Investors Invest in Business Opportunity, not in Business Idea

Why Investors Invest in Business Opportunity instead of in Business Idea

Fantastic business idea may not have business opportunity in it. Business idea is imagination of a person which he thinks can become a business if executed. While business opportunity is the profitability of such idea. No investor will invest in business or idea that has no possibility of making profit from it. For instance, you can have an idea on how to build a car that can run on water. That’s a good innovative idea. But then, the question is, how viable is the idea — how can you turn the idea into a profitable business? 

The following questions will begin to arise: 

Is there any law that prohibits such car or required approvals in the business environment? — legality 

Are material and intellectual resources available to build the car? —  Availability of resources and management competence. 

How much would it cost to manufacture the car? — Project cost

Are there people water is causing impediment to their vehicular movement and would they be willing to use car that runs on war? — market

What is the average income of the targeted market and how much would they be willing to buy the car? — affordability 

Are there competitors already in the business? — Competition 

If yes, what’s the level of their profits and how can new entrant compete with them to penetrate the market and gain some market share? — profitability/ sustainability 

If answers to these questions are positive, then, there is business opportunity to invest in. The business idea may be considered to present business opportunity that can attract funding. 

Another thing is, what efforts have you made to turn your idea into business? No investor will invest in idea you are not committed to. If you believe in your business idea, make effort on your own to bring it into fusion by starting small or at least by providing some of the needed resources — acquiring the needed skills, incorporating the business, conducting feasibility studies, writing business plan etc. 

Investors like to invest in already established business. Their coming in will now be for expansion of the business. They want to look into your books to know how successful you have run the business profitably over a period of time before committing their resources. This is to reduce investment risk and to compare the opportunity with alternative investment opportunities. A new business idea has a very high risk. As a new business, a lot of assumptions are made about the business which may not turn out as projected. Some business ideas appear too good to be true. Most investors are not interested in platitudes in business funding pitch or in your paper work (business plan),  they are interested in what you have done in practical term. 

How Do You Turn Your Business Idea Into Business Opportunity? 

Carry out Feasibility Studies

Feasibility study indicates whether the business idea is viable or not. It helps investor to sharpen his judgement. It’s often a precursor to business plan. That a business was feasible yesterday at a given location is not a guarantee that it would still be today at the same or different location owing to erratic changes that occur every now and then in the character of national and global economies.

Write Business Plan

It’s a management paper tool that outlines how you intend to run your business. It allows you create business operations on paper and manipulate and evaluate scenarios without the risk of investing resources. It defines your vision and how you intend to achieve them. It will convince you, financial institutions, investors that your idea is worthwhile and that you have adequate knowledge of your chosen area of business. 

Incorporate Your Business

Register your business with government authorities and get necessary approvals and licenses. You can register your business as a private limited liability company with single shareholder

Acquire some of the Needed Skills

Acquire expertise to run and manage such business 

Raise some Capital Yourself

You have to provide fraction of the startup capital through your personal savings. No investor or financial institution can provide 100% funding for your business. You must have something at stake. Read 3 Reasons Investors Prefer To Contribute Material Resources To A Business To Contributing Financial Resource

Start up the Project with the Little Resources You Have

This will show your convection on your idea and commitment towards making your business idea a business, investors and funders can therefore take you seriously. If you can't invest in your own business idea, nobody will.

Ikechukwu Evegbu

Ikechukwu Evegbu is a graduate of Statistics with over 10 years experience as Data Analyst. Worked with Nigeria's Federal Ministry of Agriculture and Rural Development. A prolific business development content writer. He's the Editor, Business Compiler

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