7 Obvious Questions Entrepreneurs Fail to Ask (2 of 2)
I love working with entrepreneurs. Last week I shared the first of four questions that entrepreneurs fail to ask. As I wrote then, entrepreneurs have great energy and they are passionate about their dreams. They have big ideas. The world is their oyster. They see nothing but the possibilities. But many entrepreneurs enter with the wrong mindset and are missing a great deal of important information. In particular, there are 7 obvious questions entrepreneurs fail to ask. The remaining three, along with the first four shared last week, are critical. And if they don't know the answer, or have guessed wrong, it can doom their enterprise.
7 Obvious Questions Entrepreneurs Fail to Ask
First, let's review the first four questions entrepreneurs fail to ask:
1. Does anyone care?
You have to overcome the "who cares" barrier. It's often there and it can curtail the best of ideas.
2. Will people pay for this?
This is probably the most important question. And like #1, you have to be brutally honest with yourself.
3. What is the real market size? (overestimating the opportunity)
Don't overestimate it. Base your business model off realistic projections.
4. Can others duplicate it? (especially customers themselves)
"That which is easily copied will be" (Jennings). By customers and competition.
5. Will they listen to me?
Another struggle I've seen from entrepreneurs is the struggle to be heard. I believe this generally comes from two issues, youth, and inexperience. Many times a young person will have an idea that is completely discounted because of their age and lack of experience. I don't believe this happens as much as it used to, but it still does from time to time. Secondly, I see people trying to enter a new market segment without any experience. I once worked with an entrepreneur entering the healthcare space without any true healthcare experience. Talk about a market that doesn't like outsiders... healthcare is definitely one.
To overcome this you need to find partners that can help you break the ice. In the case of youth, find mentors in the investment and business community that will help you make connections. Work with local entrepreneur support groups and find out what has worked for others. I find this issue varies greatly by geography. Let's face it, youth is not discounted in Silicone Valley. But where I am in the midwest, it is often a detriment.
If it's lack of experience, find ways to bring experience into your organization. This could be through investors (which brings a different type of risk). It could be solved with the involvement of strategic advisors. This can be a low-cost way of bringing strength and credibility to your team. I am working with one startup that has brought in highly recognized individuals as advisors to the team. And their compensation is all deferred. They believe so much in the concept of the company, they are willing to forego compensation until we are launched and bringing in revenue. Like the issue of youth, I believe this issue varies a great deal. But in this case, it varies by industry more than geography.
6. What's in it for them?
Potential buyers have one hurdle to get over. Will the value of your product be greater than its cost? We often get frustrated with buyers, but this is their responsibility. As an entrepreneur, you are bringing a new concept without proven results.
There are several ways to overcome this challenge. You might have to work out early-adopter agreements with some customers. Perhaps you find an innovative customer to be part of your testing team. Leverage those advisors you brought on the team (question #5) and work their connections to find someone to partner with you.
Another option is to provide discounted pricing for early-adopters. This can be risky if it sets a precedent. I would recommend working out preferred pricing as an early-adopter partnership rather than just a price discount. Whatever the approach, you will likely have to make sacrifices early on for the long-term gain.
7. How long will it take to get cash flow positive?
Most entrepreneurs do not accurately forecast their business model for the first 3-5 years. Most of the time they are overly optimistic about how successful their early sales will be. Sometimes extremely so. I once worked with a client that had sales projections for the first three years that were off by a factor of 100 times! And by year five, at the rate they were going, she was going to be even farther off course.
While a positive attitude and a growth mindset are critical for entrepreneurs. You must also temper that with reason. I believe in being "cautiously optimistic". But always account for the unexpected. I would suggest that, depending upon the type of business you are in, you should take your cautious sales goals and then reduce them by 20% to see if your model still holds up. If it doesn't, you should revamp your plan until you can withstand only hitting 80% of your mark.
Have you asked yourself these questions?
If you are an entrepreneur and haven't asked yourself these questions entrepreneurs fail to ask, you should seek outside advice. Hire a business coach to help you through this phase. Better yet, hire me. I have worked for and with entrepreneurs in a variety of industries. I have experienced some of the bumps and bruises along the way. And I have witnessed entrepreneurs who have not asked themselves these questions. Schedule time with me today.
And if you haven't checked it out yet, learn about my eGrowth program, the Entrepreneur Growth Program. It is a three-month program specially designed for entrepreneurs and small business owners looking to build or grow their business!