A\u00a0vision must be solid and flexible enough to pass a number of critical tests if it is to guide a business enterprise to greatness.\u00a0 Here in brief are ten tests for a successful vision.\u00a0 Try these on for size, and test yourself for attractiveness to the marketplace, to investors and to history.<\/p>\n
Ten tests for a successful vision<\/strong><\/p>\n 1.\u00a0<\/strong> Is your market identifiable and accessible?<\/strong>\u00a0\u00a0 <\/em>\u00a0Test yourself as to whether you can identify the size of your market niche, and whether you can overcome the many barriers to access customers within your niche.<\/p>\n 2. Where in industry life cycle?<\/em><\/strong>\u00a0\u00a0\u00a0 \u00a0If your vision is for a product or service that fills a need in a mature industry, you may be flying against the prevailing winds as a market shrinks over time, taking your business with it.\u00a0 Conversely, a fast growing industry lifts most all good participants, making excellent companies excel even more and grow even faster, like a small plane flying at 150 knots with a 75 knot tailwind.<\/p>\n 3. How large a total market?<\/em><\/strong>\u00a0\u00a0\u00a0 If the total market for your niche is under $100 million per year, it is going to be difficult to build a $50 million business, even if not impossible.\u00a0 If the market is ten times that size, there is probably room for competitors to fight for dominance and still succeed if you are not number one.<\/p>\n 4. Can you dominate that market?\u00a0 <\/em><\/strong>\u00a0 The dominant player in any niche controls pricing for all those under it, and often sets the risk profile for new entrants into the niche if the dominant player\u2019s products or services fill the needs of customers at reasonable prices and quality.<\/p>\n 5. Have you created high barriers to entry?<\/em><\/strong>\u00a0\u00a0\u00a0 If your business is a \u201cme too\u201d entrant into any market niche, even the smallest success will soon attract competitors that will sap some degree of your potential growth. What can you prove as a barrier to entry for competitors?\u00a0 Is it the advantage of time \u2013 years of development ahead of any competitor? A core patent or \u201cthicket\u201d of patents protecting your offering?\u00a0 A strategic relationship with one or more of the largest customers?<\/p>\n 6. Are margins high enough?<\/em><\/strong>\u00a0\u00a0\u00a0\u00a0 Some great ideas just can\u2019t make money and ultimately die for lack of profit potential.\u00a0 Profit margins are higher for unique products or services early in the life of an industry niche, or for products protected by patents that prevent others from undercutting you simply by releasing a cheaper product.\u00a0 High profit margins are a sign of high barriers to entry and attract investors and ultimately good buyers for your business.<\/p>\n 7. Can this business grow to above $20-50MM?<\/em><\/strong> \u00a0\u00a0\u00a0 This is a basic test for investors, separating your business from those with smaller visions.\u00a0 There is nothing wrong with a vision for a smaller enterprise if not in need of professional investors to make it a reality.<\/p>\n 8. Do you have a world-class management team?<\/em><\/strong>\u00a0\u00a0\u00a0\u00a0 The best way to protect against failure is to attract a team with members who have experienced success and failure and can recognize the ways to manage toward success and avoid the pitfalls previously experienced from past failures.\u00a0 From a professional investor\u2019s perspective, the team should be able to be flexible, coachable and experienced enough to get a business through breakeven and beyond the next level of outside investment, greatly reducing execution risk.<\/p>\n 9. Can you translate an idea into a compelling product?<\/em><\/strong>\u00a0\u00a0\u00a0 Some great ideas just cannot be made into a product at a reasonable enough prices to attract customers.\u00a0 And some attract early adopters but cannot pass into the mass market.\u00a0 Sometimes, an idea is just too early for the available technology to make it attractive.\u00a0 Early cell phones were large bricks that required a large carrying case and cost up to a dollar a minute to use.\u00a0 As technology caught up, allowing miniaturization and light weight, mass adoption drove the price down and allowed the building of infrastructures everywhere to support the use of inexpensive minutes.\u00a0 Do anything you can to develop compelling products or early prototypes as proof of ability to reduce technology risk.<\/p>\n 10. Is there an exit strategy for the investor(s) over time?<\/em><\/strong>\u00a0\u00a0\u00a0\u00a0 There are many professional services businesses that make fine lifestyle opportunities for architects, doctors and dentists.\u00a0\u00a0 But these types of businesses are not attractive to potential buyers willing to pay a premium for businesses that are worth millions more than their asset value.\u00a0 Building a great business to create wealth for the entrepreneur at exit, means thinking of the exit strategies from the beginning.\u00a0 Who or what type of buyer would be attracted to this business if successful?\u00a0\u00a0 Great wealth is made from selling great businesses at immense profit for the entrepreneurs and investors who took the journey.<\/p>\n Depending upon your stage of development, if you are at the initial creation stage of your business, you might now revisit the earlier posting, “The Berkus Method”<\/em> (under “Raising Money” in the contents index for this blog) for determining early stage enterprise value for investors.\u00a0 However, these ten tests certainly apply to all stages of a business’ development as entrepreneurs then professional management work to ctreate extraordinary value for the enterprise.<\/p>\n","protected":false},"excerpt":{"rendered":" A\u00a0vision must be solid and flexible enough to pass a number of critical tests if it is to guide a business enterprise to greatness.\u00a0 Here in brief are ten tests for a successful vision.\u00a0 Try these on for size, and … Continue reading