Appendix 3.1: Initial Screen for New Business...
2
Chapter 3 Starting a Small Business 1 Appendix 3.1: Initial Screen for New Business Ideas Score each item in the sections below (as a -1, 0, or +1) by circling the response that best corresponds to that item. Then add up each of those five values and enter the combined score for each part on the last line. Part 1: Strength of the Business Idea Decision Criterion Low Potential (–1) Moderate Potential (0) High Potential (+1) 1. Idea’s potential to meet a market need (soothe a pain, frustration, etc.) Low Moderate High 2. Amount of value the idea creates/adds for the end user Low Medium High 3. Level of satisfaction of end users with compet- ing products or services currently available Very satisfied Undecided Very unsatisfied 4. Extent to which the idea will require customers to change normal practices or behaviors Considerable Limited Small to none 5. Risk that the idea will have one or more critical flaws High Moderate Low Combined Score for Part 1 (−5 to +5) __________ Part 2: Target Market and Customers Decision Criterion Low Potential (–1) Moderate Potential (0) High Potential (+1) 1. Number of customers likely to be interested in the new product or service Few Average Many 2. Projected growth rate of the target market Low Moderate High 3. Purchasing power of targeted customers Low Moderate High 4. Willingness of targeted customers to pay for the product or service to be offered Low Moderate High 5. Ease of finding customers and promoting the product or service to them Very difficult Somewhat difficult Easy Combined Score for Part 2 (−5 to +5) __________ Part 3: Industry and Competitive Advantage Decision Criterion Low Potential (–1) Moderate Potential (0) High Potential (+1) 1. Number and power of competitors in the industry Many, very powerful Some, moderately powerful Few to none, weak 2. Projected growth rate of the industry Slow to none Moderate Rapid 3. Reported industry operating margins Low Moderate High 4. Level of difficulty for the new business to over- come industry entry barriers Very difficult Challenging Easy 5. Potential for the new business to establish its own sustainable competitive advantage Low Moderate High Combined Score for Part 3 (−5 to +5) __________ © 2014 Cengage Learning. All Rights Reserved.
Transcript of Appendix 3.1: Initial Screen for New Business...
Chapter 3 Starting a Small Business 1
Appendix 3.1: Initial Screen for New Business Ideas
Score each item in the sections below (as a −1, 0, or +1) by circling the response that best corresponds to that item. Then add up each
of those five values and enter the combined score for each part on the last line.
Part 1: Strength of the Business Idea
Decision Criterion Low Potential (–1) Moderate Potential (0) High Potential (+1)
1. Idea’s potential to meet a market need (soothe a pain, frustration, etc.)
Low Moderate High
2. Amount of value the idea creates/adds for the end user
Low Medium High
3. Level of satisfaction of end users with compet-ing products or services currently available
Very satisfied Undecided Very unsatisfied
4. Extent to which the idea will require customers to change normal practices or behaviors
Considerable Limited Small to none
5. Risk that the idea will have one or more critical flaws
High Moderate Low
Combined Score for Part 1 (−5 to +5) __________
Part 2: Target Market and Customers
Decision Criterion Low Potential (–1) Moderate Potential (0) High Potential (+1)
1. Number of customers likely to be interested in the new product or service
Few Average Many
2. Projected growth rate of the target market Low Moderate High
3. Purchasing power of targeted customers Low Moderate High
4. Willingness of targeted customers to pay for the product or service to be offered
Low Moderate High
5. Ease of finding customers and promoting the product or service to them
Very difficult Somewhat difficult Easy
Combined Score for Part 2 (−5 to +5) __________
Part 3: Industry and Competitive Advantage
Decision Criterion Low Potential (–1) Moderate Potential (0) High Potential (+1)
1. Number and power of competitors in the industry
Many, very powerfulSome, moderately
powerfulFew to none, weak
2. Projected growth rate of the industry Slow to none Moderate Rapid
3. Reported industry operating margins Low Moderate High
4. Level of difficulty for the new business to over-come industry entry barriers
Very difficult Challenging Easy
5. Potential for the new business to establish its own sustainable competitive advantage
Low Moderate High
Combined Score for Part 3 (−5 to +5) __________
© 2
014
Cen
gage
Lea
rnin
g. A
ll R
ight
s R
eser
ved.
2 Part 2 Starting from Scratch or Joining an Existing Business
Part 4: Capability of Founder(s)
Decision Criterion Low Potential (–1) Moderate Potential (0) High Potential (+1)
1. Depth of industry experience of the founder(s) Little to none Some Extensive
2. Strength of founder’s skills that are related to the business Weak to none Moderate Very strong
3. Reach and influence of the founder’s relevant professional and social networks
Very limited to none Moderate Extensive
4. Intensity of the founder’s passion for the new business idea
Low to none Moderate High
5. Fit between the new business idea and founder’s personal goals and aspirations
Little to none Modest Nearly perfect
Combined Score for Part 4 (−5 to +5) __________
Part 5: Capital Requirements and Venture Performance
Decision Criterion Low Potential (–1) Moderate Potential (0) High Potential (+1)
1. Amount of capital needed to launch the business, including costs of development and promotion
High Moderate Low
2. Profitability of similar ventures already in business Low Moderate High
3. Projected profits for the new business Low Moderate High
4. Potential to start the business incrementally or to test it inexpensively before full launch
Low Moderate High
5. Level of liability and other risks associated with the new business
High Moderate Low
Combined Score for Part 5 (−5 to +5) __________
Summary of Overall PotentialFor each part of the screen, enter the combined score on the appropriate line below, and circle the response that best represents your assessment of
potential. You can offer suggestions for improving the idea’s potential in the space provided. Next, sum all five combined scores, and enter that num-
ber as your overall assessment of the idea’s potential on the line provided. Space is allowed for a brief written summary of your overall assessment.
Decision CriterionCombined
Score (–5 to +5)Overall Summary of Potential
from Each Part (Circle One)Suggestions for Improving
Potential
Combined Score for Part 1:Strength of the Business Idea __________ Low Moderate High
Combined Score for Part 2:Target Market and Customers __________ Low Moderate High
Combined Score for Part 3:Industry and Competitive Advantage __________ Low Moderate High
Combined Score for Part 4:Capability of Founder(s) __________ Low Moderate High
Combined Score for Part 5:Capital Requirements and Venture Performance __________ Low Moderate High
Overall Assessment of Potential (−25 to +25) __________
Provide a brief written explanation for your overall assessment:
Sources: Adapted from Bruce R. Barringer, Preparing Effective Business Plans: An Entrepreneurial Approach (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), pp. 44–47, and Jeffry A. Timmons and Stephen Spinelli, New Venture Creation: Entrepreneurship for the 21st Century (NY: McGraw-Hill Irwin, 2007), pp. 128–129.
© 2
014
Cen
gage
Lea
rnin
g. A
ll R
ight
s R
eser
ved.
