Cut to the chase. Ask the right questions.
When a team approaches you looking for backing, investment or just feedback on their project or new venture here are the critical questions you need to ask them. If you can bite through this list of questions, you'll have a pretty decent background and understanding of the project as well as a feeling for its chances of success.
Value Proposition
Summarise the value proposition
- What is your unique selling proposition?
- To what degree is the product or service a compelling purchase for the customer? Is it significantly: faster, cheaper, larger/smaller, safer, more user-friendly, more attractive etc?
- How will the product be priced?
- What are the economic benefits to the customer?
- Describe the customer's value creation process that your service supports
Market
Market analysis
- Who is the customer and how do they make decisions?
- How much does it cost (time and resources) to acquire a customer?
- What evidence do you have that customers will buy what you propose to offer?
- How large is the market segment and how fast is it growing?
- What are the predictions for your market's long-term growth rate. This will be influenced by market macro-trends: demographic, sociocultural, economic, technological, regulatory and natural
Industry
Overview of industry information
- Who are the current competitors and biggest players?
- What resources do they control? What are their strengths and weaknesses? How profitable are they?
- How will they respond to our decision to enter the business?
- How does the value chain look?
- What will your position in the value chain be?
Sustainable advantage
Look at the sustainability of competitive advantage
- How is your product / service / business special?
- To what extent is competitive advantage sustainable? Presence of proprietary elements - patents, trade secrets, brands - that other firms are unable to duplicate or imitate
- Superior organisational processes, capabilities or resources that others would have difficulty duplicating or imitating
- How strong is your position in the value network?
- What do customer reiews say about your service / business?
Economics of the business model
Does the business model fit
- How does the business make money? (pricing and customer targets)
- Do the different elements of the business model fit well with each other? Any discrepancies?
- Tell me about the users/customers. How many do you have?
Revenue source(s)
What do the revenue streams look like
- Is the business model based on a single, a multiple and a loss leader revenue stream?
- How much revenue do they make per year?
- Is revenue increasing or falling?
- How long does it take to collect cash from a sale?
- Are there recurring revenues?
Cost Structure
Analyse the cost structure
- Is the business model's cost mostly based on fixed, semi-variable or variable costs?
- How likely is a reduction in the fixed cost base?
- Are the primary cost-drivers expected to change over time?
- What are the largest cost-centers for the business model?
- When do you reach a cash flow from breakeven point?
The team
How does your service team set up look
- When was your service launched? (if applicable)
- Do you have an aspirational team working with the service?
- Who else needs to be on your team to make the service fly?
- What are the few critical success factors in your industry?
- Can you demonstrate that your team taken together can execute on each of these CSF's
