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Sometimes when opportunity knocks, it’s best not to open the door. What seems like a good opportunity to expand your small business, whether it’s a potential partnership, a co-marketing agreement, a large new customer or even a financial investment, may end up costing you money in the long run or setting your business back. The problem is that it’s not always easy to tell the good from the bad when it comes to opportunities because on the surface they may seem to make good business sense.

Mike Michalowicz, CEO of business growth consulting firm Provendus Group, recommends several things to always keep in mind about the other party as you evaluate a business opportunity in “4 Telltale Signs of a Bad Business Opportunity,” on the AMEX Open Forum. Key among them:

History repeats itself: Don’t ignore history when it comes to setting up a partnership or business relationship with another individual. Conduct due diligence and check out the reputation of the person you are thinking of working with or even selling your business to. If someone has a history of reneging on a promise or offering deals that benefit them at the expense of others, expect that they will treat you the same way.

If you are considering a joint venture with another small business, make sure they have the same philosophy about customer service that you do. Check online reviews to see how they treat their customers and ask for references from customers, specifying which ones you’d like to talk to ensure you get unbiased feedback.

You don’t share the same goals: Even if you share a customer base and have a similar approach to business, it doesn’t mean that you have the same business goals. If your goals head off in different directions, your business relationship can turn out to be a nightmare. Before you sign on the dotted line, talk about what you hope to get from the venture and agree on objectives. In the absence of a frank discussion and mutually agreed upon goals, you may find yourself working at cross purposes.

Michalowicz also strongly cautions to avoid negotiating or evaluating deals if you feel you are feeling vulnerable because of a cash flow problem or rising competition. Try to get your business on solid footing before entering in to a partnership or any cooperative venture.

What makes for a good business opportunity?

Even if you feel good about the other party, there are still other criteria that make for a good opportunity to expand your small business. Ask yourself:

Is there a need? You may think that expanding your offerings with a new product or service that you gain through an acquisition or partnership is what the market needs, but are you sure? Have you done your homework through research and talking to customers to find out if the new offering will create interest and sales?

Do you have the resources opportunity? The addition of new products and services or expansion through a partnership or joint venture may require more staff, larger office space and new marketing initiatives. They also may require changes in the technology you use. As an example, if your small business employs unified communications so that your team can more effectively work together in the office and remotely, you’ll want to expand that capability to any other company you work with. As you consider opportunities, take into account the resources you have and whether you can afford the cost to make the new venture successful.

Is the timing right? There are lots of products and partnerships that failed in the marketplace just because the timing was wrong. On your part, you may have too many other demands from your current business to give the new opportunity all the time and attention it deserves. You also may find that market timing is off. Make sure that you feel confident everything is lining up properly for the opportunity to succeed.

As the New Year gets underway, a number of opportunities may present themselves with the potential to expand your small business. Gather data and ask lots of questions. You’ll know if the opportunity is right.


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