20 most important business questions

There are a lot of reasons that make companies go bankrupt. Bad luck is one of them, but a disaster is usually an outcome of basic mistakes in company vision, strategy, implementation or all of the above.

Even Warren Buffet would agree that starting a business no one can perceive all opportunities or predict every single threat. There are simply too many variables. And as world economy is getting more and more competetive they keep on changing faster than ever before.

This being the case an entrepreneur should ask himself a couple of difficult but basic questions, the aswer to which is a deciding factor as far as enterprise survival is concerned. Armed with them he'll have a tool necessary to deal with serious challenges. According to studies only two out of three new companies endure first two years, and less than a half live into fourth year.

One thing's for sure: looking for the answers in question is a really exhausting indeed, and it calls for profund intellectual and emotional honesty. If you are to succeed you should start long before spending first dollars, manufacturing first goods and losing first customers.

However the real challenge is to continue the quest when the company has started to evolve. New opportunities and threats keep on occuring, and the answers that were true yesterday may not - and usually don't - suffice today. It's due to neverceasing process of asking difficult questions that such tycoons as Wal-Mart, Microsoft and General Electric continue to thrive.

Bearing this in mind we would like to present the most important questions that entrepreneurs who want to keep and expand their companies should not only answer but keep on answering over and over again.

What value do you offer?

It's the most important question here. If you can't explain - using three short sentences at the most and shunning jargon - why customers need your product, you have nothing of value to offer. If a customer doesn't feel like having your product, nothing is going to make him spend his money on it. And without sales there's no business. It's as simple as that.

What distingishes your product fromthose of your competitors'?

Not many companies can afford to separate from the competiton relying solely on clever marketing tricks. True, Starbucks persuaded people they need sophisticated caffeine blends 4 bucks each, and Louis Vuitton convinced its customers to spare $1500 dollars on a denim handbag, but the exeptions prove the rule. If you want to succeed in business you've got to offer something of real value, that the competition just doesn't have. It can be extremelly low prices (Wal-Mart), ingenious project (Apple), or special customer facilities (Fed Ex).

How much money do you need to survive the first few years?

No matter how much income an enterprise can potentialy yield if the enterpreneur can't do it out of the underground and into the light. There were plenty of companies with business plans swarming with splendid financial forecasts that run out of money, before the prophesized time of plenty. (It's enough to consider all insolvent 'dotcoms' from technological boom period). Remember about money.

What are your advantages?

Google writes powerful algorithms for its search engine; Steinway works miracles in wood; Cisco looks for and purchases new technologies. Find out what you are best at and stick to it. It may be platitude but a lot of zealous entrepreneurs get lost on the way - especially when the world seems full of various possibilities.

What's the threat generated by new market players?

If you are clever enough to spot a chance of doing a good business, you may be sure the competion is hard at your heels. There are some obstacles that are more difficult to overcome than others, like patents securing technological novelties or famous brands legends, but in the end someone will find a way to do what you're doing but faster, cheaper and even better. Either a direct competitor of yours or some new technology may snatch a big part of market from you (just consider the impact digital photography had on Kodak). Solution: build loyal customer group, before anything of that kind happens.

How much impact do your suppliers have over you?

Getting customers to buy your product is hard enough without suppliers providing obstacles. In practice: the less suppliers there are the more control over recipients they have. Consider steel industry which depends on a few big companies for iron supply. If two of them signed an agreement - and such talks are being conducted by BHP Billiton and Rio Tinto - they cound gain significant pricing power and conduce to lowering steel producers marigin. On the other hand, you've got to be careful not to get solely dependent on cheep suppliers that do not pay enough attention to quality (which may result with Barbie dolls in lead tainted laces).

Does your company yield the benefit of the scale?

Bill Gates spent a lot of money to create first Microsof Office issue. But the beauty of the enterprise is that producing every next copy of the programme hardly cost anything. This is called the benefit of the scale - and it's the factor that makes the difference between decent wealth and enormous riches. What type of models do not yield the benefit of the scale? For example services industry where increase in incomes is accompanied by bigger worker demand.

How much are the customers willing to pay?

Giving wrong answer to this question is like sending a pot of gold down the drain or even worse sending your customers straight into the arms of the competition. When Apple lowered the price of iPhone by one third in just two months after its market release, even the most loyal customers made such a row, the company's boss Steve Jobs had to appologize and give them back the surplus of money they had spent purchasing the product immediately after its market release. Firms pay huge amounts of money to consultants to help them set proper prices.

How much do you want to succeed?

A year ago, Chuck Prince - current Citigroup chairman - had a lecture for the students of New York University's Stern School of Business. One of the listeners asked him what the life of the boss of such a huge company looked like. Prince answered that except for a few days he had had all evenings booked for 5 months in advance. Pay heed to the fact that if you're willing to take part in this show, you've got to be ready to break your neck or even more.