The New Business Road Test: What entrepreneurs and investors should do before launching a lean start-up

361 Pages·2018·7.628 MB·English

by  John Mullins

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Reader and media praise
for earlier editions
It is a great framework to distinguish between nutcase ideas and solid possibilities, and in
some cases to turn the mad ideas into something that could work.
Max Aitken, serial entrepreneur
Teaches entrepreneurs and business owners how to avoid mistakes that many make.
Start Your Business magazine, June 2010
The New Business Road Test has been the most valuable piece of advisory material I have
come across. Whatever else I recommend to my clients, owning and reading your excel-
lent book is highest on the list.
Ian J R Wilson, Principal, Ian Wilson Associates, Edinburgh
We combine creativity/idea generation workshops with a feasibility analysis course –
based on John Mullins’ The New Business Road Test - and it’s just wonderful for critical
thinking, embracing ambiguity, encouraging fast failures, and mixing imagination with
formal technique. Indeed, this is a capstone class for our Professional MBA. It’s also a joy
to teach, if rather chaotic at times, and the students adore it, too.
Professor Sarah Dodd, Hunter Centre for Entrepreneurship, University of Strathclyde
Some entrepreneurs might wonder why such a codified framework is needed to replace
instinct and they won’t find this book has a great deal to offer. But for most of those con-
sidering a new venture, thinking such as this offers a smart way to quickly assess what
might and might not work.
Director magazine, July/August 2010
Provide[s] a reality check for anyone poised to jump into a new venture without think-
ing. Readers will enjoy discovering the nuggets of wisdom embedded in the case studies.
Financial Times, July 2003
We’ve never met but I love your book The New Business Road Test – I can honestly say it
has done more for my businesses than 10 years of hard graft did.
Matthew Slight, Founder, Love Tea
I want to take this opportunity to express my appreciation and admiration for your ap-
proach to analysing new business opportunities using the seven domains you so elo-
quently describe in your book. While there have been a number of books written on this
subject, it is rare when this subject is treated in such a practical manner.
Gerry Lemberg, Chairman, Silver Fox TeroVentures
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Extremely valuable for entrepreneurs and small business owners alike.
David Kelnar, Greatvine.com
I have made a real breakthrough in my first year and started to win a number of con-
tracts. John’s book really helped me to understand my business model and evaluate the
risk of setting up on my own, in a style that was easy to read and understand.
Martin Costelloe, Rowan Landscapes
John Mullins is a distinguished figure in the global entrepreneurial community.
David Giampolo, Chief Executive, Pi Capital, London
I have found the framework useful in both analysing plans that we receive and structur-
ing info memos that we write.
Richard Allen, Principal, 101Capital Limited
John Mullins’s New Business Road Test provides the entrepreneurial equivalent to the
proverbial ‘sleeping policeman’ on the Sunday drive: the necessary jolt of reality for
those hanging on to the belief that value is created on a computer spreadsheet or a fancy
PowerPoint presentation.
Professor Benoit Leleux, IMD, Lausanne, Switzerland
A mandatory step required before turning business ideas into business plans.
Federico Sarti, I3P incubator, Torino, Italy
I have read a lot of business books, however yours is the only manual that seems to offer a
plan of action. … I was alarmed to realise how much I didn’t know about target markets.
Patrick Stewart, Managing Director, Central AV
My students are telling me how much they like your book for inspiration, but also for its
pragmatic and practical perspective.
Professor Larry Plummer, University of Colorado
I have realised the common errors that after seemed so obvious yet no other books have
really highlighted them. I think we are on the right track with our past experience and
some expert advice from talented people as yourself.
Heather Bonte, Managing Director, Cultivating Minds
This is the book you should read before you even think about starting a new business.
Richard Stutely, Author, The Definitive Business Plan
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As a successful entrepreneur in the satellite communication industry for the past 18
years, we were developing a new business idea for commercial launch and happened to
talk with John Mullins. His book provided an overall check for our business plan and we
were able to patch many holes. An excellent book providing an all-round framework for
new and established entrepreneurs.
Sanjay Singhal, President/CEO, Sintel Satellite Services, Inc., New York
Whilst reading your book I found myself jotting ideas down and organising my thoughts.
You have provided me with half a dozen sheets of paper full of scribbles and diagrams
which between them feel like a very ‘rounded’ view of my business. We have been run-
ning for 18 months now, and it seems time to write a tentative business plan. Your book
has provided a very welcome helping hand towards that plan.
Tim Craine, Managing Director, London Development Research
I am a Canadian entrepreneur who is having the profitable experience of reading your
New Business Road Test book. Thanks for writing a terrific (and very sobering) book.
Christian Thwaites, President (Corporate Development),
FORPAC BioSciences, Vancouver, BC
I have added your book to my own entrepreneurship curriculum and I regularly give it to
entrepreneurs we advise and in which we invest. I would like to thank you for penning
such an important tome.
Vic Sarjoo, Chairman and CEO, Radical Funds, New York
I use your book regularly to assess the opportunities that come across my desk and it has
been very useful in qualifying out of things that I might have wasted time on previously.
Jeremy Renwick, Kubernetes Ltd, Oxfordshire, UK
