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The 9 most important questions in business

The 9 most important questions in business

Companies fail for a host of reasons. Bad luck plays a role, sure, but disaster usually strikes because of a more fundamental flaw -- in the original idea, the strategy, the execution or all of the above.

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When it comes to building a business, even Warren Buffett would agree that no one can spot every opportunity or anticipate every threat. There are simply too many variables. And in an increasingly competitive global economy, those variables are changing faster than ever before. What entrepreneurs can do is ask the core set of tough questions that govern the fate of any enterprise. Armed with those answers, they stand the best chance of beating some fairly dire odds: Studies estimate that just two-thirds of all start-ups survive the first two years, and less than half make it to the fourth.
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Make no mistake: Digging for those answers is a grueling exercise -- one that takes serious intellectual and emotional honesty. With any hope, the process begins long before money's been spent, products are built and customers are lost.

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The real challenge, though, is to keep digging as the business grows. New opportunities and threats emerge, and yesterday's answers may not -- and probably won't -- suffice. Relentlessly asking the tough questions is how behemoths like Wal-Mart, Microsoft and General Electric stay on top.

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With that in mind, we present the 20 most important questions entrepreneurs need to answer -- and keep answering--to build their businesses. Some highlights:

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1. What is your value proposition?

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This is the single most important question of the bunch. If you can't explain--in three, jargon-free sentences or less--why customers need your product, you do not have a value proposition. Without a need, there is no incentive for customers to pay. And without sales, you have no business. Period.

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2. What differentiates your product from the competitors'?
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Few companies can rely on--let alone afford--clever marketing schemes to separate themselves from the competition. Yes, Starbucks made people believe they wanted $4 caffeinated concoctions, and Louis Vuitton lulled people into shelling out $1,500 for denim handbags, but those are the exceptions that prove the rule. If you want to win in business, you need to offer something tangibly valuable that the competition doesn't. Examples: rock-bottom prices (Wal-Mart); ingenious product design (Apple); extreme convenience (Fed Ex).

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3.How much cash do you need to survive the early years?

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It doesn't matter how much money your business might make down the road if you can't get out of your garage. Plenty of business plans boast hockey-stick-style financial projections but run out of cash before the good times kick in. (Remember all those busted dot-com companies from the tech boom?) Three words: Mind the cash.
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4.What are your strengths?

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Google writes powerful search algorithms; Steinway works wonders with wood; Cisco sniffs out promising new technologies and buys them. Figure out what you're good at and stick to it. An obvious notion, perhaps, but plenty of zealous entrepreneurs lose their way -- especially when the world seems so full of possibilities.
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5. How big is the threat of new entrants?

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If you're smart enough to spy a profitable business opportunity, you can bet competition isn't far behind. Some barriers to entry -- patented technology, a storied brand -- are more fortified than others, but eventually someone will find a way to do what you do faster, cheaper and maybe even better. If not a direct competitor, then a substitute technology might take a chunk out of your hide. (Think what digital film did to Kodak.) The trick: building a loyal following before that happens.
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6. How much power do your suppliers have?

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Convincing customers to buy your products is tough enough without suppliers breaking your back. Basic rule of thumb: The fewer the number of suppliers, the more sway they have. Take the steel industry, which relies on a handful of companies for its iron feedstock. If two of those big guys should get together -- as BHP Billiton and Rio Tinto have been discussing -- they would have significant pricing power, potentially crimping steel producers' margins. On the flipside, beware getting hooked on low-cost providers who don't keep an eye on quality. ("Lead-laced" Barbie, anyone?)
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7. Does the business scale?

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Bill Gates plowed piles of money into developing the first copy of Microsoft Office. The beauty: Each additional copy of that software program costs next to nothing to produce. That's called scale--and it's the difference between modest wealth and obscene riches. What models don't scale? Think service businesses, where the need for people grows along with revenues.
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8. What price will your customers pay?

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Get this answer wrong and you could leave bags of money on the table--or worse, send customers running into the arms of the competition. When Apple sliced the price of its iPhone by a third after only two months on the market, even loyal customers screamed, forcing chief Steve Jobs to apologize and offer a partial rebate. Consultants get paid handsomely to help companies arrive at the right price. For more affordable advice, check out The Six-Step Guide To Pricing Your Product. Wannabe consultants should read How To Price Your Consulting Services.
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9. How committed are you to making this happen?

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About a year ago, Chuck Prince, recently resigned chief executive of Citigroup, addressed a group at New York University's Stern School of Business. An audience member asked what life looked like at the helm of such a colossal firm. Prince responded that, save for a few exceptions, every evening for the next five months was already accounted for. Fair warning: If you want to run the show, get ready to give everything -- and then some.
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Slideshow: The 20 Most Important Questions in Business

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India drops down 2 places in HDI, ranks 128th

India drops down 2 places in HDI, ranks 128th

India's position among the 177 countries on the Human Development Index (HDI) stumbled down by two points to end at 128 as per the latest Human Development Report (HDR) released by the United Nations Development Programme (UNDP) here on Tuesday. In 2006, India ranked 126 out of 177 countries in the HDI that provides a composite measure of the three dimensions- life expectancy, adult literacy and standard of living -- of human development. Iceland has left Norway behind to take the top post this year. Norway had held the number one rank for the past six years. The HDI rankings this year do not include 17 UN member nations, including Afghanistan and Iraq, due to insufficient reliable data.

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Planning Commission Deputy Chairman Montek Singh Ahluwalia released the report in the national capital today. According to "the Human Development Report 2007-08 - Fighting Climate Change: Human solidarity in a divided world," the global climate change threatens to undermine India's efforts to improve the well-being of its poorest people. The report, which focuses on the impact of climate change on the world's poor and vulnerable, highlights that the role of energy in human development is reflected in the record of CO2. According to the report, China and India are the largest emitters of CO2 among the developing nations. The report says, in India changing rainfall patterns could result in drops in agricultural productivity, directly affecting 60 per cent of the population, who rely on this sector. The continued retreat of the Himalayan Glaciers could increase water scarcity, affecting 500 million people in South Asia, it adds. The report calls for greater efforts in developing countries to 'climate proof' infrastructure, deepen social protection for those most vulnerable, build community resilience and strengthen disaster response. To fund these critical adaptation measures, the report recommends that 86 billion dollars be transferred from developed countries, who bear the historical responsibility for climate change, to developing countries between now and 2016.

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The latest HDR has put a threshold limit of two degrees Celsius as the increase in the global temperature since breaching this benchmark would lead to irreversible and unavoidable dangers of the Climate Change. The report further argues for a global carbon budget of the 21st century- the amount of carbon that can be absorbed creating an even probability that temperatures will not rise above two degrees -- that would see emissions drop to sustainable levels. It recommends that developed countries make deep and early cuts to their emissions so that by 2050 they are emitting 80 percent less carbon than in 1990. Kevin Watkins is the lead author of this year's report, which an independent report is commissioned by the UNDP.