Startup Risk Assessment:
Factor Lower Risk Higher Risk Rank Weight
Market Testability Simple, quick, cheap Expensive
Market Stage Existing Market New Market
Customer Pain Level Must Have Would Be Nice
Months to MNCCF 36+ Months <12 Months
Market Breadth Verticle Horizontal
Competitive Advantage Strong Weak
Strategic Partner Closely Aligned None
Cash Cow <25% of your time None
Customer Channel Established None

Are you asking the right questions?

The point of this calculator is not to give you an exact answer, but to give you motivation to ask strategic questions that could lead to significant risk reductions.

Market Testability

  1. What is limiting your ability to test your ideas now?
  2. What has to happen for you to test at least one aspect of your product market fit assumptions in the next week?

Market Stage

  1. Is there a way to align your product offerings with an existing market - embrace and extend?

Customer Pain Level

  1. What adjustments can we make to the products we envision that would move the needle towards MUST have?
  2. Is there a segment of the market that would consider our a product MUST have?

Months to MNCCF

  1. Can you reduce your overhead early on while searching for a viable business model?
  2. Can you sell other businesses products that serve the same customers but do not compete with you, while trying to learn more about specific customer needs?

Market Breadth

  1. Selling to a horizontal market is at least 10 times more risky that to a vertical market? If you do not have signficant financial backing this is a tremendous risk.
  2. It is much easier for a product targeted at a vertical market to expand to a horizontal market than vice a versa?

Competitive Advantage

  1. This is too complicated to address in a couple sentences. Obviously the more patents, trademarks, etc you have the better. The challenge is trying to patent something while you are still trying to figure out exactly what the market wants. How do you find out what the market wants without disclosing the ideas you end up trying to patent? NDA's can help. Strategic alliances are better: forming alliances with stakeholders who have a vested interest in your success and can help you refine product market fit under NDAs.

Strategic Partner

  1. There are many levels of partners. The most valuable are those that already have traction in your market willing to piggyback your products and services with theirs.
  2. Other types of partners are those that offer strategic services. The challenge with partners, from what I am told, is that you are basically marrying them, so choose wisely. The decision should be made after working with them for months to give the relationship a trial run. Breaking up is hard to do in business as well :)

Cash Cow

  1. Businesses take time. It's not a sprint. Many businesses that have been around for decades got their start by focusing like a laser on solving a very specific problem better than anyone else. That became their cash cow and they carefully evolved the business around that successful offering. Are you laser focused or a flash light diluting your resources?

Customer Channel

  1. Creativity comes in many forms. It takes ingenuity to figure out how to engage with your target market long long before you try to sell to them. "Dig your well before you are thirsty" as Harvey McKay taught.

You can learn more about each risk factor here: Startup Risk Assessment: Going Meta for Smartraprenuers.

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