Becoming an entrepreneur can be an exciting time in anyone’s life. The realization of personal aspirations, and putting ideas into practice drives many of us to starting a business. The potential for financial reward also works as a key motivator, and leads individuals to invest substantial amounts of time, energy, and in most cases financial resources in their venture.
However, as invigorating as entrepreneurship can be, there are a few things to consider before taking the big step. We’ve selected five important factors any potential startup founder should assess before dropping everything to bring their idea to life.
1. Does It Solve a Problem?
The gap between a useful new product or service, and one which effectively solves a gap in the market can be quite wide, and in many cases is the reason why promising businesses fail. In The Lean Startup, author Eric Ries re-thinks the traditional launching strategy of most new ventures. Specifically, instead of creating a business and then marketing it to a potential consumer base, entrepreneurs should make sure that base exists to begin with, and that the market actually does demand their solution.
By implementing an effective market research strategy pre-launch, and more importantly before any substantial amount of money is invested in the business, founders will garner a better understanding of whether or not their idea has the potential for success. Simultaneously, it’ll limit their risk of failure, as the business plan will be molded around consumer feedback.
2. Are The Team Members Right?
Making sure founding members of the business have what it takes to effectively grow it is crucial. A FastCompany report found that 37% of startup founders listed building the right team as their biggest challenge.
For a company to be able to remain true to any initial growth strategy, the people involved in the venture have to be capable of getting it there. Besides requiring the right skill set, founders need to make sure that their team members share the same passion for the business that they do. Especially in the early stage of a venture, when funding is scarce, and revenue is non-existent, this can be the difference between success and failure.
3. Funding Options
Connecting with investors is everything. Unless the startup is planning on boostrapping its way to profitability, there has to be a plan for attracting capital immediately.
This entails personal networking campaigns the team might undertake, along with making sure the business plan, executive summary, and pitch deck are solid. With the number of new businesses they review on a daily basis, it’s unlikely that an investor will be willing to offer much time to your idea. For that reason, make sure that you’ve readied a strong pitch, and stats to back it up.
4. Expansion Potential
This metric is integral both to the initial formulation of the business plan, along with the post-launch growth of a company. By understanding the limits of a product or service’s market appeal, founders can better forecast whether the business is indeed reaching its potential.
Like many aspects of the planning process, the expansion potential of any startup is likely to change once it enters the market.
5. Exit Strategy
It might seem premature, but knowing when to sell is a virtue which escapes many passionate entrepreneurs. Having grown a business from the ground up, understanding when it’s time to make an exit is critical. For that reason, planning an exit strategy from the get-go can help guide the company’s development, along with the founders’ understanding of the businesses position in the market. Specifically, when its potential has been reached.
Of course, anticipating the future value of any startup is a challenge in and of itself, but planning ahead can make the selling process much easier when the time comes.