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Top 5 Criteria to Evaluate A Business Opportunity

Here are five criteria I use to evaluate a business. I have used these criteria for over 20 years and are based on sound economic principles. 50% of businesses fail within the first 2 years. Only 5% of businesses survive for 10 years or more. The criteria listed address the main reasons why businesses fail to make sufficient cash flow and profits. They may seem like common sense, but most start ups fail because they do not realistically appraise their chances of success.

1. How Much Bargaining Power Do Customers Have?

The more options and bargaining power your customers have, the less profitable your business will be. This is because if your customers are in a strong bargaining position, they will be able to take their business to someone else or require a price reduction to make a sale.

2. How Much Bargaining Power Do Suppliers Have?

The more bargaining power employees, contractors, and suppliers have, the less profitable a business will be. This is because suppliers will be able to increase their prices, increasing business costs. If a business cannot pass increased costs to its customers via higher prices profits will decline.

3. What is The Nature and Degree of Competition?

The more the competition, the lower the profits. If competition is in the form of price competition this is the worse case senario.

If you can differentiate your product offering and add value in a way that customers will pay a premium, this is a better senario.

The best senario is to create a virtual monopoly by creating products and services that lead the industry in terms of value for money and innovative benefits to customers. Examples include the apple ipad, the apple ipod, the windows operating system, & google search engine, google adwords and adsense.

4. What Are The Industry Barriers To Entry and Exit ?

How easy is it for others to start up and compete with the business. How easy is it for customers to switch to another supplier. What are the costs customers must pay if they switch to another supplier. Can the business create a sustainable competitive advantage that deters competition form start ups and deters customers from switching to another supplier?

5. Does The Business Generate Predictable Positive Cash flow and Profits?

Does the business generate regular repeat sales and cash flow? Are systems in place to generate cash flow and profits without the intervention of the business owner.

Does the business have a pathway to its customers to make sales?

Can be business generate sufficient positive cash flow and profits to provide a competitive rate of return to the investors?

Is the rate of return sufficient to compensate for the risk incurred and resources invested.

Is the cash flow and profits predictable and stable. Is the business a saleable asset with a value that can be objectively determined. The greater the profits and cash flow the greater the selling price, The greater the stability of cash flows and profits, the less risk which increases the selling price.



10 Steps To Internet Marketing Success

    1. Determine your target audience.
    2. Create a wordpress site and add quality content of interest to your target audience.
    3. Monetize your themed wordpress site with products and /or google ads that are of interest to your target audience.
    4. Make your visitors a compelling offer in exchange for signing up to your monetized newsletter. Send out your newsletter with special offers, competitions  and interesting content at least once every 90 days.
    5. Make website visitors a compelling reason or offer to refer others to your website.
    6. Provide tools such as “ShareThis” on your site to make it easy for people to refer others to your website content and products..
    7. This is the most important aspect of your marketing campaign. Provide a compelling rewards program to encourage referrals. Make sure your rewards provide compelling value to your target audience. Provide an incentive for each person who comes in contact with your site or newsletter to refer others to your site. eg. Offer a free report or gift after they have referred a given number of people to your site. To manage your viral marketing campaign buy a viral marketing script ot use an online referral program manager.
    8. Use the site “twitterfeed” to automatically post new content to your themed twitter and facebook account to get your posts indexed by the major search engines.
    9. Encourage sales by providing incentives to buy such as time limited offers, discounts, two for one offers and free gifts. Provide cash rewards, discounts or gift vouchers to referral program participants  who have referred  buying customers.
    10. Keep adding valuable content and new products to keep people returning to your site.

To maximise sales market products with overt benefits. Give your visitors reasons to believe in your products. (for example provide video testimonials from satisfied customers) Remove the risk for the customers perspective by providing a free trail period or money back guarantee.