In the first process, Michael Perla says answering this question could take a whole book or a single sentence, as methods could be an inch deep or a mile long. He recommends the following:

For a quick analysis, understand the 5 W's and How.

• What is your question?
• What is the problem statement?
• Why is it a problem?

State your problem as specifically as you can. Next, develop options on how to solve your problem. For each option, determine the "what" of the option—what is the specific option and describe it. Why would you execute that option? Answer it at a fairly high level in a few sentences. How would you execute that option? List key steps.

Next, look at the cost of executing the option—time, resources and capital—initial and ongoing. What would be the benefits of the particular option—some benefits will be hard (easier to quantify), while others will be softer (e.g., better strategic advantage; harder to quantify). Lastly, what are the risks of each option? How can you mitigate them and what would be the cost of doing so? This analysis can be done in a matrix and should provide a relatively in-depth look at each option. An ROI analysis would look at the incremental benefits/incremental costs.

As you get into discount rates and capital budgeting processes, the analysis becomes more quantitative and some would say, more complex. If the timing of the benefits and costs is similar, the discount issue evens out for most of the options. Some of this analysis is as much art as science. You can also look at similar businesses or companies and see what they've done. Isolate analogous businesses and review what they've done and what worked or didn't work. This could be called the precedent or pragmatic method.

A second way to go about evaluating opportunities is to research the following areas:

• Determine whether each one is right for your business.
  
  
• Review the existing conditions of your product or service.
  
  
• Decide how well each opportunity will work for you.

In determining whether an opportunity is right for your business, review your company's capabilities, both technical and financial. What's the cost of setting up your business to handle the opportunity? How long would it take to see an ROI?

What is the market for the product or service like? Is it crowded? Who is most likely to buy and how do you reach buyers? How competitive is the market? Where is the product or service in terms of the life cycle? Mature? New? What is the demand? Obviously, you want to avoid anything where the trend is slowing down. Determine the average price and how much sales you expect.

Ask how well the product or service fits in with your existing business. Does it require a process change? If applicable, how stable is the company from which the product or service comes? The stability of the business is important and checking with the BBB (Better Business Bureau) is a good place to start your research on the company's background. Also, determine how the product or service would be distributed or provided.

No one wants to think negatively, but it's useful to look at the worst-case scenario. What is the worst thing that could happen if you take the opportunity on? Is it worth the risk?

Evaluating opportunities means doing research and answering many questions. The answers should tell you whether or not taking on a new product or service is a good move.

Thorough research should help you make a sound decision.

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