What Is a Business Opportunity?

Business opportunities are typically investments that allow a buyer to begin a business. All franchises, for instance, are considered business opportunities, but they’re one of the few in which a seller has a continuing relationship with the buyer. In most cases, the seller of a business opportunity exercises no control over the buyer's operations.

Although most business opportunities offer less support than franchises, that can be an advantage for people who thrive with autonomy. Typically, buyers aren’t obligated to follow strict specifications and detailed programs to which franchisees must adhere. With most business opportunities, buyers acquire a set of equipment or materials and then operate the business using their own strategy. In most cases, there are no ongoing royalties, and no trademark rights are sold.

Although states regulate the sale of business opportunities differently, many follow and expand on the rules set forth by the FTC, which stipulate the following:

• A seller of a business opportunity solicits a prospective purchaser to enter into a new business. The purchaser makes a required payment, and the seller will provide one of the following services:
  • The seller of a business opportunity will secure or assist the buyer in finding a suitable location or provide the product to the purchaser-licensee.
  • The seller will provide outlets, accounts or customers for the purchaser's goods or services.
  • The seller promises to buy back any product that cannot be sold to prospective customers of the business.
• A seller of a business opportunity must provide a written disclosure to the buyer that includes the following:
  • Contact information for the seller
  • Any legal action taken against the seller
  • Documented earnings claims (e.g., how much money the buyer can expect to earn from the business opportunity)
  • References for potential customers
• The FTC business opportunity rule applies in all 50 states, though state laws will also apply when additional regulations are required — including registration fees or other terms that must be included in the sale.

How to determine a good business opportunity

It may seem like business opportunities are everywhere, but there are many steps between simply having an idea and creating a viable enterprise. That’s why it’s so important to investigate opportunities and make informed decisions about any potential business venture.

To do so, you must analyze a variety of factors — starting with those in your own life. According to experts at Harvard Business School, one of the first things to consider is pain points. What processes or products do you find frustrating? And what might solve those issues?

If you have an idea for solving a pain point, your next step should be market research — an essential aspect of any business plan. You’ll need to determine what other businesses exist and if your idea offers a unique value proposition. In other words, is it novel enough to

capture market share? While evaluating these factors, it’s important to question different processes and see if there's a way for you to innovate or improve on existing concepts.

Once you’ve completed initial research, you should determine to what extent a business opportunity is scalable. Will you be able to grow revenue or build a team? How much capital will it cost you upfront? What risks exist? If the opportunity presents profitability, feasibility and room for growth without excess risk or overhead, it’s likely going to be a solid business.

Types of business opportunity ventures

Business opportunities come in many different forms. Some adhere closely to federal and state definitions as they are sold to prospective buyers who want to launch a business. In other cases, opportunities arise organically as an individual or a group of people have an idea for a concept that could generate revenue. Below are some of the most common types of business opportunities.

New market opportunity

Among the best ways to grow a business is to identify and tap into a market that hasn’t previously been explored. This might be a new customer base, a new location or a new product or service (sometimes referred to as an untapped resource opportunity). By constantly analyzing markets — looking for changes in technology, demographics or sales data — entrepreneurs can get ahead of other businesses and capitalize on the opportunity.

Franchise opportunity

Buying into a franchise might be a relatively safe and profitable opportunity if you don’t want to build a business from scratch. Franchising refers to a continuous relationship in which a franchisor (the seller of the opportunity) provides a licensed privilege to the franchisee (the buyer), which comes with training, inventory, management and other support services. Restaurants and hotels are among the most common examples.

Distribution opportunity

A distributorship involves entering into an agreement to offer and sell a product without being entitled to use the manufacturer's trade name as part of the agent's trade name. Depending on the agreement, the distributor may be limited to selling only that company's goods or may have the freedom to market several different product lines or services from various companies.

Rack jobbing, which refers to a scenario where a business lets another entity distribute its products via strategically local store racks, is a common form of distribution. Vending machines, too, are a form of distribution in which the machine owner has permission to sell specific products in various locations.

Related: Why Vending Machines Are an Unexpected, Popular Side Hustle

Online business opportunity

Sometimes called a technology opportunity, this refers to any enterprise in which entrepreneurs generate revenue from the online world. This commonly involves ecommerce, developing or selling software, affiliate marketing or even building online courses. An online business opportunity might also involve search engine optimization (SEO), website development, social media or artificial intelligence.

Related: How to Start a Business Online

Startup opportunity

Particularly common in the technology industry, startups are often young companies that create an entirely new product or service with a small team of founders. Although some entrepreneurs choose to launch startups, they can also find business opportunities by investing in startups with the hope of continued growth. However, startups can be high-risk propositions, as the majority fail.

Related: 7 Ways to Fund Your Startup in 2024

Real estate opportunity

Investing in real estate is one of the oldest forms of business opportunity. Today, many entrepreneurs and investors purchase real estate with the goal of developing the asset or selling it at an appreciated price. Some people also use real estate to generate rental income, while others buy into timeshares or form ownership partnerships.

Strategic partnership opportunity

Well-established businesses often seek out mutually beneficial partnerships with companies that are not direct competitors, but that can amplify their offerings. Typically, these companies will share resources in an effort to create value for each other. It’s common to see this type of business opportunity emerge with supply chain businesses, where two or more companies will collaborate and share their designs or materials to create a better product.