Thinking of starting your own business?
Consider these five critical questions (because Angel investors will be sure to ask them of you).
Thinking of starting your own business? There are so many questions you will be asking yourself—How will I prepare my business plan? How much financing is the right amount and where will it come from? Do I have the right location? What is the right market for my products and services? While these are all necessary questions to ask, they may not be the right first questions you should be asking. Before you jump into the deep end of the world of entrepreneurship, consider these five fundamental questions, because these are the first questions that most sophisticated Angel investors will be sure to ask you.
Why am I doing this?
This is the first and perhaps the most important question. Ask yourself, what is the goal or purpose of your venture? Why have you chosen this business? What is your mission? It’s ok to get a little emotional. Passion should be the main driver of your business. For the first few years there may be little financial reward and it will be your passion that will carry you through the long, dark sleepless nights of entrepreneurship. It’s good to know why you’re not sleeping!
Why now?
Once you’re clear on the purpose of your venture, you need to ask yourself, Why now? Why will your business or idea succeed now? Sounds simple, right? Yet this is one of the most critical questions that many entrepreneurs fail to consider when embarking on their start-up journey. In business, as in most things, timing can be everything. Is now the best time to take the risk? What is the current state of the market? Are there others looking to do the same thing? How will you compete in the current market? How long do you have to maintain a first mover advantage? You have to know your market, your key market drivers, your customers, and your competition. So do your homework.
Can I be the best at what I'm doing?
Your business should be driven by your passion, so you should really be doing something you are passionate about. But while your passion can drive your business, you should also ask yourself whether you’re any good at what you’re proposing to do? And can you make any money doing it? The fuel that will power the economic engine of your business is made up of a powerful mixture of three main ingredients that when mixed together properly will provide powerful sustainable energy—what you are passionate about, what you can be the best at, and what can make you the most profit. If any of these ingredients is missing, you may fail to ignite, drive, or sustain the engine of your business. If what you are passionate about is not what you can be the best at or if what you can be the best at cannot drive optimal profits, you may want to consider another mixture to fuel your business.
What is my core competitive advantage?
What secrets do you know or unfair advantages do you have that no one else has that will help you beat the competition? An unfair advantage is something that you have that others cannot copy or buy and that can help you tilt the playing field against your competitors. Although many of us have such advantages, few of us realize it, and as a result, few entrepreneurs even bother to ask themselves whether they have any. Consequently, most unfair advantages go unrecognized and fail to be properly leveraged. And because it is the unfair advantage that often wins the investment, the customer, or the acquisition, failing to understand and exploit your unfair advantage often means significant money left on the table.
What does success look like?
Finally, you need to ask yourself, What does success look like? For you? For your company? For your stakeholders? What is the return on investment (ROI) for your investors? What is the timeline for generating ROI?
In the early stages of your start-up, all of this can seem like crystal ball gazing. But these questions will inform many of the key components and considerations of your business plan and will almost certainly be some of the first and most critical questions asked by sophisticated investors, particularly Angels. And they will expect clear, unequivocal, concrete answers. So be sure to take the time early on to do the heavy lifting these questions demand. It’s sure to pay off in the long run.