The Complete List of Things to Evaluate Before You Open or Invest in a New Venture

evaluation

Do you have an innovative idea you wish to market? Are you planning on opening a new business? Are you investing on somebody else's idea?

If you said "yes" to any of these questions, don't do it just yet!

Starting or investing on a new venture can be an emotional process full of anticipation and excitement. You need to keep a cool head and treat the process with the utmost objectivity.

To help with that, I've put together a complete list of questions you NEED to answer before you even think about putting a business plan together. This will help you make sure that no overlooked variable makes you incorrectly go forward or not. Make sure you don't skip any part of the process and end the exercise with a very honest yes or no decision based on the answers.

You will find it difficult if not impossible to answer some of the questions. It is very important to understand the sureness of each response and the risk that each unanswered question implies. Handle this risk by analyzing scenarios with the different possible answers.

Write down a simple comment to each question, doing this formalizes your analysis. You can also think about each question in a SWOT analysis context identifying each one as a Strength, Weakness, Opportunity or Threat.

If you need the list in excel form contact me at [email protected].

 

The Dos and Don’ts to keep in mind:

Do this all the time

  • Be methodic, analyze completely. Understand the need, competition and constrains, then tailor and differentiate.
  • Be on the lookout all the time for the fatal 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

  • Don´t 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 like the product, everybody else will.
  • It is common to confuse a good idea with a good business opportunity, they are not the same.
  • Thinking “We have no competition” is only for naive entrepreneurs.
  • Don´t obsess with first mover´s advantage, most of the time funds prefer second movers because the idea 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 idea scalable? Is it limited to your time or something else?            
  • Can your offering later change / adapt?
  • Risk of not being able 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 defined? 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 price is he willing to pay? Based on what? How important is it?    
  • How price-conscious is your customer?
  • Risk of change in consumer behavior?   
  • Can the target market later be changed? Can you later attack other levels in the value chain?

Industry                             

  • Can you do formal analysis or only informal?    
  • Is it thriving? Shrinking?              
  • Do suppliers have power? Risk of supply shortage? Change in price?      
  • Barriers to entry:            
    • Contractual? Patent or trademark?
    • Lead time in tech development? Innovation?
    • Management? People?
    • Location?
    • Regulations and government?
    • Other barriers?
  • Can barriers change easily?       
  • Do you have relations in place?
    • Customers?
    • Suppliers?
    • Partners? Talent? Investors?
  • Experience in industry? Yours? Other management?      
  • Risk of regulatory or other government related changes or intervention?            
  • Technology risk of obsolescence?           

Competition                     

  • Can you do formal competition analysis? If not, what informal analysis can you do? Is it good?             
  • Who else is attacking the market? How? Successfully?  
  • What is your competition´s pricing strategy?     
  • What is the closest thing 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?
    • Customer service?
    • Other?
  • Are you taking advantage of a certain opportunity, situation or advantage?       
  • How fast can competition catch up?                     

Channel                             

  • Which options do you have?     
  • Which one is the ideal? Why?   
  • If the first choice does not work, does it make sense to try others?         
  • What channels does your target market prefer?              
  • Which ones are your competitors using?             
  • How much integration do the channels have?   
  • Will the channel change with customer habits or tech? 
  • Risk of no access to the correct channel or consumer?  

Sales and Advertising                   

  • How will you get customers?     
  • How will you retain customers? Is it important?              
  • Describe the necessary salesforce?        
  • Can a salesperson of ordinary skills sell it?          
  • Do you need advertising? Which kind? How much? Is it important?        

Economics                        

  • How clearly can you model the basic economics of the idea? (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 initially? Later?

Management                   

  • Do you have or can get the necessary management team?         
  • Do management / leadership / organizational capabilities make a difference? How big a difference?    
  • How valuable is intellectual property?   
  • Does it make sense to do this solo? It normally doesn't.

Other                  

  • Validation:         
    • How fast can you know if the business can work or not?
    • Can you define the variables to know it? How fast can the data flow?
    • Do you need product development to know? Dangerous!
    • Do you need a long selling process or many tries to know? Dangerous!
  • Can you diversify? Not easy on new ventures, but can it be done?          
  • Give me the biggest drawback / risk (fatal flaw) of the idea? The one that will make it fail?
  • Enlist the seemingly fatal flaws that can be fixed.           
  • Does the idea fit your life objectives? Workload?            
  • Do you feel passionate about the idea? Enjoyable? Are you doing it only for the money?
  • Give me the upside / best case scenario?
  • Give me the downside / worst case scenario?

Similar Articles

5 Tips for Success for Women Entrepreneurs

While women’s role in business has been steadily increasing, women are still underrepresented in entrepreneurship. One of the most daunting choices for a woman is the decision to start a business, but taking the plunge can result in great rewards

Virtual assistants

Entrepreneurs have a strict working schedule, which makes it very difficult for them to give equal time to all functions of their startups. The success of their business depends on prioritizing essential tasks and delegating secondary ones to remote workers present in less developed countries.

How to Make the Supply Chain of Your Start-Up More Efficient?

Every year, a large number of entrepreneurs enter the industry to become a successful entrepreneur. However, the reality is a bit harsh because of the tough competition in the market and the majority of the start-up fails during their early years of business

How Sales Force Automation in Easy To Use CRM Separates Amateurs from the Pros

When we think about activities that are most essential to make a sale, we probably think about required actions that need human-touch of the sales reps, such as listening to the prospective customer’s needs, developing a solution for their pain points and more

3 Qualities to Learn from Successful Entrepreneurs

Entrepreneurs often share a wealth of qualities, but what are the most important for really becoming a success? We’ve rounded up some of the most prominent qualities we found in some of the world’s most well-known and commercially successful entrepreneurs.

 

Planning to be an Entrepreneur? Essential Tips to Start a Small Business

Starting up your own business and becoming an entrepreneur can be really exciting but you need to plan everything step by step. The success of a new business depends on the fact that have you planned ahead of things that need to be done?

Factory Fencing

Fencing is important not only for the aesthetic purpose but also for enhancing security. You can easily spot fencing in the factor areas. These are called as factory fencing which not only helps in laying boundaries but also for demarcating danger areas.  There are many alternatives available in terms of fencing for different purposes.

business curve

With graduate-entry level positions becoming increasingly competitive, more graduates than ever are considering setting up a business of their own and going down the self-employed route. But how do you get started? How do you source funding and mentorship? Here we will look at how graduates can turn their great ideas and skills into a fully-fledged profitable business.

catering

An event that is successful requires a lot of planning and brilliant execution. Perhaps, you are organizing an event to position your business brand in the minds of most people who will attend the party. It has to be vibrant and leave a lasting impression with every member present.