How To Build An Evaluation Matrix To Assist You In Selecting A Business Opportunity

By Jim Razz 

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When you're considering whether you want to join an Internet-based business opportunity there are a host of factors to evaluate. Have you given any thought to formalizing what those factors may be, BEFORE you begin your search?

This piece borrows some techniques used by all levels of government to assure that it's getting the "best value" when it acquires resources. This process is most commonly referred to as "source selection."

We'll employ many of these same methods to stimulate thinking on your part.  My hope is that you will use the information to build a set of criteria that you can actually use to assist you in your "due diligence" efforts.

This process is 100 percent generic. It is not slanted towards any type of business and I have no business opportunity to promote.

Your first step is make a list of the high-level Criteria that are important to you. Here is a list of ten that may be relevant to you. Your list may be shorter; it's really up to you.

  1. Compatibility (with your interests)
  2. Skills Needed
  3. Income Potential
  4. Compensation System
  5. Company Viability
  6. Business Partner
  7. Products
  8. Portability
  9. Scalability
  10. Cost
The next step in the process is to put your Criteria in descending order of importance.  That is, ordered from most important to least important. In the interest of brevity, I've done that already with the list above, but your version of this might be different.

Virtually all the authorities in this field will tell you that your top Criteria ought to be to find a business in an area that is of keen interest to you--something you're passionate about--and a business that's compatible with your skill set and experience.

Stephen Wright in his 2006 article entitled "Top 5 Criteria for Choosing an Ideal Home Based Business" said this:

Personally, I have talked with literally hundreds of home based business owners – some who were very successful, others who quite frankly were struggling and failing miserably with their home business activities at the time of the discussions.

An overwhelming number of those who were successful used one or both of Criteria 1 & 2 as the basis for starting their business. Likewise, the vast majority of the failed businesses used neither. Coincidence? I think NOT!

By the way, in case you are interested----profits and “making money” were the Number 1 criteria most common for the failed businesses.


Criteria 1 and 2 mentioned by Mr. Wright are the same number 1 and 2 Criteria in my list above: Compatibility and Skills Needed.

Continuation of Blog post...

How much do you weigh?



The third step in the process is to assign weights to each criterion. I like to keep things simple and have my weights add up to 100...but you can have them total any number.



# Criterion Weight
1 Compatibility 15
2 Skills Needed 15
3 Income Potential 15
4 Compensation System 10
5 Company Viability 10
6 Business Partner 10
7 Products 10
8 Portability 5
9 Scalability 5
10 Cost 5

 Total 100
 
Table 1

What this table portrays is that the top 3 Criteria are of equal importance as they are weighted the most: 15 points each. The next 4 Criteria are also of equal importance at 10 points each but, when combined, they are still less important than the top 3 (40 vs. 45 points). The bottom 3 Criteria are of equal rank at 5 points each--much less important than Criteria 1 through 7. When combined together to total 15 points these last three Criteria carry only as much importance as one of our top 3 Criteria.

You can assign your Weights like I have in Table 1 or assign them so that none of the Criteria have the same Weight...or you can make all the Criteria equal. The choice is yours.

You should consider the Criteria above an example that you can use to construct a set of Criteria that might be more relevant to you. 

The Opportunity Evaluation Matrix


The fourth, and most detailed step in the process, is to construct an Opportunity Evaluation Matrix using the Criteria and Weights from Table 1 above. Here's a Preview of what the finished product looks like.

Note: you don't have to do anything else if you want to use what's in the template you're getting below. Also, you can delay this step until after you have a better feel for how the template works.

Start with the Criterion # 1 and work your way down the list...or begin anywhere you want for that matter.  

What you're going to do is take each Criterion and decompose it into a number of Items that you want to evaluate. Let's take Criterion #4, Compensation System, for starters. 

We previously assigned it a Weight of 10 points and now have come up with two Items named: Type and Time to Profitability.

Now we assign each of those two Items a Weight. We've 10 points to work with--the Weight that we assigned previously to Criterion #4. Let's decide that Item 4.1 - Type is about twice as important to us than Item 4.2 - Time To Profitability. Therefore, we assign Type a Weight of 7 and Time To Profitability a Weight of 3. If they were of equal importance, for example, the Weights assigned to each would be 5. 

# Item Weight Rating Score
4.1 Type 7     -      -
4.2 Time To Profitability 3     -      -

 Criterion #4 Total



Table 2

Notice the numbering scheme uses .1, .2 etc. to keep track of your Items. Note also the two columns on the right of the matrix: Rating and Score. We use a simple rating system from 0 to 4 as shown in Table 3 below. You could use that or any one you're comfortable with. 

Rating Description
0 Unacceptable
1 Poor
2 OK
3 Good
4 Excellent

Table 3

Ready for the "heavy lifting?"


Taking the Criteria and Weights assigned to each from Table 1 we constructed a detailed Opportunity Evaluation matrix. Look at the Comments sheet in the template. You'll see that the column on the right of the matrix highlighted in yellow is labeled My Comments and is meant to amplify on the meaning of the Item. 

Take some time now to review the Criteria, Items and Weights in this matrix to see how they would apply to your situation and preferences.  Don't forget to use the My Comments column to stimulate thought on what each Item may mean to you.

You may download the template in Microsoft®Excel 2002 (.xls) format.

If you don't have Microsoft® Excel or want to purchase it, just go to Open Office.org and get the Calc program.  The Calc freeware is Microsoft® Excel compatible.  

Take some time to review this template.  Plug in some dummy Ratings.  Your Score will be calculated based on the Weight you've assigned that Item. The score of all your items will be totaled at the bottom of the matrix.

When you're comfortable navigating around the template and have seen how it works, you're ready to begin customization to suit your preferences.

Change the Weight of each Criterion to suit your preferences. If you don't want to use a Criterion just change its Weight to zero. Don't worry about changing where they appear in the sheet as the order of importance is determined by the Weight.


Using Your Evaluation Matrix

You are now at the critical part of the process:  You have to assign the actual rating based on your research into the opportunity. Use every resource at your disposal to get this information. Talk to the person who introduced you to the business.  Get on "Opportunity" call and talk to the owner or key leaders running the call. It may take you some time to glean all this info, so be patient.

Then it's simply a case of the multiplying the Weight x Rating to get the Score and then totaling things up for the Criterion Score. The template does that automatically. Using Weights totaling 100 points and a 0 - 4 Rating scheme, the maximum score would be 400 points.

The last step in the process is to make the decision as to which opportunity is right for you.  You may need to evaluate multiple opportunities against the same criteria to find one that suits you.

Will this process guarantee you'll find the right opportunity and that you'll make money at it? No one can predict how you'll fare, but I'll leave you with this quote from Henry Ford to consider:

“Whether you think that you can,
or that you can't,
you are usually right.”

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