31. Modeling: Finding a Form to Follow

Once you have your business idea, you should model a similar business. A look around should help you find such similar ventures. It would even be best for you to meet the owners in person and see how they work, or even shadow them for a day. (If you cannot find a good model for your idea, you can divide your idea into different segments and model each after an easy-to-find business.)Here are 21 questions to help you learn all you need to know about your model business:

What is the product or service that is being sold? To whom is it being sold?What was the opportunity when the business was created or acquired? Was there an opening that was taken advantage of? Who were the other players in the market at the time? What were the industry trends back then? What are some industry trends now?What was (and what is now) distinct or unique about the product or service? How was (and how is currently) the opening positioned differently from its competitors? Are there any current gaps between supply and demand? How was the product or service initially marketed?How is it currently being marketed?

What were some of the specific challenges that were faced immediately? That were faced eventually? That were being faced currently? Who is indispensable on the team? Are people hired or offered equity? What can I expect to charge for services similar to the model’s? What items represent some of the biggest expenses? Are there any unseen costs? What is the strategy going forward? Is the model’s owner planning to exit the business at any time? What is the exit strategy? Are there any other successful companies that can be looked at?

This situation is complicated by the fact that many venture capitalists will refuse to sign an NDA before looking at a business plan, lest it put them in the untenable position of looking at two independently developed look-alike business plans, both claiming originality. In such situations one may need to develop two versions of the business plan: a stripped down plan that can be used to develop a relationship and a detail plan that is only shown when investors have sufficient interest and trust to sign an NDA.