In evaluating the quality and feasibility of a proposed business concept, entrepreneurs must ask themselves some tough questions regarding their product or service, target market, team, and resources. Taking the time early on to determine the answers to these questions will be of the utmost benefit down the road as your team further develops the business, seeks investments, and ultimately launches your startup. If you do not have the answer to a question, don’t worry – this is the perfect way to hone in on areas you still need to fully flush out.
1. The Product
Can you clearly and quickly articulate what your product or service is? What does it do, and more importantly, what benefits does it provide to the customer? Does it solve a previously unsolved problem or improve an existing solution?
2. The Market
Who are your customers? What does your ideal customer “look like”? How many of them are there? How much money do they have to spend? Where are they geographically? Does geography matter? Why do they represent a solid business opportunity? Who are your competitors (the answer is not, “I have none.”)? Why will the market prefer your concept to your competitors?
3. The Business Model
How do you make money? Do you have more than one revenue stream? How long will it take you to break even? How much does it cost you to acquire a new customer? What is your gross margin for one customer? Does this margin improve as over time or as you sell to more customers? What is your customer’s life cycle? Start with one customer and then project for many based on justifiable assumptions.
4. The Team
Do you have a team that is well-equipped to execute from all angles? What about the members of your team enables you to compete? Will you need to add team members in the future? When? For which functions or skill sets will you need new team members?
What resources do you need to produce the most basic, simplified, functional version of your concept? Are they financial? Are they material? How much do they cost? Do you need to sink a large amount of resources into the concept up front? How far along can you develop the concept with only minimal resources by talking to customers and adapting a prototype accordingly? Mitigating startup costs for as long as possible is a huge advantage!
(A special thanks to Max Kaye, CEO of IDEA, for his help in generating these essential questions.)