3, I’ve had my fair share of dumb ideas, bad starts, and misaligned expectations. As a result, I’ve developed a checklist of questions to ask myself before I ever engage another person. I hope these help you as much as they’ve helped me.
This is a continuation from my last post.
How comfortable am I with failure?
Start-ups are hard, and failure is guaranteed. The fear of failure is paralyzing and will lead you to make poor, shortsighted decisions. Even if the start-up succeeds, there will be plenty of broken promises, unfulfilled expectations, and disappointment. Can you handle it with determination and grace?
Which of my responsibilities will be disrupted by starting this?
You don’t live in isolation. You have responsibilities to your family, your friends, your community, and perhaps your current employer. What will be disrupted by this endeavor? Is it worth it?
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Is it already in the market?
If you’re looking to create small pieces of paper that you can stick on your fridge, that solution (Post-Its) is already available. No amount of innovation is likely to disrupt the existing product. If someone is already doing it in the way you’ve conceived it, there are better fish to fry.
What’s the opportunity?
Business is about balancing risk and reward. So what’s the upside? If the opportunity is not significant, you either need to make sure your risk is low or abandon ship.
What is my risk to test?
A start-up is nothing more than a hypothesis, and the first phase of every start-up is testing that hypothesis. How difficult (costly, labor intensive, time intensive) will the test be to conduct? How many hypothesis adjustments (pivots) should we reasonably make based on the opportunity?
Who is going to buy and why?
Getting people to part with money is incredibly challenging, and outside of your family and your closest friends, no one cares what you’re doing. Get very specific about the type of buyers you’re trying to reach, their motives, and your ability to reach them. What methods are you going to use to acquire customers, and what is the acquisition cost to do so?
Can the concept be easily described and easily understood?
Nothing complicated goes anywhere. If your potential customers, employees, or partners can’t easily understand exactly what you’re doing, you’re in big trouble.
How many gatekeepers are there to my success?
Corporate hierarchy, middlemen, and single-source suppliers all pose significant roadblocks to long-term success. Try to have the least reliance on multi-layer sales situations, re-seller arrangements, or a single data source (Twitter).
What’s my cash requirement? What resources will you need to purchase to be successful? Whatever you just estimated, triple it. How long will it take to start bringing in significant revenue? Whatever you just said, quadruple it.
What’s my burn rate and runway? Burn rate is the amount of cash you consume every month to keep the doors open. Runway is the amount of cash on hand divided by your burn rate, which is usually stated in months. A frequent mistake is underestimating cash needs and overestimating sales opportunities. This deadly combination spells an end to more than its fair share of startups.
Where can I turn for mentorship and advice? There are lots of people who have done some aspect of what you’re trying to achieve. They have the scars and stories to prove it. Learning from their mistakes and getting sound outside counsel will be a critical component to your success. Where are those people, and can you access them?
Do you have the two most important skills?
All start-ups require some combination of technical expertise and marketing. While you don’t have to be a master at either, your company needs to have a proficiency at both. If you don’t have the skills, how are you going to get them?
17. Who is going to handle accounting, finance, and operations?
This is the most often overlooked aspect of entrepreneurship and creates massive headaches in short order. Not having a good answer for who’s handling these necessary functions is not acceptable.
These are tough but necessary questions. We all have flashes of what’s possible and sometimes delusions of grandeur, but startups don’t occur in theory. These questions help you address the rubber and the road, ensuring you don’t get caught in a sweet dream that turns into a beautiful nightmare.
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