10Factors• How large is the market?• Is the overall market growing?• Is the market expected to growwithin the next 3-5 years?• What are the typical margins withinyour industry?• Are customers in this niche overlyprice sensitive?• What is the general economichealth of your customers?• Are there any threats of anysubstitute products/services?
11Factors• What makes your offering uniqueand different?• What value does your productdeliver?• Do you have a valid “Blue Ocean”strategy or “Red Ocean” strategy?• Are yourproducts/services priceddramatically differentlythan the existing market?• How powerful anddifferentiated is your valueproposition?
15Factors• Does the sale of the product makesignificant profits or are add-onsales required?• Do you have a limited profit margindue to the competitive nature of themarket?• Is your revenue recurring or one-time hits?• Do you have a competitive costadvantage?• How do your marginscompare to yourcompetitors’?• Are any of your revenuestreams proprietary?
16Factors• Is the product marketed or does ithave to be sold?• Can a salesperson of ordinary skillsell your offerings?• Do you have a sales pipeline modelthat can accurately predict futuresales?• How does the cost of customeracquisition compare to the lifetimemargin generated?
18Factors• Does your product/service havecompetitive advantage based ondifferentiation or focus?• How significant is the value andquality of your intellectual property?• Are there any existing threats fromsubstitute products in your marketindustry? If so, how significant arethey?• Do you have a low break-evenpoint?• Do you have a meaningful costadvantage?• Are there financial barriers thathelp or hurt you?• Are there opportunities to grow ormodify your value chain?• Will you be able to maintain or growyour competitive advantage?
19Factors• If you fail to innovate fast enough,how severe are the consequences?• How much do you need to innovateto keep pace?• How well do your competitorsinnovate?• In this industry, how significant isthe competitive advantage gained bysuccessful innovation?• How much of an advantage ordisadvantage is this combination ofneed for innovation and ability toinnovate?
20Factors• Does the negative impact of a pitfallkill the business?• Are there any potential futurethreats from changing demographics,consumer behavior changes, andother trends?• Is your business prone to potentialgovernment or regulatory policychanges?• Is your business overly reliant ontrends, fashion, or whims?• Is your overall business vulnerableto litigation or legal pitfalls?• Is a large competitor entering yourmarket a possibility?
21Factors• Will you be able to sell yourbusiness for enough money so youwould never need to work again ifyou choose?• Is the business over dependent ona few customers?• How reliant is sales success onowners’ involvement?• What happens if you immediatelyhad to stop working in the business?• How many key partner, vendor, andcustomer relationships aredependent upon the owners?
22Comments & Scoring• Solid current competitive advantage• Advantage should continue• Solid moats of protection• No significant threats• Strong innovation culture• Consistently out-innovatecompetitors• Patent protection• Weak competitive innovation• Product somewhat faddish• Consumer whims favor us now• Other similar offerings have lostfavor• Technological obsolescence anissue• Exit plan – go public• Strong management team• Excellent income824826