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The Lucky 13: Essential questions for entrepreneurs

Considering a new venture? At Enotion we meet with many entrepreneurs, some of whom have a well-defined and thoroughly-vetted business plan, and some of whom are just at the concept stage. If you're one of the latter, answering the questions below should help you think through your business model and ensure that you address, at least at a cursory level, the most important aspects of starting and growing your new venture.

1) What's the gist of the opportunity?

In answering this question, try to describe the product or service in relation to existing products or services that your audience already knows and understands. For example, you might describe your product as Match.com for students of foreign languages to use to find speaking partners, or as a swap meet for purchased Groupon deals. Remember that in lieu of a digital example, you may be able to use an analogue example (i.e. something that exists in the real world.)

2) How big is the opportunity?

In broad strokes, you'll need to identify the size of your addressable market, showing the number of potential customers and the amount of potential revenue. The more precise you can make your calculations, and the more you can back up your assumptions with real data, the more credible your estimate will be.

3) Who are your target customers?

This question may seem basic but it is at the heart of every other aspect of your business. Far too many entrepreneurs invest copious amounts of time, money, and energy into a product or service, only to discover late in the game that they don't have a solid understanding of the needs and habits of their customers. Developing basic customer profiles is a useful exercise, but it's also essential to talk to prospective customers, and to validate your assumptions about their motivations and needs. Once product or service is up and running you can integrate feedback mechanisms to monitor and analyze customer behavior, but early on there's no substitute for interviews and demonstrations.

4) What's the experience like for customers?

In broad terms, how do your customers interact with your product or service? Do they visit via a website or a mobile application? Do they use it at home, or from a kiosk at a third-party location?

5) Why should customers use your product or service?

What benefit does someone using your product or service gain? If your business includes multiple constituencies, such as resellers, affiliates, etc., you'll want to answer this question for each constituency.

6) What's the current landscape in the industry or space where your product or service will reside?

To answer this question you'll need to do some research (be sure to document your findings for future reference.) What's out there right now that's similar? Why's your product better? Keep in mind that most spaces are already occupied and the companies currently in each space will most likely have advantages over yours, such as economies of scale, brand recognition, an established customer base, and real world data.

7) How are you going to position your product or service?

It's not enough to simply enter a space. For a new venture to succeed it must become a leader if not in the entire space, than at least in a particular niche or for a specific market segment. Why should customers use your product or service rather than one of your competitors? If you're entering a space with established players, why should customers switch to your product or service, especially if it requires more effort or expense for them? Once a customer uses your product or service, what reason will there be for him or her to continue to use it? What features or benefits of your product or service are going to prevent your customers from going to your competitors?

8) How is your product going to generate revenue?

In answering this question, it's helpful to look at your competitors as well as companies similar to yours in other industries or spaces to see how they make money. For example, is your product going to generate revenue through advertising? If so, what type (banner ads, textual ads)? Where are you going to find advertisers (through an existing advertiser network or through your own network, perhaps catering to local businesses?) Or is your product or service going to be a premium offering that you charge for? If so, how much do you need to charge on a per-unit, or per-service basis to cover your costs, while also staying competitive?

9) How are you going to get customers?

Wouldn't it be great if customers naturally flocked to new businesses? Unfortunately, due to human nature, and the sheer amount of noise and competition in most spaces, it can be a real challenge to even make customers aware of your product or service, never mind getting them to try it. How are you going to raise awareness of your product or service, and encourage customers to come to your site or location, and to sign up or purchase? Will you need to advertise through search engines, or through an advertising or affiliate network? If so, how much can you afford to spend per user? Alternatively, can you leverage partnerships or a non-direct distribution strategy to bring in users at a lower cost?

10) How are you going to build, maintain, and protect your product or service?

Answers to this question can vary widely depending on the nature of your product or service. If your product requires web or mobile technology, who's going to build it, and over what time-frame? Can you build a minimal viable product (MVP) first, and use it to test your assumptions as early as possible? If so, how will you gather customer feedback and incorporate it into your development cycles? This is also the time to think about possible integration, licensing costs, and technical challenges. Will your product or service need to integrate with other products or services? Are you going to use an existing technology platform, or build your own, and how will your approach affect your costs? Are aspects of your product or service proprietary? If so, how will your protect them from your competitors? Should you consider filing for patents?

11) How is the product or service going to evolve?

To be successful in the short-term, you need to have a clear idea about which features or aspects of your business you're going to offer first, and then which ones you'll add in later. You'll also want to think about which markets or market segments to target first. Typically it's best to launch with the features or aspects which are most compelling to your customers, simplest to understand, and easiest to build or offer, and to start with the market or segment that you know best. Later you can use the knowledge you've gained (and where applicable, the data) to evaluate additional features, aspects, or markets. You'll want to set up clear milestones for the first 3, 6, and 12-month periods, and then you can put your more ambitious and experimental ideas into buckets for subsequent years. You may never get to these later ideas, but at least they give potential investors, team members, and customers a sense of your vision for the product or service.

12) Who do you need to get your venture going, and how are you going to get them?

Talented entrepreneurs can wear many hats, but at some point you're going to need help. Although titles and strict areas of responsibility are often premature in the earliest stages of a startup, it's often helpful to loosely divide your tasks and milestones into categories, such as investor relations, marketing, technology, business development, sales, legal, and management. Determine which areas you can competently and reasonably cover, and then think about how you'll cover the other areas. For some areas, such as legal, you'll likely need to hire an individual or firm for cash. For others you'll want to bring someone into your company in exchange for equity. The best approach is to prioritize your hires based on the company's impending needs, keeping in mind that discussions with prospective team members may take months to develop. When evaluating a potential team member, think about how many hours per week or month you'll need his or her help, and whether it will be continuous or periodic. Do you need this person to simply advise (i.e. be an advisor) or do you need him or her to produce (i.e. be a core team member?)

13) How much money do you need, and where are you going to get it?

In many cases, this is literally the million-dollar-question. Starting a venture, any venture, requires cash, no matter how creative and thrifty the entrepreneur. How much cash will you need? Well, that's a function of two things, how much cash it takes to get your venture off-the-ground (including all expenses from incorporation fees to web hosting to advertising), and how soon you'll make enough revenue to cover your expenses. Nearly all businesses require that you spend money before you can make money, and you need to have an honest, accurate calculation of how much money you'll need up-front. Once you have that calculation, you need to figure out where you're going to get the money. If you're able to self-finance, great; however, for most entrepreneurs, the answer to this question is a combination of seed (typically from friends and family), with one or more rounds of outside investment (either angel, VC, or both) sought after an initial product.

 

If you made it through all these questions, congratulations! You now have the start of a business plan. Each of the questions above addresses an important part of any business plan, as outlined below:

Question 1 - Elevator pitch/overview
Question 2 - Addressable market
Question 3 - Target customers/segments
Question 4 - Product or service description
Question 5 - Value proposition(s)
Question 6 - Landscape and competitive analysis
Question 7 - Competitive advantage
Question 8 - Revenue strategy
Question 9 - Customer acquisition strategy
Question 10 - Technology and product strategy
Question 11 - Roadmap
Question 12 - Team
Question 13 - Financials and investment needs

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