Business Potential: How to Assess It?
By Michael Pollock in Business Development
So here’s the scenario. You have some capital to invest in 5 very small, early stage businesses. The only problem is you have 20 applications from businesses who are competing to get that capital. How do you assess which ones should get the money? What are the top 5-10 specific questions you’d ask (not just “what’s your business plan”) the business owner?
Keep in mind, this is an investment and not charity, so you’re assessing which businesses have the greatest potential to generate the most value for the most people. That includes you (the investor), the business itself, the surrounding community and the potential customer base for the business. By the way, this is based on a real situation.
Here are my top 10:
1. Why are you passionate about this business?
2. Who is your immediate market? Extended market?
3. What will they find remarkable about your product, product line or service?
4. What are your revenue targets for each of the next 3 years?
5. How will you reach those targets?
6. What are the top 3 obstacles to achieving your targets, and how will you overcome them?
7. What unforseen threats could prevent you from reaching your targets?
8. How will you invest this capital, and what sort of return do you project, and when?
9. Where might you go for additional capital if the need arises?
10. What will you do if you don’t receive this capital?
On Jan 24, 2006, Blaine Moore (Run to Win) said:
So by a real situation, is this something you are looking to ask, something that you are looking to propose so that you don’t have to worry about being asked, or just something you know about?
On Jan 24, 2006, Tim King said:
Hi, Michael. I don’t understand #7: “What unforseen threats could prevent you from reaching your targets?” I can just hear a CEO thinking: If we knew what they were, they wouldn’t be unforseen, because we’d be able to foresee them!
Do you mean, what risks might prevent the business from reaching its targets? This would differ from #6, in that obstacles are certainties, whereas risks may or may not occur.
-TimK
On Oct 25, 2007, Daniel said:
Spot on, you are really on the ball. In what I do passion is first and formost, without passion to drive yourself forward you are on a slippery slop to underachievement.
Very interesting
Daniel