You Want to Start a Business? First, Ask Yourself These Questions

So, you have what you think is a great idea for a small business. Before taking the plunge, there are a few key questions you should ask yourself.

Questions about your personality, your plans and your goals. Questions about your finances and your working habits. Questions about your motivation.

Figuring out the answers will help you decide whether you’re ready to take the big step and launch a company, as well as see potential problems down the road. That has never been more important than now, with so many small businesses struggling and so many laid-off corporate employees looking to strike out on their own.

Here’s a look at some of the questions that entrepreneurship experts, small-business advisers and company founders urge people to ask themselves.

How does this end? What is a win for me?

For anyone considering a new business, Charles Sacco, assistant dean of strategic initiatives at Drexel University’s Charles D. Close School of Entrepreneurship, recommends starting at the end and defining the goals of the venture. Are you hoping to scale the business and sell it for millions? Or will it just be a hobby business that fills extra hours on weekends and evenings around other commitments? If you don’t define the goal from the start, you may end up pursuing a path that doesn’t make sense for the business or the people involved. Knowing what you’re aiming for could also be the difference between feeling satisfied or frustrated.

Being clear about business goals—including money, scale, control, economics and time horizon—is especially important if a partner or a team of people is involved. “Sometimes they have different views of what success looks like,” Prof. Sacco says. “And if they don’t agree on what their goals are before they start, then the rails fall off pretty quickly when things get tough.”

What do I want my life to look like in 10 years?

Don’t just consider the future of the company itself, though. Think about the bigger picture.

Jane Winchester Paradis, founder of the Jane Win Jewelry line of pendants and charms, based in Wayne, Pa., says too many people focus strictly on their business goals instead of how the company fits into their life. Do you like to travel internationally for work? Is dinner at home every night a priority? Are you looking for the flexibility of setting your own hours and taking Fridays off? The type of business you choose will often determine the kind of life you’ll live.

“Once you have a vision of the ending, you can see what the building blocks are at five years, three years and one year,” she says.

Do I have five to 10 years of stamina for the idea?

Why five to 10 years? It takes that long for a business to get established. You might be enthusiastic about an idea now, but ask yourself, “Will I jump out of bed to do this in 10 years?” says Phil Black, founder of the PrepWell Academy online-mentoring program for the college-admissions process, and the only entrepreneur invited to appear on “Shark Tank” three times.

So, you need to figure out: Does the idea of starting a business today sound better than the actual long-term work of building a business for the next decade? Enthusiasm is often an abundant commodity at the start, but it can dry up when the business becomes a daily grind—or when the very survival of the business is challenged.

A good place to start is a vigorous self-audit. One part of that, says Mr. Black, is to ask: “Have I persevered through difficult things when they go sideways?” If not, did you reach out and ask for help? Or did you shut down and shut others out of helping you complete the task at hand?

Do my strengths and weaknesses make me a good fit for this work?

That self-audit can also highlight skills that might need to be brought in or outsourced. Initially, Janine Higbie, holistic nutritionist and founder of New York-based JH Wellness, tried to do everything herself. But she quickly realized that she was spending weeks trying to get her website just right at the expense of seeing clients and developing her company. She could have learned the HTML needed for her website, but she was building a wellness business—not a coding business. “I realized that there were different skill buckets in building a business,” she says. “I needed to figure out which to do on my own and which to hire.”

Can I be profitable?

It sounds simple, but Prof. Sacco says people often don’t do the math before they jump in. If they are selling a product, they often don’t think about all of the costs involved, such as materials, packaging and shipping. A detailed accounting of all potential costs is key before asking, “What would I need to charge to make a profit?”

The exercise is equally important when there is no physical product. If you’re selling an app to businesses, for instance, you may figure that you have low overhead and need just 1,000 customers to turn a profit—until you realize that each customer will take at least a two-hour sales call to sign up. That investment of time is a crucial consideration, and it might make the venture look a lot less attractive.

What are the core values I want for the business—and how do they conflict with profitability?

It’s easy for a founder to believe in certain core values, and imagining those core values as defining the company as well. But it’s crucial to understand what those values mean in concrete business terms. If an informational website is committed to having no advertising, is there an alternative model for making money? If that new juice stand is committed to using only locally sourced produce, can it still be profitable operating only seasonally, when the local foods are available?

Sometimes those problems aren’t obvious at first. For instance, a key part of Ms. Paradis’s mission was to make her keepsake jewellery in the U.S.—but the gold-plated brass wasn’t standing up to everyday wear.

It seemed she faced several options. To maintain her current prices while upgrading her materials, she would have to move to cheaper production overseas. If she upgraded and stayed in the U.S., she’d have to charge more.

