The Complete List of Things to Evaluate Before You Open or Invest in a New Venture

Do you have an innovative idea you wish to market? Are you planning on opening a new business? Are you investing on somebody else’s idea?If you said “yes” to any of these questions, don’t do it just yet!Starting or investing on a new venture can be an emotional process full of anticipation and excitement. You need to keep a cool head and treat the process with the utmost objectivity.To help with that, I’ve put together a complete list of questions you NEED to answer before you even think about putting a business plan together. This will help you make sure that no overlooked variable makes you incorrectly go forward or not. Make sure you don’t skip any part of the process and end the exercise with a very honest yes or no decision based on the answers.You will find it difficult if not impossible to answer some of the questions. It is very important to understand the sureness of each response and the risk that each unanswered question implies. Handle this risk by analyzing scenarios with the different possible answers.Write down a simple comment to each question, doing this formalizes your analysis. You can also think about each question in a SWOT analysis context identifying each one as a Strength, Weakness, Opportunity or Threat.The Dos and Don’ts to keep in mind:Do this all the time

Be methodic, analyze completely. Understand the need, competition and constrains, then tailor and differentiate.

Be on the lookout all the time for the fatal flaw that will make this fail.

Lots of questions can’t be answered or are too vague, check the risk of not knowing them.

Don’t Do This

Don´t follow the classic idea method: “I have an idea, let me think how to shove it to the channel or customer”.

Don’t focus on the features of the product, focus on the need you are trying to fulfill.

Don’t get tempted to skip a full analysis.

The most frequent mistake is to think everybody in the market is like you. If you like the product, everybody else will.

It is common to confuse a good idea with a good business opportunity, they are not the same.

Thinking “We have no competition” is only for naive entrepreneurs.

Don´t obsess with first mover´s advantage, most of the time funds prefer second movers because the idea is already validated.

The questions you need to answer:

Product or Service

Can you describe the business idea in 25 words or less?

Is the idea scalable? Is it limited to your time or something else?

Can your offering later change / adapt?

Risk of not being able to develop / manufacture the product?

Market or Customer

Can you do formal market analysis or only informal? (Interviews, observations, focus groups, surveys, market experiments, etc.)

Who is the customer? How precisely can he be defined? Location, profile, etc.?

What problem are you solving? Why would the customer buy? Does he want to?

Commercial risk, no willingness to buy?

How big is the market? Growing or shrinking?

How penetrated is the market by the industry? What share can you get fast? Later?

What price is he willing to pay? Based on what? How important is it?

How price-conscious is your customer?

Risk of change in consumer behavior?

Can the target market later be changed? Can you later attack other levels in the value chain?


Can you do formal analysis or only informal?

Is it thriving? Shrinking?

Do suppliers have power? Risk of supply shortage? Change in price?

Barriers to entry:

. Contractual? Patent or trademark?

. Lead time in tech development? Innovation?

. Management? People?

. Location?

. Regulations and government?

. Other barriers?

Can barriers change easily?

Do you have relations in place?

. Customers?

. Suppliers?

. Partners? Talent? Investors?

Experience in industry? Yours? Other management?

Risk of regulatory or other government related changes or intervention?

Technology risk of obsolescence?


Can you do formal competition analysis? If not, what informal analysis can you do? Is it good?

Who else is attacking the market? How? Successfully?

What is your competition´s pricing strategy?

What is the closest thing in the target market to your product? Are you a first mover? Second? More than that?

Strategic advantages / differentiators. Clearly visible to consumers or only in your mind? Sustainable? True, important and provable?

. Function? Design? Quality? Uniqueness? Innovation?

. Delivery? Channel? Availability? Location?

. Cost? Marketing? Sales?

. Ignorance of buyers?

. Customer service?

. Other?

Are you taking advantage of a certain opportunity, situation or advantage?

How fast can competition catch up?


Which options do you have?

Which one is the ideal? Why?

If the first choice does not work, does it make sense to try others?

What channels does your target market prefer?

Which ones are your competitors using?

How much integration do the channels have?

Will the channel change with customer habits or tech?

Risk of no access to the correct channel or consumer?

Sales and Advertising

How will you get customers?

How will you retain customers? Is it important?

Describe the necessary salesforce?

Can a salesperson of ordinary skills sell it?

Do you need advertising? Which kind? How much? Is it important?


How clearly can you model the basic economics of the idea? (Costs, sales, margins, required capital, ROI, etc.)

Will there be economies of scale? Are they important?

Accounts receivable? Can it become a problem?

How will you finance initially? Later?


Do you have or can get the necessary management team?

Do management / leadership / organizational capabilities make a difference? How big a difference?

How valuable is intellectual property?

Does it make sense to do this solo? It normally doesn’t.



. How fast can you know if the business can work or not?

. Can you define the variables to know it? How fast can the data flow?

. Do you need product development to know? Dangerous!

. Do you need a long selling process or many tries to know? Dangerous!

Can you diversify? Not easy on new ventures, but can it be done?

Give me the biggest drawback / risk (fatal flaw) of the idea? The one that will make it fail?

Enlist the seemingly fatal flaws that can be fixed.

Does the idea fit your life objectives? Workload?

Do you feel passionate about the idea? Enjoyable? Are you doing it only for the money?

