Business opportunity

A business opportunity refers to the process of selling or leasing product, service, equipment, etc., to help buyers or renters start a new business. It usually includes support or guidance to help someone begin a business, such as choosing a location or supplying the main product. The party offering the business opportunity will usually promise to help the buyer find the right place to operate, or directly provide the buyer with the desired product. This is different from an outright sale of an independent business, where there is no need to maintain a long-term relationship between the seller and the buyer. A business opportunity provides a way to start a business without the need to maintain ongoing connections like buying an independent business.

Eckhardt and Shane (2003) argue that the identifying business opportunities is a key influencing factor on the road to future entrepreneurship. In simpler terms, spotting a good opportunity is often the first and most important step toward starting a successful business. This is seen as the lynchpin around which the promise of entrepreneurial venture is to be built. According to Shane, individuals must have prior knowledge and the necessary cognitive ability to recognize the of that knowledge in order to identify the new opportunity. For example, someone who has worked in the coffee industry might notice a growing trend in specialty cafes and decide to open their own. People with relevant prior knowledge in a particular domain are more likely to identify new business opportunities within that domain.

A common type of business opportunity involves a company that sells bulk vending machines and promises to secure suitable locations for the machines. The purchaser is counting on the company to find locations where sales will be high enough to enable them to recoup their expenses and make a profit.

However, some companies have misled buyers by overstating potential profits or failing to deliver promised support. These are known as fraudulent business opportunities. Because of the many cases of fraudulent biz-ops in which companies have not followed through on their promises, or in which profits were much less than what the company led the investor to believe, governments closely regulate these operations.

In the United States, the Federal Trade Commission receives complaints and helps coordinate enforcement action against fraudulent business opportunities.

A business opportunity consists of four elements, which are usually present together within the same domain or geographical area before it can be considered a valid opportunity. These four elements are:

If one of these elements is missing, the opportunity can still be developed by identifying and addressing the gap. A desirable characteristic is for the combination of elements to be unique. The more control an institution (or individual) has over the elements, the better they are positioned to exploit the opportunity and become a niche market leader.

Business opportunities do not exist in isolation, but need someone to be able to take advantage of it to call it a real opportunity. The mere existence of a gap in the market or a good ideal product does not count as an opportunity, because they may not be used effectively. The definition of a business opportunity depends on the existence of an entity with the appropriate capabilities and resources to seize and exploit it.