Planning for a New Venture

Reality Check

To Be Made by Would-be Entrepreneurs


Vadim Kotelnikov personal logo Vadim Kotelnikov

Founder, Ten3 Business e-Coach Inspiration and Innovation Unlimited!

"Successful businesspeople are, first and foremost, salespeople. If you cannot sell, do not, we repeat, do not start your own company." ~ Spenser & Ennico

What Questions You Should Ask Yourself?

  • Does your proposed business have a realistic chance of growing into a successful company?

  • Do you have the entrepreneurial skills needed to run this business? Are you committed to the business's success?

  • Do you have time required to learn what you need to learn?

  • Have you thoroughly researched your potential market to determine whether there is a need for your product at a price which is acceptable in the marketplace and will be profitable to you?

  • Have you selected colleagues who have relevant qualifications and experience and who will work well together as a team?

  • Can you afford money needed to hire staff or to pay consultants?

  • Do you understand that a venture capital firm will invest in your business only if it sees that it can make a significant profit by doing so?

  • Do you have the support of your family and friends?

What Questions Venture Capitalists Would Ask?

  1. Is there written and fully current business plan?

  2. Are there current financial statements and cash-flow projections prepared and reviewed by an outside consultant?

  3. Does the business concept to be based on a sound technical and business principles?

  4. Is the time to reach positive cash-flow longer than the ideal term in their investment portfolio?

  5. Are adequate financial resources available?

  6. If the business opportunity is based on a proprietary technology, is the proprietary position adequately protected?

  7. Is there good personal chemistry among the principals?

  8. Do the personal financial needs of the principals match the capacity of the business?

The reality check is a benchmark scoring system that sets a baseline and establishes the strategic thinking and tactical work required to achieve the goal. As the first step, you should organize your thought about your new business, and especially the reasons why you want to start a new venture. You need particularly to have a clear idea of what your company's success ingredient will be. You should particularly assess whether your project is viable by asking yourself some simple, yet significant questions (see the table on your left).

You need to answer these questions honestly and objectively if you want to be able to understand the risks and the rewards of starting your own business, and to appreciate the difficult tasks that lie ahead of you. In considering these questions you will benefit considerably from talking with other entrepreneurs, your accountant, your solicitor, your banker and any venture capital investor you know.

These talks will also help you prepare yourself mentally for starting your business. Additionally, venture capital firms who consider funding your venture will probably ask you many of these same questions. If you have thought through the answers to them in advance you will equip yourself to convince these firms that you do understand what you are about to do and are prepared to make the necessary commitments and sacrifices.

Some typical questions venture capital companies would ask while making the reality check of your business proposal are listed in the table on your left.