THE 20 MOST IMPORTANT QUESTIONS IN BUSINESS
(Continuation Questions 11-20)
Companies fail for a host of reasons. Bad luck plays a role, sure, but disaster usually strikes because of a more fundamental flaw -- in the original idea, the strategy, the execution or all of the above.
What entrepreneurs can do is ask the core set of TOUGH questions that govern the fate of any enterprise!
Questions Continued:
11. How much power do your buyers have?
Take a lesson from Delphi, the giant auto parts supplier stuck in Chapter 11, despite its $26 billion in annual sales: It's no fun to be in a business where a few big customers can demand price cuts with each passing year.
Meanwhile, movie theaters -- even while besieged by video-on-demand and other services, still manage to push higher prices on the disaggregated masses. The cost of a seat at a Regal Entertainment theater in lower Manhattan is now $12 -- up 20% in less than three years.
12. How should you sell your product?
There is no one-size fits-all solution to wooing customers. For two decades, Dell Computers bypassed retailers and sold directly to customers, with limited tech support.
General Motors and Coca Cola rely on distributors to move their cars and cans. Clothing companies like Ralph Lauren work both internal and external channels.
And, thanks to daily, intensive sales training, privately held Lazy Days moves some $800 million worth of RVs out of one sprawling location near Tampa, Florida. Whatever sales method you choose, make sure it aligns with your overall business strategy.
13. How should you market your product?
Young companies need to get the word out, but they also can go broke doing it (social networking/social marketing is a big money saver!).
A decade ago, America Online spent so much money flooding the planet with free trial software that it tried to mask the "bleeding" by capitalizing those expenses on its balance sheet. (Regulators later nixed that accounting treatment, wiping out millions in accounting profits).
What percentage of sales should go towards marketing? As with sales, there is no one rule of thumb.
14. Does the business scale?
Bill Gates plowed piles of money into developing the first copy of Microsoft Office. The beauty: each additional copy of that software program costs next to nothing to produce.
That's called "SCALE," and it's the difference between modest wealth and obscene riches! What models don't scale? Think service business, where the need for people grows along with revenues.
15. What are your financial projections?
You can't lead if you don't have a destination. Two critical milestones: 1) the point where more cash is coming into the business than going out in a given period, and 2) the point at which you finally recuperate your cumulative initial investment (including an adjustment for the time value of money).
Financial projections should be reasonable. Paint too rosy a picture and seasoned investors will run; more to the point, you might run out of cash.
16. What price will consumers pay?
Get this answer wrong and you could leave bags of money on the table....or worse, send customers running into the arms of the competition.
When Apple sliced the price of its iPhone by a third after only two months on the market, even loyal customers screamed, forcing chief Steve Jobs to apologize and offer a partial rebate.
Consultants get paid handsomely to help companies arive at the right price.
17. How do you protect your intellectual property?
Imagine slaving for years on a new cellphone battery that lasts more than two years, only to watch it reverse engineered and patented by someone else.
Before you ask anyone to crank out a few prototypes, file for a provisional patent. It protects your idea for a year while you work out the kinks.
18. How do you keep the help happy?
What's Google worth without its super-geeks? Goldman Sachs without its number crunchers (and their golden Rolodexes?) The local bar without old Jim manning the tap?
Not much, which is why attracting and retaining talent is critical to so many businesses. For starters, that means crafting the right benefits package.
Starbucks sets a fairly high standard: Health benefits are available to any Starbucks employee who works at least 20 hours a week and has been with the company for more than 90 days!
19. How committed are you to making this happen?
About a year ago, Chuck Prince, recently resigned chief executive of Citigroup, addressed a group of New York University's Stern School of Business.
An audience member asked what life looked like at the helm of such a colossal firm. Prince responded that, save for a few exceptions, every evening for the next five months was already accounted for.
Fair warning: If you want to run the show, get ready to give everything -- and then some!
20. What is your end game?
Running a business with an eye toward flippig it to a strategic buyer is a lot different than digging in for the long haul. (Will You Tube ever turn a profit? Who knows, but that's Google's problem now; the same goes for MySpace and News Corp.)
Not sure whether you want to build the next great empire or just make a decent buck?
Next Month: A good look at SATOP, what it is and what it can do for you!
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