5 Ways to Identify Legitimate Business Opportunities
Below is a guest blog post from my good friend, and entrepreneurial genius, Bill Bartmann. Bill’s expertise and experience with the ups, downs, and ever changing business and financial paths are second to none. I hope you enjoy the article, feel free to share it with your friends and leave a comment if you do.
5 Ways to Identify Legitimate Business Opportunities
By: Bill Bartmann
If it’s such a good opportunity, why are you offering it to me?
I was a street gang member and slaughterhouse worker who later made more than a billion dollars. Along the way I’ve been bankrupt several times, built seven businesses and been pitched countless deals.
What business opportunity made me a billion bucks? It was the debt-collection business. Talk about an area with a bad reputation. Yet my company took a different path, and earned the praise of Working Woman Magazine for being one of the “Top 100 Best Companies for Working Mothers.” We broke the mold, redefined an industry, and made lots of money at the same time.
Reflecting on my successes and scars, here are five principles for how you can identify truly good opportunities of your own and quickly dump the rest:
It Should be Just Good Enough to be True
When someone pitches you on a business opportunity and there’s only good news for as far as your eye can see—that’s bad news. Engineers have a saying: “You can have any two of the following—fast, cheap, or good—but not all three.” That’s as true with bakeries as it is with bridges.
Strive to work with partners who recognize that everything has trade-offs and who are up-front about them. It’s often still possible to profit, as long as you see the negatives and act accordingly.
Barriers are Your Friend
When an opportunity seems to say: “Welcome—Come On In!”—that’s no real opportunity.
Look for conventional-wisdom barriers. Often that “wisdom” is not wise at all. Ken Olson founded Digital Equipment Corp and said in 1977: “There is no reason anyone would want a computer in their home.” Other so-called experts agreed.
Try to find powerful statements which everyone seems to accept but which are not based on any factual reason why something cannot work. In my case, the reputation of debt collectors was somewhere below politicians and scam artists. That big “Keep Out” sign meant less competition and more profit.
Talk to Actual Users
If the new opportunity is a product, use it yourself. See if you’re impressed as a consumer. If it relates to oil rigs, talk with a drilling crew. You simply must get input from actual users in order to determine how great this opportunity may realistically be.
I had been poor for so much of my life that I knew exactly what the typical bill collector was like. I treated customers with dignity and respect. They reciprocated by paying my bill before they paid others.
Question Their Motives
I know—your mother told you all about the Golden Rule. I’m not your mother.
Remember the title of this article—why are they offering the deal to you? Let’s put aside the baloney answers you’ll hear like “Because I want to give back.” That’s nice. Now why are you really showing me the deal? Other responses:
“I already have eight deals like this and I see more good ones than I can finance.” That may be legitimate, as long as the person can back it up with proof.
“We’ve had overwhelming requests by people to participate in this new opportunity, so we finally caved in.” Usually hogwash. Translated it means: “We don’t want to risk our own money on this new venture, so we’re looking to use your dough to prove our concept.”
“It’s not part of our core business so we’re selling it off.” That can be a very good reason, if they can back it up with proof. It could mean the company has decided to stick to its knitting.
Look for the Time Horizon
Business opportunities have a half-life, just like uranium. Blogs and video sites are currently “in”. If your business relies on popular trends, it pays to watch for signs of user fatigue and what may be next.
When I was buying defaulted loans in the ‘90s, I knew the business opportunity would not last forever. Sure enough, it was profitable for a few years and then dwindled.
The government bailout changed all that. I now see an even bigger opportunity for buying defaulted loans and making an absolute fortune from them. Still, the biggest window is only for another couple of years until the next major election. Politicians will want this “toxic asset” problem solved before voters go to the polls.
Just as I am looking at a two-year opportunity, you should know what the horizon is for your business opportunity.
MAJOR ANNOUNCEMENT: FREE WEBINAR
When: Thursday, January 27th, 2011 at 2:00 PM PST
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