Be honest with yourself about your new business to see how it measures up.
When you're thinking about starting a business, it's hard to be objective. After all, this is your business!
But a key to success is your ability to step back and ask the tough questions. If you find you're unable to do it yourself, you should find someone who will force you through it (this is one of the values of a great, trusted board of directors).
Here are what I consider to be the Three Toughest Questions. Ask them regularly.
1. What are you selling?
This seems simple. Of the three it's by far the easiest, and most people think, "that's easy."
But it's a bit of a trick question, because it's really about the customer problem you're solving. In other words, it's not so much about what you're selling ("organic fertilizer"), but rather what the prospective customer is buying ("natural stuff to make my vegetable garden healthy to eat").
2. To whom are you selling it?
This one's tougher, because you have to be specific. In fact, this question is what prompted this posting. I recently presented NetBooks, my own startup, at the Under the Radar competition, and I was struck as I sat through other companies' presentations how elusive this answer can be. Virtually none of the presenters could identify the specific buyer!
For example, "gardeners" is probably not the answer.
Instead, it might be "gardeners within a 25 mile radius of my location who actively tend their garden, consume its produce, are passionate about the environment and their personal health, and are both willing and able to spend 75% more than they would on conventional fertilizers."
For another business, it might be "people who develop or manage websites for companies with between $50 million and $250 million in revenue who need to be able to deliver rich, dynamic, multi-lingual, multi-currency content." Great market, but completely different from "the 150 million webstores in the world."
It's important to be dispassionate in answering this question, because it's likely to significantly reduce the size of your market -- and focus your thinking. That's a good thing: bad data leads to bad decisions.
The right answer will provide you with understanding not just of the exact target, but how you're going to reach them.
Good answers in Step 2 then tee up the final question:
3. Why in the world would they buy it from you?
I look at a lot of business plans, and this is where so many of them fall down. Simply put, if you can't answer this question, don't start the business.
The odds are that this is where you will find yourself doing the most work growing your business. Again, be objective: the "if I build it they will come" strategy rarely works. And don't guess! Talk to people in your target market (as defined, tightly, via #2) and find out.
Incidentally, here's a tip that has saved me millions of dollars and years of frustration. Don't ask questions from the perspective of "I'm starting a business doing X and would like to ask you some questions." People will skew their answers to avoid hurting your feelings. A better way to get at the answers you need is to ask like this: "Someone has asked me to get involved with (or invest in) a company they're starting that does X, and I was wondering if you could tell me what you think about the idea."
It's amazing the difference it makes: they'll tell you what they really think -- in fact, they may even be overly negative in their answers, which is good because it will give you a clearer idea of what potential customers' true objections will be.
I first heard these questions from my professor Steven C. Brandt, who taught a course on entrepreneuring at Stanford Business School when I was there over 25 years ago. I haven't always heeded his advice, but I can tell you that whenever I haven't I end up wishing I had!