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I recently completed a business plan for a start-up business. After much back and forth with the person looking to start a business I have noticed several things after doing several of these that are worth pointing out. First I am constantly amazed of how ill prepared people can be when looking to start a new business. I explain much market research must be done (primary and secondary) before one can see if the idea is viable. There is nothing worse than trying to talk someone out of an idea, even though I personally would have much to gain (creating branding, website, ads, etc..). Telling someone that their business might not be a good idea, is hard to do.

I have just finished a book by Rob Adams: “If You Build It Will They Come?” Three Steps to Test and Validate Any Market Opportunity. He states because you might have the next great idea, doesn’t mean that will translate into business success.Mr. Adams list many reasons for start-up failure, but the central theme of his book was an entrepreneur or existing company have to do market validation work, which surprising most business do not do. He put it a good way, most people, or companies, when launching a new product will do the , ready, fire, fire, aim, instead of ready, aim, fire.

Second, people constantly underestimate what expenses will be. You have probably heard the old rule of thumb, whatever you think your start-up expenses are double that figure for everyday things that will come up in a business. What I mean by this, is if you are doing financial on say sales, ROI, Profit/Loss statements, and balance sheets, start-ups really do not have an idea just what it takes to be profitable.

A good example of this is when a business pitches their idea, and you come back to them with a list of typical expenses, they balk about having a website or the costs involved. I find it interesting that in our digital age, there are people who still believe you can get by without a website. The way I explain it to people is, is you are not online you do not exist. Now the perception of having a digital presence is definitely a generational thing. From my own experience, I find people who are over 50 (and I am generalizing) tend to not use digital mediums very much. So, the yellow pages, are still a way in which they find a product/service. If you are under 50 you probably have some or a lot of experience with different digital channels. This can be a real problem when you are trying to explain to someone why having a website and proper branding is critical.

Also, If you do not have detractors you are probably not on to something. there have been many big ideas that were shot done by either someone is academia or a venture capitalist firm. Remember the story of FEDEX CEO Fred Smith, who wrote a business plan for an economics class while at Yale. His professor told him something like, ” In order for you to get a C, the idea has to be feasible”!

So here is a list of questions to ask yourself before you get your feet wet:

1. Does your business idea soothe someone’s pain, discomfort, frustration, or dissatisfaction? Is it fulfilling a consumer need?
2. Are there lots of those people out there, meaning is your market segment large enough for you to create profit?
3. Are there others who are willing to take a risk and join you?
4. Do these people have complementary skills? (I can’t tell you how many times, I have told people in this situation, that the business partner they are taking on, has the exact skill set)
5. Do you have capital, or access to capital?
6. What are unique about your skill sets? Are you a great salesman? Do you have clientele willing to follow you? Is there a technology that is new? Do you have a great geographic location?
7. Does your idea fill a niche? Meaning take the general idea, and segment down to a niche market that might be left unfulfilled. Or to put it another way, don’t try to be everything to everybody.
8. Is your idea easily duplicated by people with more capital?
9. Are you entering an established market? Is so, what is YOUR unique value proposition?
10. Are you creating a business within your field of expertise? Many times, people want to say, become a chef and open a restaurant, because they love watching cooking shows.
11. Are you willing to work many hours to make it a success? True, that in owning your own business, you have the freedom to see your kids baseball game, but, to make a new business work, many hours are needed.
Some of these questions can be tough to answer. For example, I have had several companies come to me in the construction industry who wanted to create a new company. Unfortunately, both people involved did the exact same thing, think electrician, or plumber. I explain to them, it is better to find someone with an accounting or business background to compliment your skills. If they move forward, with that person, they are basically taking on an additional salary with someone who does exactly what they do and might not agree a lot.
To touch on point ten. One should have a solid 10 years (depending on your age and field) to have a true grasp of the marketplace, and competition. Having this knowledge greatly increases your chance of success. Starting a business in a field that you have no knowledge of is many times a recipe for failure.
What I do find interesting, is typically in a small business, the ownership is made up of several members, or at least the owner has close confidants, in the company or around them who share the same socio-economic background. They tend to form a homogeneous group, meaning they think alike. This is why diversity in general terms works well in small businesses. Just because all executives think alike does not mean they are right. In fact, I have seen many a small company sink because of their inability to look ‘outside’ their circle for help and expertise. Most of the time your circle of friends will agree with you, and say, “great idea, best of luck” for fear of hurting your feelings. So during the startup phase, it is good to go outside your ‘circle’ of friends and ask others their opinion of your idea.
I think the bottom, line is the more you address these issues or pain points with someone outside your circle for go a long way to your success. This could have been a 5 page post, but I will follow up in other posts, on how exactly to determine if your idea is viable business.