I have been working on a new business and spending hours researching every facet of it.This has meant some late nights and me driving my potential business partners, team and suppliers bonkers with incessant questions.I am by profession a former lawyer and investment banker, so I can get into the detail.

Business is as about ideas, execution and managing a wide variety of risks that you face as you pursue your vision. If you don’t do your homework, you are taking on unnecessary financial, market and execution risk.Donald Rumsfeld, the former US Secretary of Defense, famously commented that there are things that you know that you know. There are also known unknowns -things that you know you don't know.There are also unknown unknowns - things you don’t know you don't know.Too many entrepreneurs planning to #startup and, even more surprisingly those with ambitions to #scaleup, don’t do their homework on even the known unknowns. What you think you know may also change if you seek different perspectives. The unknown unknows will keep you on your toes for the next ten years of your life.

Here is some practical guidance to doing your homework

Your #Startup Homework

Before you quit your job, cash in the college fund, hire a room of software engineers or order a container of stock from China, do your homework.

Ask yourself and your other founders this fundamental question:‘Why?’What problem do you solve?What do you improve?Why does the world need your product or service?If you all look at each other in silence for anything more than a few seconds; go back to the drawing board.A business succeeds if you can solve a problem – and make money doing it.It may be immediately tangible, such as fixing a leaking pipe or coding an app, or more intangible in the near-term such as the development of deep AI.Is your product or service going to add value to the life or bottom-line of your target customer?Can you deliver it at a price that makes sense? Does that price enable you to generate a gross profit and a net profit after the direct and indirect costs you expect?Do you know who your target customer is?Do you know where they are?Do you know how to get to them?How scalable is your business and does the size of the opportunity support the lifestyle you aspire to?Do you sell direct to the end customer or use a channel or both? What skills do you need?What is all of this going to cost and when?

Even if you have spent two decades working in a sector and now want to break out on your own, be objective and do your homework.Unless you are C-level, you may have never really understood, or been privy to, the reasons why your former employer ran the business as they did.

The research stage is not about writing a business plan or even worrying about the brand name or how you are going to fund your business.Obviously, if you are straight out of school, and want to take on Tesla, you may need to think again.The research process is purely about working out whether it is worth progressing the idea at all or thinking again to iterate your model.On the way, you will learn something and may even spot a better market opportunity to exploit – that is what being an entrepreneur is about.This is what has happened to me during my research.

Focus on researching the answers to these ten questions at the outset and don’t skip what you think are known knowns.

  • Why – what problem does your business solve?
  • How big is the market opportunity?
  • Who is the customer?
  • What is the right price?
  • What will it cost to design, code or produce?
  • What is the margin?
  • Who is the competition?
  • How do you get to market?
  • Are there any legal or regulatory requirements to consider?
  • Complete and seek feedback on a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis?

Your #Scaleup Homework

If you already have an established business with products, customers, revenues and even profits, your research is going to depend on your growth strategy.You have more to lose, so understanding the impact on your existing business and the risk that comes with your growth plan is key.Are you going to sell more of your existing product and service by investing in sales and marketing and customer support?Are you planning to buy out smaller or weaker competition and extract synergies or economies of scale?Do you have a completely new product or invention that you think you can sell to your existing customer base?Do you want to expand geographically?Have you proven a model that you believe you can now roll out without scaling your central costs?

Because you are already in business, it doesn’t mean that your growth plans will work.It is common for new products to fail; overseas expansion to result in retrenchment and losses; buy outs to underperform leaving debt burdens; star employees to leave; market conditions to change or disruptive competitors to appear from nowhere. Growth can even result in the original core business being put under pressure – or worse.In the case of a growth strategy, the financing options also need to be researched.

As well as the ten questions above, research answers to the following additional six questions:

  • If scaling up sales and marketing, do you understand the process, science and ROI, CAC, CLV, CPC, CTR, CRM, CPL, BOFU or NPS?
  • Is the new market opportunity tidal or a permanent?
  • Can you structure legally or new costs to scale back if things don’t go to plan?
  • What skills are required and does your business have them?
  • What skills do you need that you don’t possess?
  • How will you fund the growth – from profits or will external finance be required?
  • Are your key stakeholders aligned?

Finding the Answers

There is no point searching if you don’t know what it is that you are trying to find.Now you have some questions to get you going.

If you are starting, you should commit time and a meaningful amount of your resources to the research process.Be objective and dive into detail if it is available.Reading an article about a new market worth billions and then deciding that you “just need to get 1%”, isn’t research.Research ranges from talking to potential local customers to spending tens of thousands on commissioned primary research, including, for example, focus groups or usability testing.

Here is where you should look:

Secondary research: Most research has already been done for you. There is a huge amount of information available online, but check that your sources are credible.Depending on what information you need and the size and resources of your #Startup or #Scaleup, scour government demographic, market, economic and business statistics; third sector research and think tank output; news articles that refer to research; scholarly articles; industry association research and PR and periodicals.Beg for access to research databases or to read research reports.These can be expensive to buy, but you can always find somebody who has one – even an old one. Students often have access to research sources and so on.Use your initiative.

Primary research: Talk to target customers or conduct surveys or focus groups if you can afford it. It is money well spent.Pull the competition or comparable businesses to pieces – research them, interact with them, pull their accounts, reverse engineer their pricing, talk to employees, follow them on social media and attend their events.

Coffee:Ask people for some time and make it easy for them.Buy lots of coffees. Go to them or a nearby, independent, coffee shop and take notes.30 mins with somebody with relevant experience can be worth hours of trawling through the internet, although remember that personal experience will suffer from bias.Be persistent, but polite, professional and not annoying.If time is invested in you by somebody, send them a small gift or physical thank you note - not a thumbs up emoji on Facebook.

Next Steps

If you have followed my advice above you will be better placed to understand and manage the risks of starting up or growing.You will also find that the list of questions grows and that you can’t find answers for them all.You will have reduced the number of known unknowns and reduced execution risk.If it doesn’t stack up, don’t be bloody minded and flog that dead horse.Walk away or change the plan.

As for the unknown unknowns – that’s entrepreneurial risk and, if it were easy, everyone would be doing it.