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How to Evaluate a Home Based Business Opportunity

Apr 10, 2008
If you are considering starting a home based business then I suggest you approach it the same way any business person would approach starting any new business, at home or otherwise. With so many seemingly get rich quick opportunities available it is easy to think that you do not have to do your homework. However researching the history of a company, evaluating the market, understanding compensation and operating costs can save you time and money. By following these simple tips you can make an accurate assessment of whether the business opportunity you are considering is legitimate and setting up for success.

Research the history of the company. If you are considering investing your money and time into a business opportunity then it is critical that you do your due diligence and research the company. Think of how much time we spend researching cars when we are in the market for a new car. Treat a business opportunity the same way. You are making a huge investment and you want to make sure you are investing in a legitimate and credible company. I look for two things when researching a company. The first is that the company has been in business for over five years, mainly because most companies that fail do so within their first five years. Secondly, look for credible third party testimonials about the company. Remember, especially when searching on the internet, there is a lot of information available that may not be credible. Check the source of all testimonials to be sure you are getting accurate information.

Evaluate the market. There is two ways to analyze the market. First, simply ask yourself if there is a need for the product or service you are interested in distributing. Be honest with yourself. If you research a given product only to find that there are hundreds of competitors, then there may not be a real need for that product given that it can be found hundreds of other places. However, it is also important to consider the competition as a valid indicator that there is a need for the product. If you find that there is competition but that the product you are planning to distribute has something unique that differentiates itself from the rest then your product may be viable for the market. Look at how and what other people are advertising as it relates to your product or service.

Consider all the costs involved running your business. Usually there is an initial investment that is required when you enter a home based business. What is not talked about is operating costs. The inviter of a business opportunity is probably not going to make a commission off of your operating costs and will fail to mention to these to you because they do not want to deter you from moving forward in joining the business and thus making a commission from you. Operating costs to consider and ask your sponsor about should include marketing and advertising, software fees, cost of product, and domain names to name a few. Also ask your sponsor if there are any costs involved that is not covered above. It will benefit you in the long run to ask these questions because once you know what your initial investment is and what your monthly operating costs are you can honestly assess whether the opportunity is feasible with your budget.

Understand the compensation plan. This sounds simple but often is not especially if you are looking at a network marketing or direct sales opportunity. Many home based businesses that fall into this category have confusing compensation plans. It is important for you to ask questions until you fully understand how you will make money from the opportunity. Ask your sponsor questions until you can easily explain the compensation plan back to him or her. You should be able to answer any and all questions regarding the compensation plan of a business opportunity first for your own understanding and secondly because you will also be bringing in people to the business and will need to explain it clearly to them.

Follow these guidelines for every home based business you consider. Evaluating these aspects of every opportunity and assessing what is right for your personality will lead you to the ideal business and ensure your success.
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Scott Herrera is a success mentor and coach helping people how to work online.
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