I remember when I was in middle school, some of my friends and I had an idea to start a business. To be honest I don’t remember what the idea was, but I do remember the conversations that each of us had around where to start. One of us decided to spend considerable time working on a name and a logo in an effort to get the brand just right. Another focused on figuring out how we were going to get customers and funding while yet another tried to think about how we would actually be able to get the work done if we were successful in convincing people to pay for us.
It reminds me of the old tale of 3 blind men who have never before experienced and elephant walk up to one and are asked to describe what an elephant was like. The one near the tail says “an elephant is like a paint brush.” The one near the trunk says “an elephant is like a thick snake” while the one by the tusk says that “an elephant is smooth and hard like a spear.”
The truth is that while each of these men, like my friends, had some portion of the truth that was appropriate based on their experience but all missed the entirety of the matter.
Here are a few key questions that I’ve asked myself and have asked founders as they are looking to get started.
What assumptions do you have around Supply?
- How much can you sell before you are unable to support demand without changing capacity?
- How hard is it to change the capacity?
- What are the specs and standards that are needed to determine the quality of a product?
What are your assumptions around financing?
- What is the difference between when you expect to be paid and when you will have to pay your bills?
- Is cash a limiting factor to your growth?
What is your edge, moat, or reason for being?
- Why would someone want to work here?
- Why would a customer choose you or choose you again over another company?
- What keeps others from copying you?
What assumptions do you have about Demand?
- Where do you expect to sell (DTC, Amazon, Retail, Wholesale, etc)?
- How do you expect to attract customers?
- What do you expect that to cost (time, money, or effort)?
- How frequently do you expect to sell to the same customers?
- What are the switching costs for a customer?
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