If you mentioned "yes" to any of these questions, don't do it just yet!
Starting or investing on a new venture could be an emotional process full of anticipation and pleasure. You need to keep a cool head and treat the process with the utmost objectivity.
To help with that, I've put together a whole list of questions you NEED to answer before you even think about putting a business plan together. This will help you're making sure that no overlooked variable makes you incorrectly go ahead or not. Make sure you don't skip any part of the process and end the exercise with a really honest yes or no decision based on the answers.
You will find it difficult if not not possible to answer some of the questions. It is very important to understand the sureness of the two response and the risk that the two unanswered question implies. Handle this risk by analyzing scenarios with the different possible answers.
Write down a straightforward comment to the two question, doing this formalizes your analysis. You can also think about the two question in a SWOT analysis context determining the two one as a Strength, Weakness, Opportunity or Threat.
If you need the list in excel form contact me at [email protected].
The Dos and Donts to remember:
Do this always
Be methodic, analyze completely. Understand the need, competition and constrains, then tailor and differentiate.
Be on the lookout always for the deadly flaw that will make this fail.
Lots of questions can't be answered or are too vague, check the risk of not knowing them.
Don't Do This
Dont follow the classic idea method: "I have an idea, let me think hoy to shove it to the channel or customer".
Don't focus on the features of the product, focus on the need you are trying to fulfill.
Don't get tempted to skip a full analysis.
The most frequent mistake is to think everybody in the market is like you. If you prefer the product, everybody else will.
It is common to confuse a great idea with a great business opportunity, they are not the same.
Thinking We haven't any competition is only for naive entrepreneurs.
Dont obsess with first movers advantage, most of the time funds prefer 2d movers because the assumption is already validated.
The questions you need to answer:
Product or Service
Can you describe the business idea in 25 words or less?
Is the assumption scalable? Is it limited to your time or something else?
Can your supplying later change / adapt?
Risk of not being in a position to develop / manufacture the product?
Market or Customer
Can you do formal market analysis or only informal? (Interviews, observations, focus groups, surveys, market experiments, etc.)
Who is the customer? How precisely can he be explained? Location, profile, etc.?
What problem are you solving? Why would the customer buy? Does he want to?
Commercial risk, no willingness to buy?
How big is the market? Growing or shrinking?
How penetrated is the market by the industry? What share can you get fast? Later?
What worth is he willing to pay? Based on what? How important is it?
How worth-wakeful is your customer?
Risk of change in consumer behavior?
Can the target market later be changed? Can you later attack other levels in the worth chain?
Can you do formal analysis or only informal?
Is it thriving? Shrinking?
Do suppliers have power? Risk of supply shortage? Change in worth?
Barriers to entry:
Contractual? Patent or trademark?
Lead time in tech development? Innovation?
Regulations and government?
Can barriers change effortlessly?
Do you have relations in place?
Partners? Talent? Investors?
Experience in industry? Yours? Other management?
Risk of regulatory or other government related changes or intervention?
Technology risk of obsolescence?
Can you do formal competition analysis? If not, what informal analysis can you do? Is it first rate?
Who else is attacking the market? How? Successfully?
What is your competitions pricing method?
What is the closest component in the target market to your product? Are you a first mover? Second? More than that?
Strategic advantages / differentiators. Clearly visible to consumers or only in your mind? Sustainable? True, important and provable?
Function? Design? Quality? Uniqueness? Innovation?
Delivery? Channel? Availability? Location?
Cost? Marketing? Sales?
Ignorance of buyers?
Are you taking advantage of a certain opportunity, or advantage?
How fast can competition catch up?
Which options do you have?
Which one is the preferably suited? Why?
If the first choice does not work, does it make sense to effort others?
What channels does your target market prefer?
Which ones are your competitors using?
How such a lot integration do the channels have?
Will the channel change with customer habits or tech?
Risk of no entry to the exact channel or consumer?
Sales and Advertising
How will you get customers?
How will you retain customers? Is it important?
Describe the important salesforce?
Can a salesperson of everyday skills sell it?
Do you need advertising? Which sort? How such a lot? Is it important?
How clearly can you model the basic economics of the assumption? (Costs, sales, margins, required capital, ROI, etc.)
Will there be economies of scale? Are they important?
Accounts receivable? Can it become a problem?
How will you finance in the beginning? Later?
Do you have or can get the important management team?
Do management / leadership / organizational capabilities make a difference? How big a difference?
How helpful is intellectual property?
Does it make sense to do this solo? It on the whole doesn't.
How fast can you know if the business can work or not?
Can you define the variables to are wakeful of it? How fast can the info flow?
Do you need product development to know? Dangerous!
Do you need a protracted selling process or many tries to know? Dangerous!
Can you diversify? Not easy on new ventures, on the other hand can it be done?
Give me the maximum drawback / risk (deadly flaw) of the assumption? The one that will make it fail?
Enlist the seemingly deadly flaws that could be fixed.
Does the assumption fit your life objectives? Workload?
Do you feel passionate about the assumption? Enjoyable? Are you doing it only for the funds?
Give me the upside / prime case scenario?
Give me the downside / worst case scenario?