Conducting a business analysis to find out if a business can become profitable is not an easy task.
However, in this post, we will continue to teach you step by step how to apply the star matrix to your business idea.
This is the third part in a series of articles in which we will teach you how to use this tool through a testing company.
So I leave you the following links so that you can read both articles.
On this occasion you will now learn to assess your passion for your business, you will also know the bottom line of the 5 dimensions in which you will know if your business is profitable enough to run it.
You are ready?
So let’s get started!
Introduction to the Star Series
In short, we’ll teach you how to judge if you’re passionate enough to make your business idea a reality.
We will continue to use our testing company JM Sports.
Anyone who launches a business idea will initially be passionate about the implementation. That’s for sure!
However, maintaining that commitment in tough times is quite a challenge.
In this sense, the star matrix evaluates this dimension through a questionnaire that is divided into 3 question blocks.
- Entrepreneurial attitude.
- The love of ideas and
- The ability to sacrifice.
After answering each of the questions, you must assign them a score:
- Positive point (+) for those answers that indicate a high level of passion for the idea.
- A neutral point (0) for the answers that do not contribute passion for the business.
- And a minus point (-) for answers that distract from the idea.
Now let’s get to know Juan’s passion for his JM Sports company.
Let’s start with the evaluation of block 1.
Block 1: The entrepreneurial attitude
These are the key questions to assess Juan’s attitude towards his business idea.
Let’s move to Block 2:
Block 2: Love for the idea
Pay attention to the following questions.
Let’s continue with our last set of questions.
Block 3: sacrifice capacity
We have finished our question and answer session. Now let’s analyze the company’s earnings. Consider!
Now how does the star matrix qualify the results of this assessment?
Using the colors and weights already defined. Pay attention!
- The range of 7 to 10 points represents a great passion for the idea.
- The second interval, from 5 to 7 points, shows that the entrepreneur is highly motivated.
- The interval from 3 to 5 points indicates that there is a risk, so the remaining edges must be green.
- Finally, the fourth interval between 0 and 3 points means that it is better not to do anything.
Now we enter the results into the star matrix:
For JM Sports the final score was 7 points so we believe Juan has a great passion for the business idea.
With that in mind, let’s paint the border green and give it a weight of 20%.
We’re done with our review!
Finally, we will evaluate whether Juan’s idea is profitable or not.
Once all the edges of the star matrix have been analyzed and you add a score of at least 60%, your business idea will be considered very profitable.
Look at the table below:
We recommend Juan to take his business idea to the start as there is a high probability that it will be profitable.
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At this point you know how to use the star matrix as a tool to perform business analysis.
The star matrix evaluates the 5 edges or dimensions of a business idea to find out how profitable the implementation is.
These 5 edges are:
- Opportunities: It shows the different business options without doing any prior analysis.
- Capacities: Allows assessment of the human, financial and technical resources to achieve the initial objective.
- Competition: analyzes the rivalry of the most immediate market.
- Environment: evaluates the industry and allows defining the model to be more competitive.
- Passion: measures the commitment of the work team.
Now, as you do this business analysis, you will see how your idea can evolve into something safer, more profitable, easier to implement, and your passion will likely increase.
In previous parts, we explored how the idea came about and why Juan and his friend decided to use the Star Matrix to rate their attractiveness.
In addition, we also examine and analyze the first 4 edges of the star matrix.
Do not miss!
Thank you for reading us.
Until next time!