A Simple Business Test

I'm often asked to review people's ideas. Sometimes they want financial support, sometimes they just want confirmation that the idea they have is worthwhile. When you approach a bank about your pet project they'll ask for a business plan, as well they should. By the time you reach your local lending officer they expect you've done your homework and are not just "vetting" your idea. Business plans are long, involved and necessary when you need financing.

When people ask me for specific financial support for their idea, I usually ask for a business plan. No plan, no cash. But writing an entire business plan for every single business concept is time consuming and counterproductive. For those just looking for advice I like to ask for a very simple review. Usually I know the answer (or close enough) before I ask. What is important is that you learn the answer. The review looks like this. Imagine that your idea is well funded, marketed and accepted. That your "best case" scenario comes true. Look at your numbers. Would you want to give up your day job, risk your home, savings and sanity for the amount of money your best case scenario brings in? Being in business is far more complicated than just this test. But you can decide whether the risk has any potential for success using this simple exercise. If the best case scenario doesn't provide enough cash for you to live on the idea either needs to be scrapped or wrapped in with other ideas for a more complete business. You can practice this by analyzing businesses that you patronize. What's the overhead? Employees, leases, rents, cost of goods sold, debt service, etc. What's the likely income per day? Week? Month? Is what appears to be left over worth it? Learn to analyze on a "best case" scenario and you'll find many business ideas are indentured servitude in disguise. As long as you're going to be a wage slave, you might as well let someone else take the risks!

About the Author

Bruce McCurtain has owned, operated or partnered in ski areas, marinas, campgrounds, title insurance, hotels, land development, restaurants, and many other businesses. He spends most of his time working on the new frontiers, whether that is in business development or reorganization of existing operations