With so many different opportunities in the world today, it can be hard to choose the right opportunity to run at with your full strength.
Knowing that you can’t run at too many things at once, one of the most important things you can do is choose your opportunities wisely.
Time spent chasing the wrong thing - or even the “non-optimal” thing - can waste precious time and resources.
This reality puts even more pressure on the need to choose the right opportunity to pursue. You and your team must do the work to ensure that you are running at the right thing.
Many inputs factor into making a great decision about what opportunity to focus on, but, no matter what, leaning on data to guide your decision is essential. Let’s jump into how to do just that.
Whenever you are pursuing a new opportunity, it’s hard to not get lost in the fear around what happens if it doesn’t pan out as planned.
Further, it’s easy to end up in analysis paralysis mode where you spend too much time trying to justify why it’s the right move.
Building conviction is all about creating the confidence necessary to run at an opportunity with your eyes open.
Building conviction doesn’t mean that you will always be right or that things won’t go wrong. It does, however, mean that you have taken the time to get confident about your choice.
Finally, building conviction isn’t just about understanding what could go right, but it is also about understanding how things could go wrong. The better you can wrap your head around the risks in front of you, the easier it is to run at something.
The task of researching an opportunity and building conviction is not a small one. The more organized you can be around what you are looking for and why, the better.
First things first, it’s important to wrap your head around the potential size of the opportunity. If everything were to go right, what is the upside potential?
This can be calculated using some pretty simple inputs. The key here is that you can justify how you got to each number that is used in your model. The best models will be (relatively) simple to explain and will use numbers that seem familiar to the audience (even if you are just doing the exercise for yourself!).
The trick here is to make sure that you are doing this exercise bottoms up, in the sense that you shouldn’t rely on someone else’s calculation of the upside opportunity. This is an easy mistake to make because it can seem easier and faster to source numbers from elsewhere on the upside opportunity. However, it will be well worth it to research how big the opportunity can be by using inputs that you yourself have validated.
Second, consider the margin of safety of the particular opportunity. The concept is margin of safety was developed to help professional investors pick the right stocks, but the lessons can be applied to anyone thinking of pursuing any opportunity.
In general, the margin of safety should give you an idea of how protected you are in case something goes wrong. Usually when pursuing an opportunity, there is an opportunity to exit the effort and recoup some of the investment that you have made. The margin of safety exercise forces you to be specific about what you think you can recoup.
This can also be expressed by thinking about the number of unit sales you need in order to breakeven on the project. If you need to sell 100 units to breakeven and the opportunity analysis shows a high likelihood of selling 150 units in the first year, you have a 50 unit margin of safety.
It’s critical to analyze and understand your opportunity’s margin of safety because it helps everyone wrap their heads around various sales scenarios.
Third, lay out the costs and complexity to pursue the opportunity, from start to finish. This should include an assessment of hours dedicated to the opportunity, with the appropriate hourly rate applied, as well as any other direct expenses that will be incurred for this opportunity.
Like the rest of this analysis, it’s important that you take the time to deeply research and understand the costs to address an opportunity.
When it comes to estimating costs, it’s human nature to underestimate the true cost of pursuing any opportunity. Your goal here should be to conservatively estimate costs and ensure that you are thinking holistically about what it will really take to capture the opportunity.
Fourth, make clear the opportunity costs. If you are focused on this particular opportunity, what do you have to say no to? What do you stop doing or what other good opportunity must you walk away from?
Without framing any opportunity in the broader context of the other opportunities that you could be pursuing, everything seems attractive.
Your goal here is to paint an accurate picture of the other major initiatives and goals that you won’t be able to pursue. With this, it’s important to understand the impact of not pursuing these other opportunities.
The impact could be a lost opportunity or it could be a potential loss of previous efforts that must wind down. Either way, being clear about the opportunity costs are essential.
Outside of these categories to help you organize your thinking and research, it’s important to augment your analytical approach with conversations and human connection.
Sometimes the numbers say one thing but your gut says another. Assuming that you have been doing the work necessary to build an informed opinion, you should trust your gut.
Frameworks and data storytelling can only go so far in helping you make important decisions. At the end of the day, leaning into what your gut is telling you is always a good idea.
Building conviction in the opportunities you and your team are pursuing is one of the most important things you can do to be successful. Hopefully our guide has helped you better understand some steps you can take to build more conviction.