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 Form 1 Business Studies online lessons on entrepreneurship

Factors to consider when evaluating a business opportunity

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Answer Text:
Evaluating a business opportunity.
Factors to consider when evaluating a business opportunity
a) Personal consideration-These are the abilities and expectations of an entrepreneur. They include the following;
-Objectives-The entrepreneur should evaluate
the business idea to find out whether it is in line with his/her objectives.
-Skills-Where a business requires certain specialized skills and those skills are lacking the idea may be dropped.
-Commitments-Where the business is likely to interfere with the entrepreneurs other commitments it may fail.
-Interest-It is necessary to check whether the intended business will interest the entrepreneur or not. If the entrepreneur will not enjoy running the business, the idea should be dropped.
b) Business consideration-These are external factors that are likely to affect the operations of the business and they include;
-Availability of market for the product-An entrepreneur should assess the availability of customers before starting a business. Customers exist where there is a gap/nich in the market.
-Technology-The business should be evaluated in terms of whether there is an appropriate technology that can be used in production. Factors to be looked into include;
a. -Appropriateness of the technology
b. -The cost of the technology
c. -The possibility of the business suffering in case the technology becomes outdated/obsolete.
-Availability of raw materials and other resources-The raw materials and resources required should be within
the reach and affordable to the entrepreneur.
-Government policy-An entrepreneur should consider the requirements of the government before starting a business e.g. the government may require certain businesses to be located in certain areas only.
-Amount of capital required-The capital
required to run and maintain the business should be considered i.e the source of capital.
-Profitability of the business-Within a certain duration of time.
-Level of competition-This will help determine whether the business will survive or not.