Choosing a Business Opportunity

How to Choose and Buy a Business Opportunity

Evaluating and Selecting a Business Opportunity
Checklist Tips, Guide, How to Start a Business
Read all of this BEFORE you buy any business opportunity.

Most business opportunity and work-at-home offers are not superior or even good or viable businesses. Many are scams. But if you are tired of working for idiots or a greedy cruel corporation, then read on. You can succeed in business and perhaps even find a good and real business opportunity. Along with this, first read Avoiding Business Opportunity Scams, then read How to Buy a Business.

If you are also considering starting a business or buying a business, a franchise, or going into a corporate partnership, read this page and related pages, and check out other opportunity evaluation sites also. Either way, you are probably going to need to know about internet web marketing and owning a good business website. There is lots to learn in that area. If you are really going to run a business of your own, study Web Success articles and learn about good web site design and promotion.

After you read about avoiding business opportunity and work-at-home scams and network pyramid schemes, read the following goals and caveats that you should know. Most opportunities are not scams, but simply inferior businesses touted by founders who could not make their products sell enough on their own:

1) A main requirement is to know how to recognize a good business that is a near-monopoly, with exclusive rights to a high demand product in a growth industry, and the field or industry matches interests you have had for a long time. This is extremely important, because the new business owner (you) will make many mistakes, and only such high-profit growth businesses become a joy to run and real money-makers. Such type of high-margin business with little competition covers a multitude of sins (mistakes). "Leaders" enjoy so many benefits, and the 2nd and lower-tier followers seldom get half of that market nich sales among all the secondary competitors added together. Which type of business would you rather run? A booming cash maker, or a struggling 3rd tier business in a competitive stagnant or dying field?? The answer is obvious, but hard to discover or identify without study and practice.

2) You should have strong interest, knowledge, ability and preferably some experience in your prospective field of the business. Enthusiasm overcomes most problems. Try to pick something you like or love. But don't let your good work ethic be taken advantage of by some: Beware most "work at home" offers and programs! The worst say you "can" (note "can", not "will") make $thousands of dollars per week or month from the comfort and security of your home with just a computer. There are very few of these that are legitimate and fewer really show you how to make money and very few actually make good money. Most buyers of "work at home" never get their "sign up", "training fee" or educational materials fee back. In all of these offers, ask for recent references of people making the big money, not just the 2 or 3 "stars", but how many out the last 100 sign-ups are making over $500 per week cash paid to them (not just some ethereal "credits").

3) First and foremost is choosing the right business opportunity, choose one that is in demand in a growth field. Most good businesses present a clearly identifiable product or service and are not just weak questionable "opportunities" touting "income streams" and "cash flow". The first tale sign of a scam is an emphasis on the number of program participants and the goal of bringing in new members. Run away when you hear that. That is not what real businesses emphasize: They emphasize good products and new customers (not more member-sellers to compete with you). Think about how it sounds to help large numbers of people take part of your profits. Few "network marketing" programs have unique high-demand products at reasonable prices.



4) If the business opportunity doesn't first and foremost talk about exclusivity, uniqueness and high demand for the product or service, emphasizing product quality, demand, uniqueness and reasonable-pricing, be careful. The product or service itself should hit you with a "wow" response. You should get excited about the product or service, not the sales or networking scheme. A good marketing plan is still very secondary to the products or services. It should be something that you and your neighbors or certain segments really want, need and demand. Your friends may not be honest with you. Ask knowledgeable experienced strangers and test your likely ads, appeals, ad copy and do actual product tests. Get real feedback from people not in the sales program. Nothing is more educational than listening to real stranger prospects as to their real opinions. Do this for at least twenty people or many prospective companies (unless you are in a narrow business-to-business niche).

5) More important, buyers should only be able to get this WOW product or service from you in your exclusive territory. A real business has a virtual monopoly over a demand product in an area, like an exclusive dealer or a licensee in a state, territory or region. If you are considering buying a franchise, this is just one of many aspects of a franchise you should also consider. If the product is really great, the opportunity is not worth much to you if scores of people within 20 miles of you are selling it. In a non-exclusive business, only a handful of top sales people with full-time efforts, networking and advanced sales methods will succeed. Few will thrive. Almost none will become wealthy. But if you are the only dealer for a 100 mile radius, you really have something that can be worth money. But that may require an investment more than the typical $300 to $3000 of the usual "me too" weak business opportunity. A real business may take $100,000 or more in inventory ordering and consideration (dealer fee or Franchise Fee), plus an agreement that you will perform a minimum quota and follow certain standards. (Beware of limits on your advertising, web sites and means of payment from customers).

6) Your opinion is no substitute for market testing. Be absolutely sure the product or service is tested on the public and audience likely to buy the product. This can be done by samples, focus groups, questionnaires, interviews and market research tests. This is especially important if this is a new product in a crowded field, like food, clothing, energy or utility cost savings or some type of construction or home fix-up related product. (For example, contractors don't change from the most popular local dealer).

