Milestone number one – the idea. You can’t move on with just a great idea until you figure out how you are going to build it and what it will cost you. Five quick questions:
- What are you building?
- What do you need to build it?
- Can you get it?
- Can you build it?
- How are you going to make money from it?
You have to build what you are going to sell. It may be a product, a concept, or a transaction. Irrespective of its physical shape and form, you need a tangible wrapper around it for customers to visualize the value your idea creates. For a services solution, you need infra-structure; for a technology product, you need a finished, packaged, and working edition; for a concept, you need a pilot. In most cases, you need help to build it. In very rare cases, you may be able to build it by yourself. If you need help, do you know enough about your product to select the appropriate partners and vendors? How will they be compensated? Beyond compensation, who captures the economic rents from fulfilling this need? You, the originator of the idea; they, the manufacturer of the idea; or the channel, the ultimate distributor that touches the customer?
Milestone number two—the customer. We have already touched on this in the previous chapter, but I think the questions are important enough to be reproduced here again:
- Who are you selling to?
- Why will they buy it from you?
- What’s in it for them?
- Who will sell it?
- Can you sell it?
- Do you know anyone who can be a ready customer today?
- Do you know a customer who will fund this from day one and buy it when it’s ready?
Milestone number three—economics. Can you still make money while doing all of the above? Also consider these questions:
- How long will it take the business to reach profitability?
- Is profitability sustainable, seasonal, or erratic?
- Who do you need to run it?
- Can you hire them? Will they work for you?
- How sensitive are you to economic cycles?
Milestone number four—the end game. You have made it work, now what?
- What is it worth today?
- What will it be worth tomorrow?
- Do you want to sell it?
How do you monetize the capital investment (human, financial, and other) made over the four milestones? Do you plan on holding it forever and collecting your profits until the end of time? Is the business more valuable to you or more valuable to someone who is willing to buy it from you?
You need to have an exit strategy in mind before you commit yourself to the venture and make your first moves. The end game dictates what your opening moves will be. It also dictates the intermediate milestones you have to hit before you can reach your destination.