But her company’s core values made her go with a different option, even though it was costlier for her in the short term. She upgraded and stayed in the U.S.—but kept her prices the same. That meant accepting lower margins and a longer timeline to profitability, but it also allowed her to stay true to her mission.

“We knew it was the right thing for the customer,” Ms. Paradis says. “And we would create a long-lasting relationship with the customer and she would buy more over time.”

The plan worked. The company turned a profit in 2019, its second year of operation, and last year, Ms. Paradis started paying herself.

Is anyone else doing this? If it has been tried and flopped, would my experience be different?

These questions can help entrepreneurs zero in early on the major pain points of the problem they are trying to solve. Competition should not be an immediate deterrent, but assessing those competitors and their trajectories is critical.

“What is their origination story, who are their founders, who are their advisers and investors, have they already pivoted” are just some of the questions Prof. Sacco forces his students to answer. The exercise obviously helps prevent repeating the mistakes of others, but it can also highlight where there is room for improvement over other startups in the space.

One helpful exercise, known as a “pre-mortem”: Imagine all the ways your business could fail. Identifying and owning crucial problems at the start can prevent your being blindsided down the road. Did you make an assumption about market size? Your customer? The urgency of the problem?

Greg Fisher, assistant professor of entrepreneurship at Indiana University’s Kelley School of Business, has students gather as founding teams to discuss the errors and mistakes that led to the theoretical failure of the business—forcing them to search for and find challenges that would derail the actual company in practice. The exercise helped one budding entrepreneur recognize that no matter how great his electronic healthcare-records software might be, the regulatory hurdles were too great to warrant the years of his time and money.

How much am I prepared to put in—and lose entirely?

Prof. Fisher says the “affordable loss principle” is key when starting out. “Without it, each stage, every decision and every investment return calculation can be crippling,” he says. If coming up with an actual number is difficult, Prof. Fisher says, ask yourself: “What amount of capital could you easily justify to your significant other and/or parents?” If the answer is zero, then you probably shouldn’t be starting a new business.

Why will someone part with their discretionary income and buy this?

Prof. Sacco says that too many entrepreneurs are focused on the product—what it does, how cool it is and what it looks like. He pushes them to focus on what drives the purchase decision. Often, that means recasting the service or product as being more than simply functional or beautiful—but solving a problem. Will having this item in my home impress other people? Will using this app help relieve stress? What is the “more” of your business that taps into human emotions? That is what creates a customer.

Serial entrepreneur Mr. Black takes it a step further. “Will people love it enough to tell other people about it? Is there a way to leverage other people and let them do the heavy lifting of marketing for you?”

What kind of peer mentorship or industry experience do I need?

Every industry has its own nuances, landscape and dynamics. Even if you’ve worked in the field before, starting your own business will force you to approach it from a whole new angle.

That is why it is important to figure out what it will take to get to know the players in the industry, how they operate and what challenges they are facing. When Prof. Sacco’s technology company started building out software for the hotel industry, he and his team had no background in hospitality. “We started going to conferences, joining associations and reading journals. It was important to learn the language of the industry and how decisions are made.” For Ms. Higbie’s nutritional-consultation business, it meant finding a network of peers who were a few years ahead of her and could give guidance on issues like payment systems and help with tax and legal questions.

Do I want to spend that much time by myself?

Working for a company often means co-workers and camaraderie and a generous budget. A startup is very different.

“All of a sudden I was self-funded, working from home, alone, every day,” says Ms. Paradis. “I got told ‘no’ 100 times a day. It takes a lot of mental strength to deal with those challenges with no external energy.”

Loneliness can be the unexpected downfall for an entrepreneur just a few months in. Prof. Sacco advises solo entrepreneurs to build out their “virtual team” from the start—including advisers, mentors, service providers and family and friends who will be critical to their journey and their success. He recommends setting up regular check-in calls with them to establish a routine of engagement and feedback.

Prof. Fisher of Indiana University also endorses a support network, but he calls on his solo entrepreneurs to consider the ultimate alternative—find a co-founder. “Ventures founded by two or more people are more likely to be successful,” he says, “and having one other person to walk the road with you can make a big difference.”

If the business doesn’t go as planned, are there other benefits to make it worthwhile?

While a successful business is certainly the goal when launching anything new, look for other advantages and opportunities that can make the venture worthwhile. When starting his San Diego-based mentoring business, Mr. Black knew that he—the father of four boys on the verge of the college process—wanted the product and knowledge himself, whether the business succeeded or not. And indeed, his family has already benefited from the business and Mr. Black’s increased knowledge of the process. His twin boys, just completing their senior year in high school, were both admitted early to Yale University.

