If I were thinking about starting a small business from nothing or I were actively operating a small family company, there are eight questions that I would immediately ask myself about any entrepreneurial idea I had. These eight questions are:
- How do we make money? (What product or service do we provide at a profit? What makes a customer choose us over the competition?)
- How do we grow sales?
- What is our return on capital as owners?
- What is our return on time as employees?
- What is the total size of the industry in which the business competes?
- Is the enterprise scalable?
- Does this play to my strengths?
- What is my ultimate objective? To build and sell the business? To pass it on to my kids? To live off the earnings?
Unless I could answer those very quickly, each on a short, succinct index card, I wouldn’t even consider investing in or starting the enterprise.
Then, after all of that was done and I’m examining the results in front of me, I’d ask one final question:
- Does my involvement in this project conflict with the primary mission of my life?
If the answer is “yes”, it is set aside and never acted upon, regardless of the profitability or prestige. It’s a pass/fail test.
