The Widener SBDC Consulting Team recently conducted a "brain storming" session to come up with questions for entrepreneurs to consider when starting a new business. We focused on what it takes for a good idea to become a good business and decided there are five basic questions (with a few sub-questions).
- Is there a clear MARKET for my product or service? We've found that it is not enough for an entrepreneur to be interested in providing a product or service; there also has to be a "gap" in the market where customers are seeking (and will pay for) a new or improved product or service. Having found a clear need, it's important that your product or service be specific enough to implement and include the actual product or service design, manufacturing or service process, along with a clear definition of how you will deliver it to your specific target market.
- Is my idea FINANCIAL FEASIBLE? The answer to this question requires an analysis of the potential market and anticipated revenues from sales along with the costs associated with starting the business and covering ongoing operational expenses. You really need to know the numbers. New entrepreneurs need to list the start-up costs, develop a realistic sales forecast (estimates of quantities and prices for all products and services to be provided), and an income statement with sales and costs (materials, labor and overhead) by month for the first year and by year for at least two years out.
- How is this business REGULATED? What permits, registrations, inspections will be required to operate in my chosen location? What laws govern the operation of my new business idea? These questions need to be asked at the local level (township, municipality, county) and at the state and federal level. Unfortunately, regulations vary dramatically by location and by type of business; so this is a very important area of research for new entrepreneurs.
- Do I have the RESOURCES it will take to create and operate the business? Here we're talking about: the skills, finances, know-how, time, contacts, practical experience and attitude needed to get started and thrive in the business. We've found that a critical component of having what it takes relates to your passion for the enterprise. Do you have a burning desire to create and operate a successful business that will sustain you through the long days and nights, difficulties and frustrations you will undoubtedly face? Do you have a team with diverse skills working with you? We've seen time and time again that the lone entrepreneur cannot possibly see all the issues and opportunities a new business might face nor have the necessary skills and experience needed to deal with them.
- Have I identified the KEY RISKS and developed plans to manage them? Successful businesses are skilled at risk management. They understand what could go wrong and have "risk mitigation" plans in place to reduce the chances that key risks will occur. They also develop "contingency" plans that allow them to act quickly in case problems do occur. Successful business leaders are also mindful of possible future market conditions and trends. They know that changes in technology, regulation and customer needs can have a dramatic impact on a new business. While no one has a crystal ball, the proactive entrepreneur will be on top of potential issues and opportunities with clear plans for the future under varying scenarios. They will have monitoring devices in place to watch for indicators of change. Advance planning can mean the difference between a successful business and a failure.
Of course, there may be more questions for your specific business idea, but we think the above provides a reasonably good starting point for most new entrepreneurs...
