Business opportunities come in many forms—partnerships, expansion, the big sale or the even bigger investor, just to name a few. The toughest thing about new opportunities is that it’s sometimes difficult to sort the good ones from the lousy ones. Are you looking at a goldmine or a money pit, and how can you tell the difference between them?

Here are four surefire ways to sift out the good business opportunities and make sound decisions about them.

1. History Repeats Itself

You ignore history at your peril, as past behavior is the single best predictor of future behavior. When someone presents you with a new business opportunity, do your homework, and look into the reputation of the person you’re considering working with. For example, if you’re thinking about selling your business and the buyer is known for gouging folks on price, you’d be foolish to think you’ll be treated any differently.

If you’re considering a joint venture, take the time to look at online reviews and see how the business treats its customers. If you’ve done some research and are still considering the opportunity, you should ask for references. You know, of course, that any business will pick their best clients, who are most likely to say positive things, so it’s best to specify the references you want. I suggest asking for a reference from their oldest client (for performance over time), their newest client (for recent first impressions), then let them choose the last references. If you specify which references you want to see, you’ll get the real scoop and learn how your opportunity is likely to pan out.

2. There's a Lot of Big Talk but Little Action

Lip service is the easiest thing in the world to give someone. Making promises costs nothing, but delivering on those promises—well, that’s a whole different ball game.

You must protect yourself from people who promise the moon but never get off the ground. I suggest building small milestones of success into your deals, making each marker or evaluation point a fail-safe—an opt-out point. You’re mitigating your risk by requiring progress, and you’re also minimizing the possibility of being sweet-talked into continuing with a partnership that isn’t working for you. Make the milestones concrete and easy to evaluate, and you remove the subjectivity. Be clear, and be firm.

3. Desperate People Do Desperate Things

You absolutely must make sure you’re not negotiating or evaluating deals from a position of desperation. If you’re seriously strapped for cash or frantic for more market share, you’re vulnerable and there are plenty of unscrupulous people who are more than willing to take advantage of you.

You need to be aware of the times when you’re in a weak position and be prepared to take measures to mitigate your losses. If possible, get your business into a solid, profitable position before you take on any new partnerships or cooperative ventures. At the very least, you need to be conscious of where you stand and be aware of your weaknesses.

4. You Don't Have the Same Goals as Your Potential Partner

You may find what you think is the perfect complement to your business—whether it’s a shared customer base, common location or similar approach. But if your ultimate goal and your potential partners' goals are in opposition, your business opportunity will turn into a nightmare.

You must want the same things in order for the partnership to work. You must be willing to walk the same path toward the same goal if you want the opportunity to pan out. It’s absolutely critical that any joint venture begins with a frank discussion and agreement about objectives. Failing to discuss your goals upfront means you’re losing out on the benefit of combined, cooperative effort, but what’s worse is that you could even end up working at cross purposes.

Opportunities are everywhere. The trouble, though, is that not all opportunities are good opportunities. As an entrepreneur, you're probably well acquainted with the pitfalls that seem to reside around every corner, and business opportunities are no different. We have to get better at making reasoned decisions—objectively evaluating the options available to us—if we’re truly going to be successful.

Mike Michalowicz is the author of Profit First, The Pumpkin Plan and The Toilet Paper Entrepreneur. He's also the founder of Profit First Professionals, an organization that certifies accountants and bookkeepers in the Profit First method. 

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