In this video, I discuss one criteria on how to spot a business opportunity, two examples of how people took advantage of such opportunity and lessons we can learn from it.
I would define a business opportunity to exist when an opportunity is identified to meet a need in life with the possibility of making money from it. I consider four things that make for a good business opportunity:
- Your product meets a need in your local market.
- You have the right resources to start and sustain business success.
- You can sustainably develop and distribute the product at the price that the market will be willing to pay for.
- The timing is right for you to introduce the product to your market.
Pierre Omidyar and eBay
Pierre Omidyar is a person who took advantage of the opportunity that he found. Omidyar believed that money could be made by connecting people who had items to sell with people who were looking for items to buy through the Internet. The idea itself is not new, with the existence of physical swap meets, flea markets, garage sales all over the United States—and not to mention newspaper classifieds. However, Omidyar knew that he could modernize the idea and make it even more convenient for people to sell things to other people in a wider geographical area. So he conceived of an online auction where transactions could take place anywhere in the world by anyone with an Internet connection.
In 1995, he created the prototype for his idea of a direct consumer-to-consumer auction using his own computer. He launched this business using a free web space and operated out of his own apartment. He earned a small fee each time a transaction took place. The prototype itself was simple and uncomplicated, which allowed him to scale from his original design. Today, eBay is considered as the world’s 9th largest Internet company by revenue.
Brian Chesky, Joe Gebbia, and Airbnb
In 2007, Airbnb founders Brian Chesky and Joe Gebbia moved to San Francisco from New York. They had difficulty paying their rent and found a simple way to earn some quick cash. They found out one day that there was a local design conference in San Francisco and hotels were fully booked. To capitalise on this opportunity, they bought air beds, bundled them with breakfast in the morning, and advertised them over the. They received 3 bookings that night.
They soon realised that there was money to be made from their home sharing idea. The pair took a couple of years to develop the idea, find mentors and others partners to help them grow the business further, figure out how to solve important issues such as customer feedback and security, and, in general, go through the birthing pains and changes many startup businesses go through.
Today, Airbnb has over 3,000,000 lodging listings in 65,000 cities and 191 countries. The company has a $31 billion valuation.
If you are curious to know more about Airbnb, I also talk a bit about Airbnb in my video, “4 traits you need to succeed in business.”
We can derive 3 lessons from these two case studies.
Lesson 1: Business opportunities exist when a need is identified and an avenue exists for it to be met. In both cases, both the founders used similar tactics. Omidyar developed and modernized the flea market model, while Chesky and Gebbia created a new accommodation model—and then the used a different channel or avenue, in this case, the Internet, to launch their business.
Lesson 2: If and when you find an opportunity in the market, capitalise on that opportunity. It’s acceptable to start small—in fact, it makes a lot of business sense, especially when you are developing a new product or service that the market has never heard of before. Once you have more information about the market and have developed the product to suit the market’s needs, you can then scale up.
Lesson 3: Along the way, you may find that you will need help from people with more experience or knowledge. You are not alone on that front. Understand that founders and business owners do not have all the skills to establish and develop an enterprise. You need a team with diversity and the expertise that you do not have to support you to grow your business.
If you are interested to know more about what a business has to go through when facing exponential growth, you can download the first chapter of the book, ”$20K to $20 Million in 2 Years” absolutely free here. The chapter talks about the differences between a good and a great business and puts out questions that make you consider how you can turn your business from good to great.