Time to get back to business. Seriously.
So let's start with the 20 Most Important Questions In Business. I have read lotsa marketing and business books, but this article summarizes the questions for the ever changing technology and variables in business.
Companies fail for a host of reasons. Bad luck plays a role, sure, but disaster usually strikes because of a more fundamental flaw--in the original idea, the strategy, the execution or all of the above.
When it comes to building a business, even Warren Buffett would agree that no one can spot every opportunity or anticipate every threat. There are simply too many variables. And in an increasingly competitive global economy, those variables are changing faster than ever before.
What entrepreneurs can do is ask the core set of tough questions that govern the fate of any enterprise. Armed with those answers, they stand the best chance of beating some fairly dire odds: Studies estimate that just two-thirds of all start-ups survive the first two years, and less than half make it to the fourth.
The 20 Most Important Questions In Business
Make no mistake: Digging for those answers is a grueling exercise--one that takes serious intellectual and emotional honesty. With any hope, the process begins long before money's been spent, products are built and customers are lost.
The real challenge, though, is to keep digging as the business grows. New opportunities and threats emerge, and yesterday's answers may not--and probably won't--suffice. Relentlessly asking the tough questions is how behemoths like Wal-Mart (nyse: WMT - news - people ), Microsoft (nasdaq: MSFT - news - people ) and General Electric (nyse: GE - news - people ) stay on top.
With that in mind, we present the 20 most important questions entrepreneurs need to answer--and keep answering--to build their businesses. Some highlights:
What is your value proposition?
This is the single most important question of the bunch. If you can't explain--in three, jargon-free sentences or less--why customers need your product, you do not have a value proposition. Without a need, there is no incentive for customers to pay. And without sales, you have no business. Period.
What differentiates your product from the competitors'?
Few companies can rely on--let alone afford--clever marketing schemes to separate themselves from the competition. Yes, Starbucks (nasdaq: SBUX - news - people ) made people believe they wanted $4 caffeinated concoctions, and Louis Vuitton lulled people into shelling out $1,500 for denim handbags, but those are the exceptions that prove the rule. If you want to win in business, you need to offer something tangibly valuable that the competition doesn't. Examples: rock-bottom prices (Wal-Mart); ingenious product design (Apple (nasdaq: AAPL - news - people )); extreme convenience (Fed Ex (nyse: FDX - news - people )).
How much cash do you need to survive the early years?
It doesn't matter how much money your business might make down the road if you can't get out of your garage. Plenty of business plans boast hockey-stick-style financial projections but run out of cash before the good times kick in. (Remember all those busted dot-com companies from the tech boom?) Three words: Mind the cash.
What are your strengths?
Google (nasdaq: GOOG - news - people ) writes powerful search algorithms; Steinway works wonders with wood; Cisco (nasdaq: CSCO - news - people ) sniffs out promising new technologies and buys them. Figure out what you're good at and stick to it. An obvious notion, perhaps, but plenty of zealous entrepreneurs lose their way--especially when the world seems so full of possibilities.
What are your weaknesses?
You may know how to design a widget, but not know a thing about running an efficient manufacturing plant. Apple designs and markets its nifty iPods and iPhones, but lets someone else slap them together. Countless Webpreneurs farm out the design of their sites and back-office payment systems. Wasting resources just to be mediocre is suicide. Stick to core competencies and find trusted partners to handle the rest.
How much start-up capital do you need?
Any early stage investor or small business consultant will tell you that most businesses fail because they were undercapitalized. The lesson: Figure out how much you think you need, and then add plenty of extra cushion.
How will you finance the business?
You have a few choices: Aunt Sally, credit cards (dangerous), angel investors, and if you're really onto something, venture capital. Forget bank loans (at least until the cash is flowing in a positive direction). As for selling shares to the public, what with all the regulatory hurdles, you might find the price of that exposure a tad steep. If you can bootstrap your business, do it; raising money is difficult and distracting. If you plan on stumping for capital, consider how much equity and control you're willing to give up. (The more you need the money, the stiffer the terms will get, so ask for it sooner than later.) Finally, always remember to match the timing of cash inflows from your assets and the outflows to cover liabilities. A mismatch can sting.
How should you sell your product?
