Essentially, entrepreneurs recognize an opportunity and turn it into a successful business. An opportunity is a favorable set of circumstances that creates a need for a new product, service, or business. Most entrepreneurial ventures are started in one of two ways. Some ventures are externally stimulated. In this instance, an entrepreneur decides to launch a firm, searches for and recognizes an opportunity, and then starts a business, as Jeff Bezos did when he created Amazon.com. In 1994, Bezos quit his lucrative job at a New York City investment firm and headed for Seattle with a plan to find an attractive opportunity and launch an e-commerce company. Other firms are internally stimulated, like BenchPrep. An entrepreneur recognizes a problem or an opportunity gap and creates a business to fill it.

Regardless of which of these two ways an entrepreneur starts a new business, opportunities are tough to spot. Identifying a product, service, or business opportunity that isn’t merely a different version of something already available is difficult. A common mistake entrepreneurs make in the opportunity recognition process is picking a currently available product or service that they like or are passionate about and then trying to build a business around a slightly better version of it. Although this approach seems sensible, such is usually not the case. The key to opportunity recognition is to identify a product or service that people need and are willing to buy, not one that an entrepreneur wants to make and sell.