In my initial post in this series I suggested a step-by-step process for launching a business. This article will focus on Step 3 – Evaluate, where you evaluate the opportunities you’ve identified. (See Part 2 of this series if you missed my explanation of Step 2 – Generate).
Evaluating Opportunities – In this phase, the ideas generated in Step 2 are evaluated using the criteria established in Step 1. By using this methodical process of starting a business – and with God’s guidance – you will hopefully develop a high-quality business idea that can be pursued with confidence and enthusiasm. In this phase you want to eliminate bad ideas based upon their poor fit with your pre-determined evaluation criteria. You should never feel bad about abandoning an idea that is not a good fit with your spiritual, personal, or business evaluation criteria. Simply move on to your next idea instead and iterate as needed through these first three steps until you land upon an idea that you feel the Lord is leading you to build.
Criteria for Evaluation
If you’ve been following the process, your criteria for evaluation in Step 1 – Define should be in general categories, but personalize and add other categories as you see fit. I recommend the following order, since if the idea does not meet your spiritual criteria, there is no need to move on to your personal criteria, and so forth.
- Spiritual evaluation criteria – The goal is to seek to build Kingdom value and honor God in all you do. Example questions or principles that you might include in your evaluation are as follows:
- Does this business honor God?
- Is the opportunity consistent with the patterns, precepts, and principles of scripture?
- Will the offering cause anyone to stumble?
- Does the offering add value or does it merely promote consumption or unhealthy appetites?
- Does the business provide a platform to perform the “one-anothers” of scripture for how we are to serve others and the church universal?
- Personal evaluation criteria – The goal is to seek alignment between you, your resources, and the opportunity. Example questions or principles that you might include in your evaluation are as follows:
- Spiritual gifts – Will the opportunity make use of your spiritual gifts?
- Passion to serve others – Do you have genuine passion for the idea and the opportunities it gives you to serve customers?
- Abilities – Does the opportunity make use of your God-given abilities?
- Personality – Is the opportunity and the work involved consistent with how God wired you?
- Skills – Does the opportunity fit well with your skill set?
- Experience – Can you leverage your past industry and work experiences with this opportunity?
- Resources – Is the opportunity a good fit with your available resources in terms of time, money, and family members or other advisors or employees?
- Ideal context – Does the opportunity fit in terms of lifestyle considerations (commute distance, amount of travel, amount of income, and control over schedule) and work environment considerations (size of workplace, family vs. employees, physical setting, typical work hours, pace of work, geographic location, and level of ownership)?
- Business evaluation criteria – The goal here is to evaluate your idea and prioritize its quality from a business perspective. I recommend a rigorous process to evaluate the idea as follows:
- Industry evaluation criteria – “How Does the Industry Context Impact the Opportunity?” – The industry context of an opportunity has a dramatic impact on the potential for the initiative’s success due to external market forces that shape the industry and affect supply and demand for your offering. We need to fully understand the dynamics of the new opportunity such as those listed to the right prior to investing our time and money.
- Financial evaluation criteria – “How do the financial characteristics affect the opportunity?” – The financial analysis of an opportunity is usually part of the typical business planning process, but I recommend going further and examining the business model in detail as outcomes can vary dramatically depending upon how the business model operates.
- Operational evaluation criteria – “How do the operational characteristics affect the opportunity?” – The operational aspects of various business models can also vary dramatically depending upon how the business model works including the risks and capabilities required as well as key business model characteristics that can dramatically affect profitability, such as scalability and repeatability.
- Offering evaluation criteria – “How do the offering characteristics affect the opportunity?” – The aspects of the actual product sold or service delivered will also have an important impact on an opportunity. While these characteristics may vary from product to product or service to service within a new venture, there will typically be a portfolio of products or services with similar characteristics.
- Customer evaluation criteria – “How do the customer characteristics affect the opportunity?” – The aspects of how you acquire customers and interact with customers will have an enormous impact on an opportunity and I recommend analyzing sixteen different criteria to test for in order to deepen your understanding of the ability to grow the opportunity. Everything from how to find potential customers to how long it takes to work them through the sales process from prospect to customer will have implications for an opportunity’s required level of investment, ability to grow, profitability, and more.
The Process in Action
Several years ago I followed this same framework with a group of other investors when we set out to build an IT-enabled services company. We generated about 20 different business ideas that we eventually evaluated and narrowed down to one idea we choose to launch the business around during Step 3. Because I had followed this process, I was fully confident that we were onto the best idea out of the twenty. The company we launched has since grown to be a successful company and one of the top performers among its industry peer groups.
Launching Your Best Idea
See Part 4 of this series where we will explore the benefits and challenges of various methods of launch from a rank startup to a franchise to an acquisition of an existing business. We will also discuss the various components of the business that will need to be filled out at that stage of the process, from strategy to operations.
- See Venture Academy Course #11 – Building a Business from Start to Finish for detailed video instruction.