Weekly I am approached with new ideas for businesses. Ideas are easy, but few find true opportunity. Determining the difference between an idea and an opportunity is a critical first step in the evaluation of a business's potential. Let me show you how I perform an opportunity analysis. Photo courtesy of Flickr/Creative Commons/Craig Sunter [/featured-image] Click to Listen*NOTE: If you are reading this in email, you will need to go to Itunes or my blog to get access to this show.Ideas vs OpportunitiesAn idea is a groundless supposition, while an opportunity has potential to allow you to meet a goal. The opportunity analysis is the process of determining if an idea is in fact an opportunity. The world of venture capital would call this doing your due diligence. I just call it doing your homework.First - get clear on the basics What will you do? Be clear and concise!Who is the customer? Think of a list. How big?What is the pain that you are relieving? The pain helps you identify your value proposition.What is the market size of YOUR segment?What is the price?Second, talk to potential customersThis step is so often missed that it is almost sad. Once you know what the idea is, you want to vet it to potential customers. The key thing you need to know is if your idea solves a true pain they have. And, would they be willing to buy it...Third, ask a womanThis might sound sexist, but over and over I have found men seek counsel from their wives to make sure an idea is sound. Even if the woman knows nothing about the business, they seem to have some God given ability to read truth and character.If you are a woman, seek the counsel of another woman you trust who has no knowledge of your business idea...Fourth, do the math I mean put the numbers to paper and see if the idea makes sense. What you are looking to learn is if the revenue potential is there and interesting enough to go after. We would call this the size of the addressable market...The Addressable MarketConsider the addressable market. The addressable market is the size of the market that cares enough about what you are selling to buy from you or your competitor...Poor Logic Example - missing the true addressable marketAssume you have developed a smartphone app you will sell for $0.99 each. Since there are 1 billion smartphones in service, your revenue will be $990 million.WRONG. Just because I have a smartphone does not mean I will buy your app...Poor Math Example - Addressable market is not large enoughWade Myers (New Venture Lab) tells about a company selling software to PBS Stations in the US. Here is his data.Annual Addressable Market 368 stationsx 5% switched software each yearx $50k/each software app install= $920kx 20% probability (5 total competitors)= $184k My Example - Lifestyle ProductHomeschool market 2 million familiesHigh School Percent 50.00%Dropout of HS Rate 50.00%% of Market we expect 0.50%Sales (units) 2500Average sale per unit $200Revenue = $500,000Hope you get the idea. While all of this should be common sense, these basic steps are often overlooked. Doing a quick opportunity analysis can save you months of chasing a bad deal..Episode ResourcesIn this episode I mentioned a few resources, including:Egoscue Postural Therapy .\Subscription LinksIf you have enjoyed tDale Callahan, Ph.D.Business Coach for Professionals Ready to Take Control Helping you move from stuck to in-demand — or start something of your own. Grab the Idea Engine: 7 prompts to find your next move Book a Next Step Strategy SessionDirector of Engineering Management @ UAB (205) 790-8447 dalecallahan.com LinkedIn

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