David Cummings on Startups

7 Questions Every Entrepreneur Needs to Answer

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David Cummings

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Earlier this week I finished Peter Thiel’s new book Zero to One (see my previous post Creative Monopolies on the Mind). My favorite part in the book is where he talks about the seven questions every entrepreneur needs to answer. He provides details for each question and then goes through a few example companies with one that can positively answer the majority (Tesla) and one that can’t (Solyndra).

Here are the seven questions every entrepreneur needs to answer:

  1. The Engineering Question
    Can you create breakthrough technology instead of incremental improvements?
  2. The Timing Question
    Is now the right time to start your particular business?
  3. The Monopoly Question
    Are you starting with a big share of a small market?
  4. The People Question
    Do you have the right team?
  5. The Distribution Question
    Do you have a way to not just create but deliver your product?
  6. The Durability Question
    Will your market position be defensible 10 and 20 years into the future?
  7. The Secret Question
    Have you identified a unique opportunity that others don’t see?

While it isn’t critical to be able to answer every question in the affirmative, it is critical to answer a majority of the questions in the affirmative. One of my favorite lines from the book:

If you don’t have good answers to these questions, you’ll run into lots of “bad luck” and your business will fail.

Entrepreneurs would do well to answer these seven questions and revisit them on a regular basis.

What else? What are some more thoughts on the seven questions every entrepreneur needs to answer?

Comments

7 responses to “7 Questions Every Entrepreneur Needs to Answer”

  1. Buddy Avatar
    Buddy

    I’m having trouble synthesizing the ideas of Creative Monopoly and number 6, Durability — How can any business expect to maintain a creative monopoly for 10-20 years in 2014?

    Whether or not the space you enter is clear or crowded, your business, if successful, will have competitors. The durability question seems to presuppose that the business will maintain the creative monopoly for 20 years.

    Reply
  2. Franco Arda Avatar
    Franco Arda

    Fantastic post again! I will definitely read this part.

    It makes a ton of sense.

    Ok, maybe not #6. I highly doubt whether anyone can see 10-20 years ahead …

    Reply
  3. Fred Schmidt Avatar
    Fred Schmidt

    Great post. Really insightful. What I’m wondering is, what sorts of factors would I look at to determine durability?

    Reply
    1. aiyshah2014 Avatar
      aiyshah2014

      My belief is – an incredibly good team and an incredibly good manager of that team.

      Reply
      1. aiyshah2014 Avatar
        aiyshah2014

        Sorry, also, diversification and risk taking play a part.

  4. aiyshah2014 Avatar
    aiyshah2014

    I think No. 7 is the key. As a business owner myself, I have to say I stumbled upon this business by accident. All I actually wanted to do was a good job for the few customers/clients I had. What soon emerged was something I had never thought about. the fact was that in the market that I was in, very few people were offering such a thing….sounds strange? Well as it turns out most people doing what I was doing were not doing it very well, and so what happened was my business went from a small regular client base of 3 people, to over 300 monthly. (And now internationally a further 1100 monthly, soon to be over 1700)

    So I was forced to make this business big, professional and enduring.

    I always remember someone saying to me years ago. To be successful, all you need to do is to find out what people want/need and deliver it (with bells on!).

    It has worked for me.

    (Ooops…I also have to add that a bit of luck, timing and absolute perseverance through the rough spots are critical too.)

    (So in a nut shell…..many people have asked me what it is that we do that is makes us stand out in the market, and I always reply, we don’t deliver anything different to our customer than anyone else, all we do is deliver it really really well, every single time!)

    Reply
  5. Darragh McCurragh Avatar
    Darragh McCurragh

    As for question 7: this is a potential modifier for all the other aforegoing 6. Because what others don’t see can be a simple thing. As simple as opening a kiosk or ice-cream parlor on a beach where none yet exists. (Due diligence: was there one before and failed? Then why? If not – any counteracting facts, like no planning permission etc.? If not – go for it!). Then no technology needs to be of break-through character. The monopoly will be a given. Your team will come with time. Sales will thrive etc.

    Reply

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