If you start a start-up, lots of people will try to give you advice, but I'm usually more interested in asking questions. If you've founded a new business, I doubt anyone knows more about your vision than you do. The right investor or consultant may know the specific market you are operating in better than you, but they certainly won't know where you want to take your business except from what you tell them. So I think the art of helping the founder of a start-up lies in asking great questions, to tease out exactly what that vision is, and whether it makes sense.
I've been asked hundreds of questions about my start-ups over the years, usually by prospective investors and funders. They range from pithy quips like "what's in it for me then?" through to intensely complicated invitations to explain my theory of change or articulate my five year growth model in 500 words or less. I've been recommended loads of books that claim to have figured out the three/four/six/nine steps for create a compelling business proposition. I have spent several years now feeling incredibly confused about all this.
But there are a handful of questions that I keep coming back to, and the more I focus on these questions, the less confused I seem to get, and the more I am able to tell a good start-up pitch from a bad one. So here are a few questions that I think anyone running a business (large or small) should be able to answer:
1. Who pays you money and why?
Unless you know who you're invoicing and what to write on the invoice, you don't have a business.
2. How much money will they spend with you?
Delivering amazing benefits to a handful of impoverished people won't make a business.
3. How much will this idea cost to make and sell?
If this idea costs more money to make and sell than people have to spend on it, you should expect to lose money.
4. What do you own?
If your business doesn't have anything - great staff, famous brand, key relationships, IP rights, infrastructure - then anyone can do what you're doing and you don't need a business to do it. Build around your core assets and what they make possible.
If you can answer each of these questions in one sentence, and mean it, you just might have a business.
Not everyone is at that stage of course. It can be a little crushing to ask a bright-eyed young entrepreneur all these questions, because most of us start out with a little intuition and a lot of hope. Every business needs to bring benefit to someone - solving a problem, helping them do something, creating an experience - and that's where it all starts, even if we don't have all the answers just yet.
So if you're just starting out with an idea for a start-up, here are the two most important questions you should ask yourself:
5. what incredible benefit can you give your customers?
If you didn't bother doing your business, who would miss out? What wouldn't they be able to do? Why does that matter?
6. Is that benefit worth paying for?
There are many problems to be solved in the world. Most of them are worth solving. Many of them people would like solved. A few, people will invest their own money in getting solved. That last bit is business. Everything else is philanthropy.
If you can answer those two questions positively, you're off to a pretty good start. If not, well...