analyzing your business ideas you must be
able to pass them through a test to determine
if they truly are valid opportunities. All
of your ideas must have a demonstrated need,
ready market, and ability to provide a solid
return on investment.
the idea feasible in the marketplace?
Is there demand? Can it be done? Are you
able to pull together the persons and
resources to pull it off before the window
of opportunity closes? These questions
must be considered and answered.
entrepreneurs start with the customer
and the market in mind. They analyze the
market to determine industry issues, market
structure, market size, growth rate, market
capacity, attainable market share, cost
structure, the core economics, exit strategy
issues, time to breakeven, opportunity
costs, and barriers to entry. Below are
two models that entrepreneurs use to evaluate
their business ideas and plans.
Questions to Ask Every Time
evaluate opportunities, entrepreneurs
ask the following questions:
What is the need you fill or problem you
solve? (Value Proposition)
2. Who are you selling to? (Target Market)
3. How would you make money? (Revenue
4. How will you differentiate your company
from what is already out there? (Unique
5. What are the barriers to entry?
6. How many competitors do you have and
of what quality are they? (Competitive
7. How big is your market in dollars?
8. How fast is the market growing or shrinking?
9. What percent of the market do you believe
you could gain? (Market Share)
10. What type of company would this be?
(Lifestyle or High Potential, Sole Proprietorship
11. How much would it cost to get started?
12. Do you plan to use debt capital or
raise investment? If so, how much and
what type? (Investment needs)
13. Do you plan to sell your company or
go public (list the company on the stock
markets) one day? (Exit Strategy)
14. If you take on investment, how much
money do you think your investors will
get back in return? (Return on Investment)
take the above fourteen questions and
term them into an easy model that you
can use to evaluate your business ideas
you come up with. This is called the RAMP
start with the first letter, R, which
stands for Return. Return really is return
on investment. R Discuss Exit Strategy
(acquisition or IPO)
R Is it profitable? Will your revenues
be higher than your expenses?
R Time to breakeven (how long before
cash flow positive? How long until the
company begins to have an aggregate net
R Investment Needed. How much money
will it take to start-up this venture.
Will it be $20,000, $200,000, or $2,000,000?
Now lets look at A. A stands
for advantages. A Look at cost structure
(suppliers, what each element will cost
to source or manufacture)
A Barriers to entry (large competitors,
regulations, patents, large capital requirements.
If there are many barriers to entry, it
will be difficult to enter a market. The
higher the barriers to entry, the more
disadvantaged you will be.
A Intellectual Property. Do you
have a proprietary advantage such as a
patents or exclusive licenses on what
you will be selling.
A Distribution Channel. How will
you be selling your product? Will you
sell it direct to the consumer via the
Internet, sell it to wholesales, sell
it to businesses, or sell it to retail
stores. If can develop a unique distribution
channel this can surely be an advantage.
Now lets look at M. M stands
The Need. Is there a big need for this
product or service. Try to avoid ideas
that sound cool but there is no real need
for. Make sure your product or service
fills and need or solves a problem.
M Target market (who are you selling
to? businesses? consumers? what demographics?)
M Analyze target market (who are
you selling to? businesses? consumers?
M Pricing (what you they charge,
what will be the price, will there be
a high enough markup).
M Analyze market size
lets look at P. P stands for
potential. P Risk vs. Reward. How risky
is the opportunity? If it is very risky,
it there a chance for the business to
do very well. Will there be a high reward
for the founders and investors if the
P The Team. Is the team right for
the business. Do you have knowledge in
P Timing. Is the market ready for
your product. You may have a great idea
for flying cars, but if consumers are
not ready for your product you may not
be able to turn your idea into a successful
P Goal Fit. Does the business concept
fit the goals of the team to create a
high potential or lifestyle business?
By using the RAMP model and the fourteen
questions above you should be able to
do a thorough job analyzing your business
ideas and opportunities presented to you.