There is no one-size-fits-all solution to wooing customers. For two decades, Dell Computer bypassed retailers and sold directly to customers, with limited tech support. General Motors and Coca Cola rely on distributors to move their cars and cans. Clothing companies like Ralph Lauren work both internal and external channels. And thanks to daily, intensive sales training, privately held Lazy Days moves some $800 million worth of RVs out of one sprawling location near Tampa, Fla. Whatever sales method you choose, make sure it aligns with your overall business strategy.
How should you market your product?
Young companies have to get the word out, but they also can go broke doing it. A decade ago, America Online spent so much money flooding the planet with free trial software that it tried to mask the bleeding by capitalizing those expenses on its balance sheet. (Regulators later nixed that accounting treatment, wiping out millions in accounting profits.) What percentage of sales should go toward marketing? As with sales, there is no one rule of thumb. For more, check out Six Marketing Strategies Worth Paying For.
What are your financial projections?
You can't lead if you don't have a destination. Two critical milestones: 1) the point where more cash is coming into the business than going out in a given period, and 2) the point at which you finally recuperate your cumulative initial investment (including an adjustment for the time value of money). Financial projections should be reasonable. Paint too rosy a picture and seasoned investors will run; more to the point, you might run out of cash.
How big is the threat of new entrants?
If you're smart enough to spy a profitable business opportunity, you can bet competition isn't far behind. Some barriers to entry--patented technology, a storied brand--are more fortified than others, but eventually someone will find a way to do what you do faster, cheaper and maybe even better. If not a direct competitor, then a substitute technology might take a chunk out of your hide. (Think what digital film did to Kodak.) The trick: building a loyal following before that happens.
How much power do your suppliers have?
Convincing customers to buy your products is tough enough without suppliers breaking your back. Basic rule of thumb: The fewer the number of suppliers, the more sway they have. Take the steel industry, which relies on a handful of companies for its iron feedstock. If two of those big guys should get together--as BHP Billiton (nyse: BBL - news - people ) and Rio Tinto (nyse: RTP - news - people ) have been discussing--they would have significant pricing power, potentially crimping steel producers' margins. On the flipside, beware getting hooked on low-cost providers who don't keep an eye on quality. ("Lead-laced" Barbie, anyone?)
Does the business scale?
Bill Gates plowed piles of money into developing the first copy of Microsoft Office. The beauty: Each additional copy of that software program costs next to nothing to produce. That's called scale--and it's the difference between modest wealth and obscene riches. What models don't scale? Think service businesses, where the need for people grows along with revenues.
What price will your customers pay?
Get this answer wrong and you could leave bags of money on the table--or worse, send customers running into the arms of the competition. When Apple sliced the price of its iPhone by a third after only two months on the market, even loyal customers screamed, forcing chief Steve Jobs to apologize and offer a partial rebate. Consultants get paid handsomely to help companies arrive at the right price. For more affordable advice, check out The Six-Step Guide To Pricing Your Product. Wannabe consultants should read How To Price Your Consulting Services.
How committed are you to making this happen?
About a year ago, Chuck Prince, recently resigned chief executive of Citigroup (nyse: C - news - people ), addressed a group at New York University's Stern School of Business. An audience member asked what life looked like at the helm of such a colossal firm. Prince responded that, save for a few exceptions, every evening for the next five months was already accounted for. Fair warning: If you want to run the show, get ready to give everything--and then some.
How do you protect your intellectual property?
Imagine slaving for years on a new cellphone battery that lasts more than two days, only to watch it reverse-engineered and patented by someone else. Before you ask anyone to crank out a few prototypes, file for a provisional patent. It protects your idea for a year while you work out the kinks. For more on intellectual-property protection, check out Protect Your Prototype and The Patented Path To Profits.
How do you keep the help happy?
What's Google worth without its super-geeks? Goldman Sachs without its number crunchers (and their golden Rolodexes)? The local bar without old Jim manning the tap? Not much, which is why attracting and retaining talent is critical to so many businesses. For starters, that means crafting the right benefits package. Starbucks sets a fairly high standard: Health benefits are available to any Starbucks employee who works at least 20 hours a week and has been with the company for more than 90 days.
What is your end game?
Running a business with an eye toward flipping it to a strategic buyer is a lot different than digging in for the long haul. (Will YouTube ever turn a profit? Who knows, but that's Google's problem now; the same goes for MySpace and News Corp.) Not sure whether you want to build the next great empire or just make a decent buck? Ask yourself the following eight questions.
