Identifying Good Business Opportunities…

I have often thought about, and am occasionally asked, why some people are better than others at identifying opportunities.  I am sure it will come as no shock to you that I have a couple of thoughts on the matter. Clearly, those that have significant experience, education and understanding in an industry or business are going to be more adept at selecting opportunities that pertain thereto. I assume though myself and others are generally referring to people that are still relatively new to the world of decision making and don’t have 20 years behind them to call upon when looking at new opportunities.

With that in mind, I think that there are three different types of people and/or personalities when it comes to recognizing and capitalizing on opportunity. The first group is fortunate enough to be born with an innate ability to recognize opportunity.  Let’s call these people the “Naturals” (cue home run scene from one of my favorite movies of all time).

Lights crashing down, blood thru the uniform - hits a home run!

They are rare, but they certainly do exist. They have the “Midas touch” if you will. I am sure even these Naturals have had to experience some degree of failure, but by and large, they have an instinct when it comes to recognizing and capitalizing on opportunities that present themselves. These personalities experience success in multiple areas and seem to be able to recognize opportunity both inside and outside of their comfort zone. They are the captains of industry, often found on the covers of magazines and such. One real advantage that these types enjoy beyond their Natural ability is the fact that over time, really great opportunities are brought to them due to their reputation as Naturals. It seems unfair, but those with the Midas Touch enjoy special privileges that they really don’t need. It is kind of like the gift bags that celebrities get at award shows.  Why do millionaires get free watches? Anyhow, I digress…

There is another type of personality that seems to be able to recognize and capture success over and over again. This type really enjoyed whatever it was that they did the first time, or they realized that they aren’t that smart, but got a little lucky the first time – or both. However, they are smart enough to repeat the model they found success from and not venture out of that comfort zone.

Which one is Pete and which one is Repeat?

Let’s call this type of person “Pete and Repeat” for the mere fact that their last 5 business models were similar, and each time it was successful to some degree. These types may or may not have the ability to identify opportunities as much as the outside world might think they do. They are not like the first group I identified, they are more industry specific. They also may or may not be able to replicate success outside of the field they know. But, again, they were at least smart enough to recognize that they needed to stick with what they knew, and go for the Pete and Repeat version rather than venturing out. Therefore, they are good at recognizing and capitalizing on opportunities – however narrow they may be.

Finally, there is the remaining group (outside of those who never find success nor recognize opportunity) that most of us fall into. We find both failure and success. We likely go from business to business…we don’t necessarily specialize. I think we are the “Simpletons” of the bunch and thus I will call us that.

Self portrait - except I am a little chubbier and have more hair

Our ideas are in a broad range of areas, and as such, we find a broad range of success and failure. It is difficult to consider ourselves good at recognizing opportunity because we feel like we have had mediocre results. I think that we wonder how other people, particularly those who have had multiple successes, recognize and capitalize on opportunity. I would submit that if you aren’t in the first category (the Naturals) or in the second category (Pete and Repeat) then you are part of the vast majority (the Simpletons) of us who can improve upon our abilities.

This leads me to a follow up question, “What can people do to become better at recognizing and assessing good opportunities?”

Well, assuming you are in the third category (Simpleton), you/we have some work to do. I would suggest that the following are some good ways to help improve your ability to recognize and capitalize on opportunity (in no particular order):

1 – If you have had success before with something, and you enjoyed it, look to copy it and do it again somewhere else. Who says you can’t be a Pete and Repeat and laugh all the way to the bank?

2 – Invest your time and money in people, not just ideas. If you have great ideas, which I am sure you do, they won’t go very far with time and money invested in bad people and partners. Take the time to evaluate who you are getting into business with, whether it is partners, customers, vendors, investors or all of the above. Compare this group to your other groups from other opportunities, and see who scores better. Who can you trust more? Who do you like more? Who will give you more time, effort and money?

3 – Get in motion. Although you may make a bad decision or two, at least you will have made a decision and will move onto the next one (hopefully a little smarter). It is likely that every category above will experience different levels and frequencies of failure. So embrace that, accept it, and move on. The next opportunity you jump on might be “The One”. So quit wasting time and get through this one so you can get to that one.

4 – Which opportunity might lead you to want to Pete and Repeat? Since you aren’t a Natural, your best chance for continued success is to develop knowledge and experience that allows you to have a high degree of probability that you will choose wisely. It helps when you know the business and the industry – you can move the clutter aside and call on your past experiences which will help you make an educated decision.

5 – Why not increase your chances for success and partner with someone who has already proved that they know what they are doing? For example, let’s say you have two opportunities in front of you at the same time. Let us also assume that you like both businesses equally – you find them both interesting. The first one is comprised of you and three partners that have never started a business before. It is a great idea, but there isn’t much experience or money available to the partnership at this time. The second opportunity gives you a chance for a small equity piece in an established business with partners that have a proven track record. I would suggest that you take the latter; you will learn a lot and the business has a better chance to succeed. Perhaps you will hook up with a Natural, or Pete and Repeat and find yourself learning to become a good decision maker as a result of what you learn from them.

6 – Consider the source of the idea/opportunity. I know some very successful people (financially) that are in the business of getting other people to chase down their ideas. They don’t know if they will work, and when push comes to shove they may not offer much in the way of time or money. But they use their position to get others to do the grunt work and maybe, just maybe, a business comes out of it and this person gets a freebie. Remember, ideas and opportunities are only as good as the time and money the person who provided them to you is willing to part with.

Unless you are a Natural, or involved in a Pete and Repeat business, you probably are still trying to figure out what makes these types tick. I think I have provided a reasonable road map with regard to some areas that you may want to consider when weighing various opportunities. I would be very interested to hear your thoughts on the matter. Did I miss anything? If you actually try some of the things I pointed out, and made some decisions based on it, I would be very curious to know what the results where. That is assuming, of course, that my six readers (I think I lost one due to the length of this post) made it this far in the post.

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