Ms. Higbie thinks that when her two young children are older, she may want to pivot to school-nutrition reform advocacy in addition to private clients. To further her knowledge and network, she looks for opportunities where she can write and speak on wellness and holistic nutrition.

“Having worked for a big company for 10 years, I knew I wanted my business to be different,” she says. “Something that I could grow and evolve, where I wouldn’t get bored or complacent.”

If there’s a major crisis, shutdowns and stay-at-home orders, how will I respond?

Clearly, no one writes a small-business plan with a section titled “what to do in a global pandemic.” But being prepared for a major crisis—or at least recognizing one could happen—is important to consider when starting out. Is your idea one that can pivot? What if you lost your major supplier? What if international shipping were halted? Or the U.S. Mail stalled? Trying to pandemic-proof your business at the start could highlight important weaknesses that can be addressed before they jeopardize the business.

“When starting a business, you have your plan, but during the pandemic, I learned that you need a backup plan and a backup plan for your backup plan,” says Ms. Paradis. When the factories making her jewelry in New York were deemed nonessential and shut down, she had to shift production to Rhode Island. When Rhode Island couldn’t keep up with demand, the business focused on making new seasonal items at its Pennsylvania offices, with materials they already had on hand.

Ms. Paradis says learning to survive and thrive through the pandemic has made her production base more diversified. “When things are going well, you can get lazy and rely on that one factory, but getting to three or four suppliers you can count on is important.”

Teaching entrepreneurship during the pandemic, Drexel’s Prof. Sacco pushes students and small businesses to see the changes in customer behaviour brought about by Covid as an opportunity. “One of the hardest things to do as an entrepreneur is to get people to do new things and change their behaviours,” he says. “The pandemic has already forced those changes—so it’s the optimal time to consider whether your business can tap into those new behaviours.”

For nearly a decade, workers in a warehouse in Seattle’s Denny Triangle neighbourhood have shipped boxes of shoes, beach chairs, Marvel T-shirts and other items to online retail customers across the U.S.

The operation, called Big River Services International, sells around $1 million a year of goods through e-commerce marketplaces including eBay , Shopify , Walmart and Amazon .com under brand names such as Rapid Cascade and Svea Bliss. “We are entrepreneurs, thinkers, marketers and creators,” Big River says on its website. “We have a passion for customers and aren’t afraid to experiment.”

What the website doesn’t say is that Big River is an arm of Amazon that surreptitiously gathers intelligence on the tech giant’s competitors.

Born out of a 2015 plan code named “Project Curiosity,” Big River uses its sales across multiple countries to obtain pricing data, logistics information and other details about rival e-commerce marketplaces, logistics operations and payments services, according to people familiar with Big River and corporate documents viewed by The Wall Street Journal. The team then shared that information with Amazon to incorporate into decisions about its own business.

Amazon is the largest U.S. e-commerce company , accounting for nearly 40% of all online goods sold in the U.S., according to research firm eMarketer. It often says that it pays little attention to competitors , instead focusing all its energies on being “customer obsessed.” It is currently battling antitrust charges brought last year by the U.S. Federal Trade Commission and 17 states, which accused Amazon of a range of behaviour that harms sellers on its marketplace, including using anti-discounting measures that punished merchants for offering lower prices elsewhere.

Workers filled orders at an Amazon fulfillment center in Garner, N.C., in 2021. PHOTO: JEREMY M. LANGE FOR THE WALL STREET JOURNAL

The story of Big River offers new insight into Amazon’s elaborate efforts to stay ahead of rivals. Team members attended their rivals’ seller conferences and met with competitors identifying themselves only as employees of Big River Services, instead of disclosing that they worked for Amazon.

They were given non-Amazon email addresses to use externally—in emails with people at Amazon, they used Amazon email addresses—and took other extraordinary measures to keep the project secret. They disseminated their reports to Amazon executives using printed, numbered copies rather than email. Those who worked on the project weren’t even supposed to discuss the relationship internally with most teams at Amazon.

An internal crisis-management paper gave advice on what to say if discovered. The response to questions should be: “We make a variety of products available to customers through a number of subsidiaries and online channels.” In conversations, in the event of a leak they were told to focus on the group being formed to improve the seller experience on Amazon, and say that such research is normal, according to people familiar with the discussions.

Senior Amazon executives, including Doug Herrington , Amazon’s current CEO of Worldwide Amazon Stores, were regularly briefed on the Project Curiosity team’s work, according to one of the people familiar with Big River.

Some aspects were more Maxwell Smart than James Bond. The Big River website contains a glaring typo, and a so-called Japanese streetwear brand that the team concocted lists a Seattle address on its contacts page. Big River’s team members list Amazon as their employer on LinkedIn—potentially blowing their cover.

