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Business dreams are fun, but they don’t change the world and make you money if you can’t turn them into reality. Many budding entrepreneurs are stuck in the idea phase, and only a few have the discipline and insight to move into the execution phase. There is no magic formula for starting a good business, but I have seen enough successful businesses to identify some common elements.
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In fact, as an angel investor, I find that many of the questions in the due diligence process give me real insight into the maturity of a startup. I offer these same questions as a self-assessment of your progress and your ability to turn your idea into a business:
1. Did your vision attract you to intelligent people?
A vision that only you believe in will not make a business. It is really about clarity of communication with others. You need the right team to build and develop a business, and your first challenge is to show that you can build a team, with effective continuous written and verbal communication.
2. Have you defined a targeted strategy and plan to achieve this?
If your strategy and plan are not clear even to you, or if voters don’t seem to get them quickly, you can bet that potential customers won’t understand them either. Strategies require no more than three elements, and the plans that are written are easier to understand and more likely to be executed.
3. What level of stakeholder engagement do you have?
The first and greatest stakeholder is you, the entrepreneur. Is it a spare time effort you’ve been working on for the past five years or do you have real skin in the game? Investors expect to see personal commitment, as well as team members, other investors or even clients.
4. Is this a win-win opportunity for all directors?
Business ideas that only win at the expense of the client, investors or partners will fail in the long run. With the best dreams, customers get great value because your business is making money. Pyramid schemes and homework scams look good in marketing, but no one wins.
5. Does your dream include automated and reproducible processes?
We all know of artists and consultants who bring great value, but their businesses will not grow because they cannot clone the founder and cannot use tools to automate the process. Highly manual processes cannot be easily automated and measured, and tend to be very expensive.
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6. Are you able to show a “sense of urgency” and not a “sense of urgency”?
Succeeding in business means staying focused on important things, rather than the crisis of the day. Good entrepreneurs are able to manage priorities, keep them low, and communicate effectively with all constituents to maintain commitment and momentum.
7. Do you promote a culture of teamwork, mentoring and training?
It all starts with attracting and hiring the best people, and nurturing those people with support and opportunities for continued growth. Too many entrepreneurs assume that everyone knows what needs to be done, and everyone is motivated and committed to the same dream.
8. Can anyone see a pattern of team actions and results?
Some entrepreneurs remain an “individual show,” even with good team members around them. The entrepreneur must assign and delegate the right actions, motivate the real results and hold people accountable. At the same time, leaders must be “on the ground,” not just observers.
9. Are there adequate steps and measures in place?
The execution reaches a series of small milestones, not just a great final success. Along the way, you cannot achieve what you do not measure. I am looking for a concentration on a few pilots rather than a long list of deliverables. Things change quickly in a startup, so strategy reviews are a must.
10. Are team members rewarded for the right things?
Some entrepreneurs, out of habit, focus too much on hours worked rather than on results. In all work environments, you get what you pay for. The best entrepreneurs set high standards of performance, but are quick to celebrate results with rewards, recognition and advancement.
If a potential investor does not see enough of these attributes, it does not mean that your business efforts will fail, but it may indicate that your dream is still in the idea stage or in the initial start-up stage. More work is needed to turn it into a business. Otherwise, you will likely hear investors and other voters dreading “come back when you have more traction”.
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