Yesterday I posted a list of questions to ask about your business, which came from Brad Burke of the Rice Alliance for Technology and Entrepreneurship. Here’s another list along the same lines, this one compiled by Melanie Lindner of Forbes, in a piece called “Is Your Great Idea a Real Business?” It’s nicely packaged, too, with a slide show illustrating each of the questions.
However, one caveat: It is also based on the idea that “a real business,” as Lindner calls it, is a business suitable for professional investment. I object to that assumption, and I rest my objection on the statistic (from a Wells Fargo report) that the average startup cost in the U.S. is $10,000; that’s bootstrapping, not outside investment. Don’t think this list means you aren’t a real business just because you can’t get outside investment. Anyway, it’s still a good list. Here it is below (with my comments added in between):
- Do you have a compelling value proposition?
I’m not a great fan of the “value proposition” phrase because it’s a buzzword, but the idea is, do you have something that people will want to pay for at the price level you want to charge?
- Is there a viable market for your product or service?
- Can you cover the (honest-to-goodness) development costs?
That “honest-to-goodness” addition is brilliant, because it gets right to the point that there are so many ways to underestimate real development costs. Don’t.
- Can you reach your target market in a cost-efficient way?
- Can you sustain a competitive advantage?
Here’s where we see the professional investment focus again. Sustained competitive advantage makes a huge difference for eventual exit and return on the professional investors’ money. It’s good to ask yourself this, whether you’re after professional investment or not, because even for the bootstrapper it makes your business life a lot easier. Or, as Lindner puts it: “Great business ideas require great execution; wasting resources just to be mediocre is small-business suicide.”
- Are you committed enough?
And this includes a great quote: “Fair warning: This is hard work. If you’re not ready to give everything–and then some–it doesn’t matter how great your great idea is.” I couldn’t agree more. On the other hand, it does remind me of a bad idea that’s all too popular in the lore of entrepreneurship, namely, that you can make it on hard work alone and that passion is everything. Hard work and passion don’t make you successful if you don’t have something people want to buy or if you don’t focus well and manage your business. Commitment is a necessary but not sufficient condition.
And here, again, is the link to that story with slide show: Is Your Great Idea A Real Business? – Forbes.com.