In this article, you'll learn...
- Which four questions to ask yourself before starting a business
- The deeper meaning behind the question "Does it have legs?"
- The best rule for what you should do and when
Many people are bullish about growth prospects now that the Great Financial Crisis seems largely behind us.
But a lack of planning and preparedness will sink many of ambitions to start a business. Plenty of resources are available to help people write business plans and set budgets, but more fundamental issues need to be considered before budding entrepreneurs go much further.
Some of the questions we ask are worth considering before contemplating a startup, because they can help structure your thinking prior to making some important decisions—and without burning any bridges.
1. Does it have legs?
A great startup plan is achievable, has an identifiable market, and makes a powerful proposition to that market. But a lot of people fail to ensure that their plan meets those three fundamental criteria.
Asking whether the idea has legs sounds simplistic, but it's actually a few questions wrapped into one:
- Is there a difference between what you're offering to the market vs. that of your competitors? If you can create a stronger proposition, the money you need to take it to market can be considerably less than if you pushed an average ''me too'' message. The better the proposition, the more effective each dollar is in promoting it.
- Will your market understand your proposition quickly? The less explanation needed, the faster the cut-through and the more effective your entire venture.
- Can you easily identify your market? It doesn't have to be big, rich, or established, but it does need to be easy to find and reach. Some of the most profitable markets are quite small.
(We've seen a company pitch to just six targets and triple the size of its business when it got just three targets to convert. Another client advertises fortnightly to the masses; the key to growing faster has been improving how that advertising flags and identifies with the right readers of that newspaper.)
- Are your startup costs low? Some industries have high cost-related barriers to effective entry. Others are much easier to ramp up slowly. If you can test small, it helps: Sometimes propositions, ways of transacting, even aspects of your core offer itself need adjusting over the first 12-24 months as get your bearings.
If you can answer those questions, then your startup is already a long way ahead of many others, because it has a grounded strategy at its core.
Now you can expand some of the details and consider more of the math.