Starting Up – 9 Business Selection Criteria

Small Business and Startup Selection Criteria For Entrepreneurs

Last week we wrote about Fabrice Grinda, a serial startup entrepreneur. During a podcast interview he spoke about his experiences on building large successful businesses. On his blog he writes about his experiences and shares a wealth of knowledge.

One area of interest is his writings on business ideas and business selection criteria. Below we have summarised his approach to picking a business idea or market to enter. They are not a stringent set of rules but do present some strong points to consider when brainstorming your next startup.

9 Business Selection Criteria

1. At least $1 billion addressable market – May be easier to obtain funding and holds greater upside potential.

2. A valid business model from the beginning – This is having an understanding of how the business will generate money. The stronger the cash flows and balance sheet, the better chance of business longevity. Grinda later removed this criteria however increases the risk of the business idea.

3. Does not require more than $2 million in seed or $15 million in first round VC money – Any more, and the business may be too large for a startup to build.

4. An opportunity to be one of the top players (market or region) – Consider markets where large players do not hold strong positions.

5. A scalable idea – An idea that can be grown.

6. A business with little or no risk of margin compression – Beware of markets where customers and/or suppliers can controls revenues and expenses. These create variables you cannot control.

7. A business in a rapidly growing market – Share the success in fast growing markets.

8. An idea that you can execute or learn to execute – Focus on an area where you have a clear advantage.

9. An idea that you want to do! – Pursue a business you have a genuine interest or passion in.

Note: These criteria are taken from a 2005 blog post and may not suit everyone.

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You might also enjoy:
+ The Top 100 UK Startups (2010)
+ The Startup Dictionary – Learning the Lingo #3
+ Learning From Other Startups – 6 Real Life Stories
+ Samsung’s Pivot From Dried Fish to Smartphones
+ Top Startup Podcasts – Learning From Listening

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One response to “Starting Up – 9 Business Selection Criteria”

  1. richardbutler28 says :

    I really love to read your blog as well as the examples that you’ve mention. Thank you so much for this helpful contents. I am looking forward to see more example contents like this.

    If you have time you can also visit this site that I managed to surf in Startup.

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