Business road test or comprehensive analysis of your startups commercial viability
First introduced in 2003 by London Business School Professor John Mullins “business road test” is a seven domain framework which assesses how good are the chances to succeed with your new venture.
1. Macro market
The top left in Mullins’ framework is the market domain at the macro-level. Here you look at the attractiveness of the market from a macro perspective, how big is the market, how many customers are there, is the market growing or is it likely to grow in the coming years. You can apply frameworks such a PEST analysis to help to analyse it.
2. Macro industry
The top right in the framework is the industry domain at the macro-level. Here you dive down on market pressures. You analyse barriers to entry and use quantitative and qualitative secondary research along with market research to find out the gaps in the market.
3. Micro market
The bottom left in Mullins’ framework is the market domain at the micro-level. Here you assess which market segments you should target your venture or product to; you use quant and primary qualitative research along with market research to find out what are the unique value proposition is relative to the rest of the market.
4. Micro industry
The bottom right in the framework is the industry domain at the micro-level. Here you evaluate how you compare with others in your space, what are your core competencies, what is there a unique selling proposition, how are you compared to the competition, your critical success factor (CSF).
5. Person & People
Next, you analyse the ability to execute on critical success factors. Then, connectedness across the value chain. Team and people are at the core of the Mullins model and that’s right as if you have the right people with the right skills, which is also the company’s CSF, doing the right thing, then you, as an entrepreneur will be happy and will not have to worry for the rest of your life.
6. Cash & Risks
This section is designed to project the cash flow for the company and work out key ratios to evaluate the feasibility of the business from the financial perspective.
There are various projection methods available, the data can be collected from the secondary sources and modelled into cash flow. For the service industry the very simple option is to break down into thirds: one-third fixed costs, one third variable costs, one third [margin]. The percentages can vary quite a bit, but it’s a good rule of thumb.
Once all above sections are covered the results can be calibrated in a table which will consist of the conclusions from each part of the analysis with the indication whether those conclusions are plus or minus for the feasibility of the business.
Headings to analyse to decide feasibility / Conclusions / +- for the biz
As you sum up all the pluses and minuses you have a picture of the viability of your project. From there, you can see what you need to address for the analysis to have a positive result i.e. to have all seven pluses.
References:
Morrison CM., 2014–2020. M059 CULC.
Mullins, J., 2017. The New Business Road Test.
