Table of Contents
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).