FIT Analysis Framework

FIT

People:

• Right people with the right skill sets and attitudes?
• Do they understand the commitments and risks they are facing?
• What are their motivations and track record (stable, committed, reputable, etc.)?
• Do they have industry knowledge or contacts?

Opportunity and context:

• What? Who will buy? How will it be delivered? When will industry react and how?
• How much does it cost (time and resource) to acquire customers?
• To deliver the product?
• Is now the right time?
• How much cash is needed and what is the break even point?
• Is the industry structurally attractive or can it become that way?
• What is the competitive environment like?
• How is it changing?
• Is the plan cognizant of risks at hand and has it addressed them realistically?
• How much time and money will be necessary to make a decision on future of business?
• Is the exit strategy?

Deal:

• Do the incentives for the people involved = CSF’s?
• Who is providing the financial data, other data, and why?
• Have they tried to raise money from potential customers?
• What is the harvest potential of the business?
• Is the deal fair to all parties involved?

Other General Questions:

• What is the economic life of the opportunity?
• What should be the time span for analysis of the opportunity?
• What are the CSF’s (critical success factors) for this business?
• What must be done to satisfy the customer?
• What must be done to erect barriers?
• What must be done to lower costs and/or improve quality?
• What can go right?
• What can go wrong?
• Has the plan established checkpoints to aid in guidance of the business?
• What actions can we take to shift the odds in our favor?

Numbers

• Who supplied the data and why?
• Which assumptions about the numbers are critical to the problem at hand?
• How accurate is the data?
• How inaccurate in aggregate can it be before it changes a decision?
• What contradictory assumptions are possible?

Find the numbers below – and also examine trends in the data to find out where things are headed:

• Start-up costs
• Fixed costs (for various volumes)
• Variable costs
• BEV
• Burn rate/Fume date (BEV/Sales per day)
• At what level does the firm turn positive cash flow?

Below are numbers for startups or industry:

• Sales growth of industry:
• Gross margin (price – COGS/price):
• SG&A (and compared to industry):
• COGS/Sales:

Micro Economics:

• Marginal revenue = d(Total Revenue) = 0.5 slope of demand curve
• Want marginal revenue = marginal cost because that is profit maximizing point.
• This is different than the revenue maximizing point, which occurs at unitary elasticity. MR = MC somewhere in the elastic range (a lower price than the revenue max. price).