Business Idea Assessment

A useful business idea assessment tool for the entrepreneur

Below you will find a link to download an Excel file called the Business Idea Assessment. Try out this tool and let me know if you find it useful.

Bruce Barringer, in “Preparing Effective Business Plans” (and published by Pearson Ed in 2009) provided a First Screen assessment for entrepreneurs to use to do a quick evaluation of their potential business. Bruce broke his assessment into five sections: 1) Strength of the Business Idea, 2) Industry-Related Issues, 3) Target Market and Customer Related Issues, 4) Founder Related Issues, and 5) Financial Issues.

Although I quite like the assessment, I wanted to build an assessment that was quicker to go through. Thus, I have reduced the assessment to three sections: 1) The Entrepreneur, 2) The Idea, and 3) The Market. I liked his use of a simple scale that would help to visualize certain areas of low or high potential. As such, I’ve used a similar scale with -1 being low potential, 0 being neutral, and +1 being high potential. I’ve used this assessment in my course, “The Entrepreneur and the Idea.”

What do we do?

Most of the questions are straight forward, though reasonably subjective. I’d encourage you to go through this document with your idea and potential target in mind. I would then have someone who knows you go through the document as well. In particular, you’ll want to get their feedback on things like your management skills, value-added for the customer, and other components as you see fit for your idea.

Most of the questions should be self-explanatory, but a few may require a bit of research. I have an article posted on perceptual mapping, which you may have to dig into further (a Google search works too). As well, you might want to do some thinking about what substitute products are for your idea as this is an area people often underestimate.

What does it mean?

Once you have gone through and noted a -1, 0, or +1 beside each statement, focus on the different parts honing in on any parts that total to 0 or less. The overall score on this assessment is less useful than the totals for the individual parts. Think to yourself, “what do I need to do to rectify the weak areas?” It may be that you need more money, or refine your target market a bit, or find a few people with the skills you lack. Either way, I encourage you to do this exercise before diving into a full business plan. For that matter, I will provide my opinion of what business plans should and should not be in a different article. But as a spoiler, most business plans miss the mark on what they really ought to deliver.

Let me know what you think about this tool, and if you have found it helpful by contacting me now.

What is entrepreneurship?

Original beliefs on entrepreneurship

There’s been a long held belief that entrepreneurship is about the person, or personality. To be an entrepreneur you need to be this or that kind of person. I even would have agreed to that theory in the past. Previously, I would have agreed that some people can’t be entrepreneurs. We could then provide training to improve the chances of success for those that had the ability to be an entrepreneur. However, after meeting with several entrepreneurs and reading various researchers’ work on entrepreneurship (Shane 2000, Rae 2000, Minniti & Bygrave 2001, Cope 2005, Rae 2005, and Diamanto Politis 2005), I’m not convinced that its based on personality. I believe that entrepreneurship is a process of interaction. Therefore, a cross-disciplinary interaction process might be in order. There could even be an argument for entrepreneurship being the result of a learning process.

Getting to the process of it

Yes, there are stories of entrepreneurs that have doggedly pursued a new idea and have made millions in doing so… Jeff Bezos, Steve Jobs, and Bill Gates are examples. However, the most common example of an entrepreneur that drives economic growth is the expert. An expert in an area or industry. Whether through life situation – laid off or their supervisor would not let them pursue something – discovers an opportunity. The entrepreneur then proceeds to explore or exploit it.

The decision to explore or exploit is also dependent on life events (March 1991). The decision is part of the process of life that has led the entrepreneur to where they are at in the present time. In addition, there’s likely many other factors that help transform a variety of experiences into relevant entrepreneurial knowledge (Politis 2005 and Cope 2005). This area is the topic of my research. These other experiences can determine how the entrepreneur goes about dealing with opportunities and uncertainty. This points to a process of learning that has led to the individual going out on their own to start something. For now, know that more work is being done in this area to build out a refined model of the entrepreneurial learning process.

Entrepreneurs you know

In the meantime, think about the entrepreneurs you personally know of. And trace how they got to where they are now. I bet most of them didn’t invent something new at the age of 20 and were off and running. So what? So this raises the question of how can educational institutions and government policy encourage entrepreneurial activities? The research on business incubation suggests that firms that go through business incubators have a higher likelihood of failure after a period of higher growth. As such, there is limited possible economic benefits (Amezcua 2010 and Schwartz 2012). For that matter, a degree or major in entrepreneurship might not be that effective either. Formal education misses the key ingredient – experience – which allows for opportunity recognition and development.

Place for incubators

There may be a place for new technology initiatives in business incubation. However, I would challenge incubators to at least rethink how they intend to incubate such new technology. Perhaps finding a few seasoned industry professionals and matching them up with someone who knows the new technology would be a better way to go (less of a mentorship and more of a partnership). For example, if you are attempting to incubate something in Blockchain technology related to logistics, find someone who has been in logistics for 25 years and pair them up with a Blockchain expert. Finally, throw in someone with some business skills and you might have a shot at a sustainable, viable, new business.

If you’re interested in becoming an entrepreneur, contact us now or have a look at the business idea assessment post or a course offering.