Give me the upside / best case scenario?

Give me the downside / worst case scenario?

Alternative Financing for Wholesale Produce Distributors

Equipment Financing/Leasing

One avenue is equipment financing/leasing. Equipment lessors help small and medium size businesses obtain equipment financing and equipment leasing when it is not available to them through their local community bank.

The goal for a distributor of wholesale produce is to find a leasing company that can help with all of their financing needs. Some financiers look at companies with good credit while some look at companies with bad credit. Some financiers look strictly at companies with very high revenue (10 million or more). Other financiers focus on small ticket transaction with equipment costs below $100,000.

Financiers can finance equipment costing as low as 1000.00 and up to 1 million. Businesses should look for competitive lease rates and shop for equipment lines of credit, sale-leasebacks & credit application programs. Take the opportunity to get a lease quote the next time you’re in the market.

Merchant Cash Advance

It is not very typical of wholesale distributors of produce to accept debit or credit from their merchants even though it is an option. However, their merchants need money to buy the produce. Merchants can do merchant cash advances to buy your produce, which will increase your sales.

Factoring/Accounts Receivable Financing & Purchase Order Financing

One thing is certain when it comes to factoring or purchase order financing for wholesale distributors of produce: The simpler the transaction is the better because PACA comes into play. Each individual deal is looked at on a case-by-case basis.

Is PACA a Problem? Answer: The process has to be unraveled to the grower.

Factors and P.O. financers do not lend on inventory. Let’s assume that a distributor of produce is selling to a couple local supermarkets. The accounts receivable usually turns very quickly because produce is a perishable item. However, it depends on where the produce distributor is actually sourcing. If the sourcing is done with a larger distributor there probably won’t be an issue for accounts receivable financing and/or purchase order financing. However, if the sourcing is done through the growers directly, the financing has to be done more carefully.

An even better scenario is when a value-add is involved. Example: Somebody is buying green, red and yellow bell peppers from a variety of growers. They’re packaging these items up and then selling them as packaged items. Sometimes that value added process of packaging it, bulking it and then selling it will be enough for the factor or P.O. financer to look at favorably. The distributor has provided enough value-add or altered the product enough where PACA does not necessarily apply.

Another example might be a distributor of produce taking the product and cutting it up and then packaging it and then distributing it. There could be potential here because the distributor could be selling the product to large supermarket chains – so in other words the debtors could very well be very good. How they source the product will have an impact and what they do with the product after they source it will have an impact. This is the part that the factor or P.O. financer will never know until they look at the deal and this is why individual cases are touch and go.

What can be done under a purchase order program?

P.O. financers like to finance finished goods being dropped shipped to an end customer. They are better at providing financing when there is a single customer and a single supplier.

Let’s say a produce distributor has a bunch of orders and sometimes there are problems financing the product. The P.O. Financer will want someone who has a big order (at least $50,000.00 or more) from a major supermarket. The P.O. financer will want to hear something like this from the produce distributor: ” I buy all the product I need from one grower all at once that I can have hauled over to the supermarket and I don’t ever touch the product. I am not going to take it into my warehouse and I am not going to do anything to it like wash it or package it. The only thing I do is to obtain the order from the supermarket and I place the order with my grower and my grower drop ships it over to the supermarket. “

This is the ideal scenario for a P.O. financer. There is one supplier and one buyer and the distributor never touches the inventory. It is an automatic deal killer (for P.O. financing and not factoring) when the distributor touches the inventory. The P.O. financer will have paid the grower for the goods so the P.O. financer knows for sure the grower got paid and then the invoice is created. When this happens the P.O. financer might do the factoring as well or there might be another lender in place (either another factor or an asset-based lender). P.O. financing always comes with an exit strategy and it is always another lender or the company that did the P.O. financing who can then come in and factor the receivables.

The exit strategy is simple: When the goods are delivered the invoice is created and then someone has to pay back the purchase order facility. It is a little easier when the same company does the P.O. financing and the factoring because an inter-creditor agreement does not have to be made.

Sometimes P.O. financing can’t be done but factoring can be.

Let’s say the distributor buys from different growers and is carrying a bunch of different products. The distributor is going to warehouse it and deliver it based on the need for their clients. This would be ineligible for P.O. financing but not for factoring (P.O. Finance companies never want to finance goods that are going to be placed into their warehouse to build up inventory). The factor will consider that the distributor is buying the goods from different growers. Factors know that if growers don’t get paid it is like a mechanics lien for a contractor. A lien can be put on the receivable all the way up to the end buyer so anyone caught in the middle does not have any rights or claims.

The idea is to make sure that the suppliers are being paid because PACA was created to protect the farmers/growers in the United States. Further, if the supplier is not the end grower then the financer will not have any way to know if the end grower gets paid.

Example: A fresh fruit distributor is buying a big inventory. Some of the inventory is converted into fruit cups/cocktails. They’re cutting up and packaging the fruit as fruit juice and family packs and selling the product to a large supermarket. In other words they have almost altered the product completely. Factoring can be considered for this type of scenario. The product has been altered but it is still fresh fruit and the distributor has provided a value-add.

The idea for factoring/P.O. Financing is to get into the nuts and bolts of every single deal to ascertain if it is doable.