PCM - A Simple Tool for Considering any Business Venture

In a preceding column, I discuss how a simple tool may be more effective when making complicated organic level judgements, in that case that of considering the value of employees. Here I suggest a different tool, one for considering the potential success of a business venture I call PCM.

CPM stands for PEOPLE, CONCEPT, and MONEY, which I submit comprehensively covers the potential success of any venture. Do you have the right PEOPLE to make it happen? Is your CONCEPT valid? How will the MONEY flow?

People are generally the most important factor; a good team with an average idea is generally preferable to a poor team with a great idea.

Nevertheless, a concept must be valid to begin with. For example, a business to represent convicted felons as housesitters is seemingly a failure conceptually. One would certainly think so.

With regard to the money flow, this refers not only to the entity but the capital structure. For example, a business that one might expect, based on the concept and people, to make $1 million in its second year might sound good. However, if you had to invest $5 million for 10% (making your portion of these earnings owned $100,000) it then makes the flow of money to you not so great. Thus the flow of money is meant to refer not only to operationally, at the entity level, but to the person considering any participation. Considering money flow at only the operational level is more of a consideration of the probability of ongoing viability than to how well one might individually do with a participation.

I've used this to quickly consider a number of business opportunities, sometimes finding the answer is a resounding yes, but other times finding that one of the three pillars, P,C, or M, has a weakness. I believe this methodoloy has made me a bit more effective at quickly considering business opportunities.