I picked up the current HBR and read the case about ‘Good Money after Bad’. But most
of all I picked up the trail to your book, The New Business Road Test. What a ‘eureka’ mo-
ment I had. Your comments and seven domains just sharpened up our thinking several
very large notches.
Dave Sutherland, Retrievall Inc., Ontario, Canada
A much needed and invaluable resource for both entrepreneurs and line execs. I have spent
part of my career working with people trying to start and/or grow companies, and the hard-
est part of pushing the rock uphill is the effort to convince them to do the hard work in
that micro-market quadrant to identify the customer pain and develop the real solution to a
customer’s problem, rather than focusing on the ‘build it and they will come’ mentality. As
someone who both writes and reviews business plans, I now have an important resource to
hand to people rather than just shaking my head in frustration or repeating myself endlessly.
Mark Pfeifer, business planning expert
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The New
Business
Road Test
What entrepreneurs and investors should do before
launching a lean start-up
Fifth edition
John Mullins
Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney • Dubai • Singapore • Hong Kong
Tokyo • Seoul • Taipei • New Delhi • Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan
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PEARSON EDUCATION LIMITED
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First published 2003 (print)
Second edition published 2006 (print)
Third edition published 2010 (print)
Fourth edition published 2013 (print and electronic)
Fifth edition published 2018 (print and electronic)
© John Mullins 2003, 2006, 2010 (print)
© John Mullins 2013, 2018 (print and electronic)
The right of John Mullins to be identified as author of this work has been asserted by him in accordance with
the Copyright, Designs and Patents Act 1988.
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ISBN: 978-1-292-20839-8 (print)
978-1-292-20840-4 (PDF)
978-1-292-20841-1 (ePub)
British Library Cataloguing-in-Publication Data
A catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data
A catalog record for the print edition is available from the Library of Congress
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Cover design by Two Associates
Cover image © petovarga/iStock
Print edition typeset in 9/13pt Stone Serif Std by 30 by SPI Global
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NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION
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Contents
Why read this book? / ix
About the author / xvii
Author’s acknowledgements / xviii
Acknowledgements / xxi
PART 1: Road test your new business idea / 1
1 Our opportunity: why will or won’t this work? / 3
2 Will the fish bite? / 25
3 Is this an attractive market? / 51
4 Is this an attractive industry? / 75
5 Competitive and economic sustainability: how long can we
dance? / 101
6 What drives your entrepreneurial or investment dream? / 131
7 Can you and your team execute? / 151
8 Your connections matter: which matter most? / 177
9 Develop your opportunity: put the seven domains to work / 197
10 What entrepreneurs and investors should do before pressing
‘Start’ / 213
PART 2: A toolkit for your road test / 227
11 How to learn what you don’t know you don’t know / 229
12 Who needs investors? / 243
13 Market analysis worksheet / 257
14 Industry analysis checklist / 261
15 Do-it-yourself marketing research for your new business
road test / 271
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viii Contents
16 Evidence-based forecasting / 285
17 Have you got what it takes? / 297
18 Getting help with your road test / 305
Appendix – Research methodology / 307
Notes / 311
Index / 329
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Why read this book?
Every year there are 2 million entrepreneurs in the UK actively engaged in
starting a new business. Many of their ventures will never get off the ground.
Of those that do, the majority will fail. There are more than 15 million entre-
preneurs in the USA doing the same thing. Most of their ventures will fail, too.
Of the many lean start-ups, most are soon gone. Of those who seek funds from
business angels or venture capitalists, fewer than 1 per cent will be successful
in raising the money they seek.
This picture of entrepreneurship is not a pretty one. The odds are daunting, the
road long and difficult. Why, then, according to the Global Entrepreneurship
Monitor, were a stunning one of every 12 adults in the UK – and one in seven
in North America – actively pursuing entrepreneurial activities in one way or
another in 2016? And why are so many individuals around the world getting
involved in angel investing? In a word – opportunity. Opportunity to develop
an idea that seems, at least to its originator, a sure-fire success. Opportunity
to be one’s own master – no more office politics, no more downsizing, no
more working for others. Opportunity for the thrill, excitement, challenge
and just plain fun inherent in the pursuit of
“
most opportunities entrepreneurial ventures, from either side of the
are not what they deal table. I know, because I’ve been there, too.
appear to be,
as the business But there’s a problem. Most opportunities are not
failure statistics what they appear to be, as the business failure sta-
demonstrate” tistics demonstrate. Most of them have at least
one fatal flaw that renders them vulnerable to all
sorts of difficulties that can send a precarious, cash-starved new venture to the
scrapheap in a heartbeat. An abundance of research makes it clear that the vast
majority of new ventures fail for opportunity- related reasons:
■ market reasons – perhaps the target market is too small or simply won’t buy;
■ industry reasons – it’s too easy for competition to steal your customers;
■ entrepreneurial team reasons – the team may lack what it takes to
cope with the wide array of forces that conspire to bring fledgling
entrepreneurial ventures to their knees.
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