7) Be especially wary of marketing and sales schemes touting "income streams" and "high potential" and "high income" but focused more on marketing than the products. That is the tell-tale clue. Among the least-safe opportunities are multi-level marketing programs with more than 1 one 2 layers and "me too" products" in crowded markets. The silliest are where the buyers of marketing web sites sell each other space for links and listing exchanges with affiliate ads. It is all an illusion that works like any pyramid scheme for a little while, usually 18 months to 2 years. Some variations might work, but most don't make money. There must be an outside source of real sales to end-user customers, not just mostly among members.

8) Beware of claims of high returns or "income" over 30% per year on your time and money. Anything promising over 4% per month is likely a fraud pyramid scheme. Beware of foreign companies making these claims. Especially avoid those who promise putting your money in a foreign account so they can yield big gains from special banking or other relationships, gambling or other special "financial instruments". Most of all avoid anything requiring your money to get money back to you. That does not mean most foreign companies are illegitimate. Just realize that generally you have almost no ability to enforce your contracts in the USA, much less somewhere else. Do your homework. Buy very carefully. You don't need some foreign scheme promising 100% or more per year. Claims of "high returns" and "high profits" are red flags!! Be triply careful if the company is under one year old. Frauds run big schemes for about 12 to 18 months and then run off to Australia and places with your money. For real! This happened to many people.



9) To succeed in business, you have to learn the basics of business. That is to look for unique products in high demand and low competition. Real profitable businesses are like virtual monopolies. You look for "high margins" and "fast turns" of inventory or production. High margin is about 60% to 300% mark-up by YOU, not your supplier. If you are the only "curved banister craftsman" for a 40-mile radius, and people are building those, you have a legal monopoly. People will wait for you and pay you well. Or having the only big and tall store for 50 miles around. Or even better, own the secret formula or best quality production for something everybody wants.

10) Real business have additional strong features besides only great products or services. They talk about production efficiencies or special skills or machinery unavailable to anyone else (i.e.; custom), strong marketing, customer service and quality. Or their secret techniques are so unusual that they completely dominate their market niche by unusual terms, methods and benefits to all involved. They may do ALL of that!

All better opportunities will have a great business strategy focused around their products and customers, and outperforming their competitors. They will talk the language of real business: the type of market, the target audience, the competition, positioning, product features and improvements that no competitor has, legal aspects and how to get paid.

11) Avoid buying any inventory that you and prospects do not crave, desire and would use. Strangers should frequently say "wow" if your product is really good. They should want it. It should be an easy sell. Ideally it almost sells itself to non-members !! It does not take rah-rah pep-rally conference sales call pressure to sell. It does not focus on how much you will make from your "downline"! (That does NOT mean there are not a rare few multi-level marketing methods associated with a "WOW" product. Just not many.)

Don't fall for hype and buy into some scheme for selling and marketing business opportunities or some non-exclusive rights to sell a me-too product. Do you really think that all the world needs is one more brand of nutrition supplements, cooking pans that your neighbor also sells? Get real. Too often, the only ones who win out on those programs are the first five or ten people in the company.

12) What is really special about the product? How tested is it? Is it government-regulated, approved or licensed? Do you have the time to sell and perform a service? Consider companies who train financial advisors as their unique "service". They want to market annuities and novel discounted policies and settlements, or insurance. But financial planners are a dime a dozen, commonly with insurance companies and others. The odds of you really doing well long term depends on your ability to work hard for years and approach the right people and then not make any mistakes with their money. Even top experts can't promise that last one. Think your opportunity all the way through to the end.

Understand that people in the program who try to sell you probably get a commission or gain from the sale of the opportunity to you, or they are highly invested in it and have no choice but "group think". Consider lower people who try to sell you as being "brain-washed". Take what they say lightly. NEVER make a decision without going away for a few days. When they pressure you that someone else will take your place, say thanks but no thanks.

13) Like with a franchise or other opportunity or any business, competition is key. So not only must the product or service be great, but you should demand an exclusive territory or strict limits on who can sell the product within your territory. For example, a secret formula sauce that everyone craves that is gourmet top-shelf priced for good margins, and only two levels (you and a few retailers and the manufacturer) over a territory with 200,000 prospects... is a real business opportunity, even in the competitive food market. Most business opportunities fail these tests. Although it is wonderful to have a not-only unique and difficult-to-copy product, a very good WOW product in exclusive territories can work fairly well. You can't always wait for the perfect opportunity.

14) Does the seller of the opportunity over-promise returns? The company should be realistic, and not promise more than the market will bear for your territory. How can 5000 neighbors build a big market for supplements when everyone sells those? Probably they are over-priced, and the members buy most of the product. How can more than a handful do well? In the example of the secret sauce above, over three years you might develop 30,000 steady buyers of one bottle per month, and you make about $1.20 each. That's $36,000 real profit per month. That's $432,000 per year. That's a real business. And there are far better categories-growth businesses than foods. (Although food has many other advantages). But be careful about "vending" routes. Many are too costly for the machines and products and they are not easy to place and service.

