Jeff Bezos knows a thing or two about spotting good business opportunities. At age 30, he left the security of a high-level job in finance to launch the online bookstore Amazon. Years later, his keen business sense has transformed the company into an ...
Jeff Bezos knows a thing or two about spotting good business opportunities. At age 30, he left the security of a high-level job in finance to launch the online bookstore Amazon. Years later, his keen business sense has transformed the company into an e-commerce juggernaut with a $1 trillion market cap.
With years of experience under his belt, the CEO shared the four key characteristics of a "dreamy" business in a 2014 annual shareholder letter. "Customers love it, it can grow to very large size, it has strong returns on capital, and it's durable in time – with the potential to endure for decades," he wrote.
When you find a business initiative with these traits, he wrote, "don't just swipe right, get married."
Being able to identify good business opportunities is an extremely useful skill for entrepreneurs, given that a majority of new businesses fail. Young people looking to invest money in emerging markets or job seekers weighing the longevity of smaller companies can also benefit from this wisdom.
Of course, the CEO was referring to three specific Amazon initiatives at the time — Marketplace, Prime and Amazon Web Services. However, these traits also match Amazon overall.
Here are the four traits Jeff Bezos says every great business opportunity should have:
1. Customers love it
Serving the needs of the customer has been at the center of Amazon's business plan from day one. "We're not competitor obsessed, we're customer obsessed," Bezos wrote in a 1997 shareholder letter. "We start with what the customer needs and we work backwards."
The results of this customer-centric approach speak for themselves. Amazon consistently takes the No. 1 spot for online retailers on the American Customer Satisfaction Index and more than70 percent of U.S. online consumers say did most of their holiday shopping on the site.
2. It can grow to a very large size
Amazon's growth is undeniable. What started out as an online bookstore with a small group of employees has catapulted into a retail giant that sells nearly everything and boasts more than 500,000 employees.
The Seattle-based company has also expanded into new markets such as food delivery and grocery chains and is currently on the hunt for a second headquarters.
3. Strong returns on capital
Amazon has become more focused on delivering strong returns to investors in recent years. Spurred by fast-growing initiatives like cloud computing and digital advertising services, the company topped $2 billion in profit for the first time last month, continuing its three-year profitability streak.
4. Durable in time
Bezos' penchant for long-term thinking has helped Amazon withstand the test of time. "Because of our emphasis on the long-term, we may make decisions and weigh trade-offs differently than some companies," Bezos wrote in a 1997 shareholder letter
At a Forum on Leadership panel, the billionaire revealed that he rarely works in the present. Instead, he works two to three years in the future, which allows him to "look around corners" and predict the next change in business.
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