Are You Ready for Business?

Use this as a reality check. Make your best effort – put a question mark if you don’t have the answer.

1. The business I want to be in is (____________________) and I will make money by: (_______________________________________________________________________________).
2. I worked (_____) years doing (____________________) in this and related industries.
3. I studied (____________________) for (_____) years to learn about the business I want to start.
4. I explain my product or service to customers with this one sentence: (_______________________
__________________________________________________________________________).
5. To be a success, I have to beat this competitor: (____________________).
6. My family/friends support my decision after telling them the risks and time required: (Yes / No).
7. My credit score is (_____).
8. I have six months of savings in a bank account (Yes / No).
9. I have: a reliable car (Yes / No), child care (Yes / No), phone, computer and internet (Yes / No).
10. I have good exercise, stress management, sleep and eating habits: (Yes / No).
11. These two successful entrepreneurs have agreed to give me feedback and share their business
connections as I start my company: (____________________) and (____________________).
12. The industry charges ($_____) for the product I want to sell and I can deliver that product for
($_____).
13. The best sources for information on my customer’s habits and spending are
(____________________) and (____________________).
14. The main regulations and licenses I need to worry about are (____________________) and (____________________).
Share your results with us so we can help you decide what your next step to business success should be.

Use our Business Startup Worksheet to track the key steps in forming a business.

Make sure you have a good business idea before you start a company around it.

1. Set your financial and personal goals for the business. You can only test your idea by comparing it to your goals. What is a good enough outcome to make the business worth your time and effort?
 What financial return do you need or expect?
 How much money do you want to make?
 What will your life look like if this is a success? Is this how you want to spend your time?

Think about whether you would be excited to tell people at
a party what you do.

2. Find out if the idea meets a market need.
The business idea has to meet a need, solve a problem or take away someone’s pain. Put yourself in the customer’s mind.

Can customers tell the difference between your product and the alternatives, including doing without the product altogether?

Reduce risk with low-cost ways to find out what customers think. Ask
potential customers about their problems before introducing your solution. If they aren’t interested find out why. Visualize the idea as much as possible before going into business.

Make scale models of products. Map out service processes. Diagram the layout of your shop or facilities. Mockup screenshots for the website. Then share these with your mentors, potential customers, and peers to find problems before you start.
3. Measure the size of the market.
Know the difference between your market and your industry. The market
is who you sell to and the industry is who you compete with.
 How many customers need your product or service?
 How much will they pay?
 How often will they buy it?
 How fast has the market grown in the last five years?

3. Measure the size of the market (continued)
 What is the forecast growth for the next five years?
 If you succeed in this market will that let you branch into related markets?

Make sure your product is easy for customers to understand since you can’t afford a big ad campaign. Also, don’t let your love of a hobby lead you to be unrealistic about demand.

4. Check on the industry’s attractiveness.
Many entrepreneurs use a version of Michael Porter’s5 checklist for testing an industry.
 Will it be easy for competitors to follow you into this market?
 Do your customers have a lot of alternative products and services to switch to if you raise
prices?
 Do you have a lot of suppliers to choose from if one raises their prices?
 Are your processes better, more efficient, or much less expensive than the competition?
5. Find out if you can make money with this business model.
You need to produce, distribute and sell enough of your product at a price that lets you cover
startup and operating costs and still make a profit.
 How much will it cost to startup?
 Do you have that much money?
 If not, how can you cover the difference?
 When will you break even and can you get up and running and sell enough before you run
out of money?
 Is this business too complicated to start and run with your resources and skills?
Angela Ly6 says high-growth companies need big cash reserves to cover day-to-day expenses since you will want to reinvest a lot of revenue to drive expansion.

References:
1. http://bizeebee.com/blog/2010/06/how-to-evaluate-a-new-business-idea/
2. http://www.gaebler.com/How-to-Test-Your-Business-Idea.htm
3. http://faculty.london.edu/jmullins/The_New_Business_Road_Test.htm
4. http://www.powerhomebiz.com/vol13/evaluateideas.htm
5. Porter, M.E. (2008) The Five Competitive Forces That Shape Strategy, Harvard Business Review, January 2008
6. http://www.gaebler.com/Is-My-Business-Idea-A-Good-One.htm

1. Cover Sheet
Name of Business
Name of Business Founder
Business and Founder Address and Phone Number
2. Statement of Purpose
The intent of the plan is written for the reader.
3. Table of Contents
4. The Business
 Business description
 Product/Service
 Market (demographics and psychographics)
 Location
 Competition (strengths and weaknesses)
 Management
 Personnel
 Funding (if needed)
 Summary
5. Financial Data
 Sources and use of funding
 Capital equipment list
 Financial statement assumptions
 Balance sheet
 Break-even analysis
 Income projections (profit & loss statements)
– 3-year summary, detail monthly first year, and detail quarterly years 2 and 3
 Cash flow projections
– 3-year summary, detail monthly first year, and detail quarterly years 2 and 3
 Deviation analysis
 Historical financial reports for existing business
– Balance sheets for the past 3 years
– Cash flow for the past 3 years
– Income statements for the past 3 years
– Tax returns for the past 3 years
Business Plan Checklist
6. Supporting Documents
 Personal Resume
 Personal financial statement
 Cost of living budget
 Credit reports
 Letters of reference
 Job descriptions
 Letters of intent
 Copies of leases
 Contracts
 Legal documents
 Any additional relevant information

• Use the Resource Navigator to find organizations and services to help you consult for your business stage.
• Look for training or business networking events on the Source Dallas calendar.