NOTE: As of 2022 the Center for Executive Coaching is now accredited with the ICF as a Level 2 Coach Training Organization. The ICF has changed their language and replaced ACTP with Level 2. We were among the first group of coach training programs to receive this accreditation, after a rigorous review by the ICF.

Eight Questions to Ask Before Jumping into a Business Opportunity

Business owners sometimes make the mistake of jumping into business opportunities too impulsively, without doing the appropriate amount of due diligence.

This observation is not as obvious as it may seem, because many entrepreneurs fail to separate facts from myths about their business.

Here are two examples:

First, what do you conclude when you see a business featured in Entreprenuer, Inc. or Fast Company magazines? Our instant reaction is that the business must be profitable. However, this turns out to be untrue. Most businesses featured in media have a certain glamour factor to them, or are backed by huge publicity efforts. The media features stories on businesses that are interesting first and profitable second. For instance, one company that specialized in promoting extreme sporting events for 18-34 year olds appeared in many publications as a highly successful venture. However, on looking at the numbers (not published in the media), this company was sucking up cash and mainly feeding the ego of the owner rather than having any chance of being profitable.

The same principle applies to industry analysis in the media. When I worked for a Wall Street firm, the first thing the senior management taught us was, “If it appears in the newspaper, it is already too late.” Two years ago, every newspaper was featuring articles about real estate moguls who were speculating in hot markets like Southwest Florida. I know some of these moguls, and they are struggling to keep their own homes (and cars, in one case) today. Had you begun to invest in real estate after reading a newspaper article, you would have been way too late, and in worse shape than speculators who got in before the media frenzy.

If you are about to make a business decision and are not already independently wealthy, forget about the “glamour factor,” forget your ego, and forget about status. Focus on facts and on detailed due diligence.

Questions to ask include:

  1. How big can this opportunity get?
  2. What is the worst possible case?
  3. What are the relative probabilities of achieving a high, moderate, low, and loss rate of return?
  4. Given the probabilities, what is the expected outcome of this decision?
  5. Is my investment worthwhile given the expected outcome?
  6. Do I have the talent and resources in place to act quickly and take advantage of this opportunity?
  7. How do I exit?
  8. What reserves are available when it takes twice as long and twice as much money to achieve success?

Sound business leadership requires an emphasis on cold hard facts, not the temptations of status, glamour, and being in the newspaper.

Aflac

Amazon

Ancestry

Army Corp of Engineers

Ascension Health

AT&T

Bank of America

Bechtel

Best Buy

Booz Allen

Bose

Bristol-Myers Squibb

Brown University

Capital One

Caterpillar

Charles Schwab & Co.

Children’s Hospital Colorado

Cisco

Citrix

Coca-Cola

Deloitte

Dropbox

Duke Energy

Galveston Independent School District

General Atomics

General Electric

Google

Harvard Business School

Home Depot

Inland Steel

International Red Cross

Johnson and Johnson

Kaiser-Permanente

KPMG

Laser Spine Institute

Lexis Nexis

Liberty Mututal

L’Oreal

Macy’s

Mckinsey Consulting

Merck

Microsoft

MIT

NASA

National Basketball Association (NBA)

Nike

Nissan

Nvidia

Partners Healthcare

Philips

Procter & Gamble

Price Waterhouse Coopers (PWC)

Ralph Lauren

Regeneron

Rice University

Ross Stores

Russell Reynolds Associates

Schneider Electric

Shell Oil

SLAC National Accelerator Laboratory

Stryker

The Ohio State University

Tom’s Shoes

United Nations

University of Florida

Unum

UPS

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US Army

US Army Medical Corps

US Marines

US Navy

USAID

Valassis

VMWare

Xerox

Zappos

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