suggests some fundamentals that every entrepreneur should consider:
- Does my idea correct an inefficiency in the market?
- Do I have the resources and capability (or at least the power to bring those pieces together) to carry out this idea?
- Is the market for it real? (i.e. Are there customers willing to buy it? And at what cost?)
- Who are my competitors, and what are they doing?
- Is this industry growing, and how hard is it to enter?
According to Amit, the most important element of any entrepreneurial endeavor, and a common theme of most successful startups, is answering an unmet need.
When asked to identify the biggest mistake entrepreneurs make when identifying business opportunities, Amit responds, “Customers buy products that add value. Customers buy products that they need, in order to satisfy some issue that they wish to satisfy… Very often, entrepreneurs… pay too little attention to what the customers want.”
“There is no substitute for understanding the unmet needs of customers,” he says.
It’s easy for an entrepreneur to get immersed in the excitement of an opportunity that these basic questions get overlooked. I’d also add that one should consider whether the business opportunity is sustainable, or whether the business environment, technology and customer need is changing so rapidly that the opportunity would be obsolete.
FedEx launched a business in the early 80s, which was basically an email messaging system. Interesting opportunity at the time, but that was a good example of an opportunity that was not sustainable. In this case, the technology was changing so quickly that it was not an ownable, sustainable business. Basically, this was a pre-cursor to email we use today!