15) If the company creates web sites for many sellers with non-exclusive territories, then that is not likely a viable business. They will be like the "me too" neighbors, too many around. On the other hand, if you are an area dealer or distributor, there is an advantage to the uniformity and brand and content control the manufacturer must maintain. Just be sure of your rights and limits on your own additional web site and payment systems.



16) Franchises are more expensive up-front than the typical business opportunity and may have some advantages over the average network marketing scheme. They are typically more proven. But the issues of exclusivity and high cost remain. Franchises have a big overhead on legal costs and must be fairly large companies. That is one advantage that also they are more highly regulated. But you pay for that, usually about 8% to 10% of sales. That is a big chunk of profits. A license for a unique product for about 5% of sales in a territory could be a better option. Both of those also require front money investment of typically $10,000 to $300,000. But if you get an entire metro area as your very own for about $20,000, like the sauce example above, that could be a godo deal. They may have a license financing option available in terms, so you might only be putting out about $6000 to get started. Any real business requires pretty much at least that much. The good news is that probably buys you also about $4000 of inventory at retail ($2400 wholesale) value, so the money is not gone. You get exclusive product and exclusive territory. THAT's a business. But be aware, these are serious business commitments that you are expected to work at. There is no free lunch, no matter what "biz op" people tell you. Any opportunity that does not require your work and participation can only be sold by a securities dealer. If you see that kind of offer promising $1000 per week with little or no work, it is likely illegal, especially if it alleges high profits and states percentages of return on an amount invested.

17) Consider also the business as a whole, with its strategies taking into account the competition, the company's strengths and weaknesses, threats and opportunities (SWOT), and its care of "branding", image, positioning, and pricing. All these must line up and seem reasonable to your careful observation. Step back as a hard cold buyer of the product with no vested interest. Would you be highly-impressed anyway? Notice that you should repeatedly "step away", take time, avoid pressure and never make a fast decision on going into business. Take months at least to study and decide, even better a year or more.

This is a good way also to evaluate a business opportunity. Do they come at you first with product quality, uniqueness and evidence of demand with reasonable pricing, or do they talk "income stream" and "high potential"? Guess which might be a real business?

18) Examine limitations on advertising, ad copy and content. Who pays for this? Is it joint or co-op? Can you vary the message at all? Can you have special promotions in your territory? If the business is highly dictated and everything is structured and strictly defined, it may fall under a licensing agreement or a franchise. Those expect you to follow strict methods to maintain the image, methods, messages and branding. Verify their policies on web sites and advertising, in case you want to do more within their guidelines.

19) Examine the exit options. Can you sell your license to an approved buyer? Can you sell your business? Can you take on corporate investors or partners? Know your "exit strategy".

20) How much time does this take? If they tell you little or none, beware. All businesses require some work. Most require tons of hard work. Otherwise they would not need you, or they are just taking your money as an investment without the strict securities license and disclosure requirements. The people selling you that may disappear to prison for doing that without a securities license, so be careful. You also may go to jail if you repeat and sell their promises of high income without work or participation. For any business, after you study it, a brief visit with an expert or accountant is a good idea. Talk to the Association of Retired Business Executives through your chamber of commerce or local SBA office or business college. They are invaluable to give you a final critique of your plan. They were successful business owners or executives who know the ropes.


OTHER POSSIBILITIES if you are an entrepreneur at heart or have a good idea but no money and don't want to work that hard:

Before you buy, also think about other ways to go into business. Working for a great company with great products is really the easiest way to participate in a good business, rather than trying to do all that mostly by yourself. To be an entreprenuer, you have to be very special, pragmatic, knowledgable, studious, hard-working, able to go without pay for a while and have nerves of steel. If you realy want to be like that, maybe you can just come up with your own business, likely better than most of these not-very good opportunities you read about. Most of those opportunity sellers just can't quite sell enough on their own, so they want to make money getting you to do that hard selling, and have you pay them for you getting to work for them.

You might be better off finding a great friend or local person interested in running a business, who has complementary skills, and consider a small cooperative venture then maybe a corporation. You might even pay someone for a good idea who has no money or who will never run a business, and license their idea for about 2-4% of sales and maybe $1000 down. They might have the next billion-dollar idea. If you like the sound of that, or you have a great idea and want to be the Licensor or a minor corporate partner, get in contact with us. We love business, and like to do it right. We do consulting reasonably or may take a stake as a small royalty for helping you. Or, we may want to license your idea or help some people join up into a real corporation to "do it right".

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Summary

Do your homework, assume half or more of business opportunity ads to be scams or pyramid schemes. Analyze the business like a business analyst with the pointers above, to see if it has all the features of a real business, and you will likely succeed where many fail. Don't get discouraged. The time and money saved here will help you succeed when you do choose a good business. Good luck!

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