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Wednesday, February 20, 2008

Opportunity and business planning

In the past few days, I've received a business proposal that, on some levels, is highly appealing. If successful, the idea could accelerate our growth, expand our capacities, and allow us to develop exciting new markets, vertically and within our niche. And I sense the proposal's proponent is desperate; allowing (at least in theory) the opportunity for a good deal if we move quickly.

But I'll pass on the opportunity. I don't know the other party to the transaction at all. He initiated communication with me through a public portal; all his communications have been over the phone and some things he said left more questions than answers.

I, of course, think it is wise to keep my mind open to unsolicited external proposals; there can be a gem out there that we might otherwise miss. In any case, the openness of this blog and other external marketing is great enough to invite new ideas.

One thing you learn quickly in business is there is never a shortage of ideas and possibilities. Out of 100 idea initially, 10 might be worthy of further review, and only one is 'right' to implement. (The same ratio, it seems, also applies to resumes from people seeking employment!) Here are my screening criteria:

Is the proposal relevant to our business? We publish locally relevant construction industry news and information. If it isn't in that area, we should pass;

Is the risk worth the reward? This invites several other questions. Is capital required; and if so, how much? Will the project/initiative tie up management resources and time that can be dedicated to other opportunities? Is the payoff worth the effort? How likely is the project/initiative to succeed?

Am I comfortable with the other party(ies) to the project? This is both subjective -- a 'gut feel' --and objective. Are there warning signs like poor or non-existing references? Sometimes you can hold your nose and do business with people you don't like for transactional/short-term projects; but you wouldn't want to set up an initiative with anyone longer-term if there is any significant doubt.

Now, ideas that don't entirely pass this scrutiny can still move forward, but with caution, or if they represent exceptional opportunity or otherwise are very low in risk. And bigger direction changes and fundamental shifts in the business are possible, but these should be planned carefully and executed only after the planning is completed.

So the idea I heard yesterday might 'work' but only after we put it through our full-scale planning process. And if this means we miss a short term opportunity because of the desperation of proposal's proponent, so be it. The potential reward in this case is simply not worth the risk.

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