The LinkedIn page of Max Kless, a former eBay executive who led Big River in Germany before moving to a senior role on the team in the U.S., says that he “developed and led a research subsidiary for Amazon in Germany that prototyped and researched new experiences for Small Business sellers and developers.” Kless didn’t respond to requests for comment.

“Benchmarking is a common practice in business. Amazon, like many other retailers, has benchmarking and customer experience teams that conduct research into the experiences of customers, including our selling partners, in order to improve their experiences working with us,” an Amazon spokeswoman said. Amazon believes its rivals also carry out research on Amazon by selling on Amazon’s site, she said.

Focus on Walmart

Virtually all companies research their competitors, reading public documents for information, buying their products or shopping their stores. Lawyers say there is a difference between such corporate intelligence gathering of publicly available information, and what is known as corporate or industrial espionage.

Companies can get into legal trouble for actions such as hiring a rival’s former employee to obtain trade secrets or hacking a rival. Misrepresenting themselves to competitors to gain proprietary information can lead to suits on trade secret misappropriation, said Elizabeth Rowe, a professor at the University of Virginia School of Law who specialises in trade secret law.

Amazon for years has had what it calls a benchmarking team that sizes up rivals to ensure the best experience for people who shop on its site. The team has placed orders on websites such as Walmart.com for delivery around the U.S. to test things such as how long it takes competitors to ship. Other companies also have teams to compare themselves to rivals.

In late 2015, Amazon’s benchmarking team proposed a different sort of project. The business of hosting other merchants to sell their products on Amazon’s platform was becoming increasingly important. So-called third-party sellers on Amazon’s Marketplace, which the company started in 2000, surpassed half of the company’s total merchandise sales that year, and rival retailers had started similar marketplaces.

Amazon wanted to better understand and improve the experiences of those outside vendors. The team decided to create some brands to sell on Amazon to see what the pain points were for sellers—and to sell items on rival marketplaces to compare the experiences, according to the people familiar with the effort.

The benchmarking team pitched “Project Curiosity” to senior management and got the approval to buy inventory, use a shell company and find warehouses in the U.S., Germany, England, India and Japan so they could pose as sellers on competitors’ websites.

The benchmarking team reported into the chief financial officer, Brian Olsavsky , for years, but this year changed to report to Herrington, the consumer chief. Olsavsky and Herrington didn’t respond to requests for comment made through Amazon.

Once launched, the focus of the project quickly started shifting to gathering information about rivals, the people said.

In the U.S., the Big River team started by scooping up merchandise from Seattle retailers holding “going out of business” sales. Some of its first products were Saucony sneakers from a local retailer that was closing. The company registered for a licensing agreement with the popular Marvel superhero franchise to sell Marvel-branded items, and bought items including Tommy Bahama beach chairs from Costco to resell.

In the pitch, Project Curiosity leaders identified online marketplaces that they wanted to sell on, including Best Buy and Overstock.

The top goal was Walmart, Amazon’s biggest rival. But Walmart had a high bar for sellers on its marketplace, accepting only vendors who sold large volumes on other marketplaces first. Big River initially couldn’t qualify to be a Walmart Marketplace seller, but it did sell on Jet.com, which Walmart acquired in 2016 and later closed in 2020. And in India, it sold on Flipkart, the giant Indian e-commerce marketplace in which Walmart owned a majority stake.

In order to meet Walmart’s revenue threshold, the Big River team focused on pumping products through Amazon.com to bolster its overall revenue, some of the people said. Big River’s goal wasn’t to do massive amounts of volume on the competing platforms, but to simply get on them and gain access, they said.

The Amazon spokeswoman said that in 2023, 69% of Big River revenue worldwide was on Amazon.com.

In 2019, Big River finally got onto Walmart’s website. This month, Big River had around 15 products listed on Walmart.com under the seller name Atlantic Lot, including Tommy Bahama beach chairs, cooking woks and industrial-size food containers. In 2023, Big River had more than $125,000 in revenue on Walmart.com alone, according to a person familiar with the matter.

Walmart wasn’t aware that Amazon ran the seller accounts on the Walmart and Flipkart sites before the Journal told it, according to a person familiar with the matter.

Rivals’ logistics services

Atlantic Lot is listed as a “Pro Seller”—a distinction Walmart says is for “top-performing Walmart Marketplace sellers.” Listings show that Walmart Logistics, another Amazon rival, handles storage and shipping for it.

Amazon at the time also was building up its logistics business to store and ship items for sellers for a fee to compete with FedEx and United Parcel Service . The business has boomed over the past decade. Amazon’s total revenue from what it calls third-party seller services has grown nearly twelvefold since 2014 to $140 billion last year, accounting for nearly a quarter of Amazon’s total.

To get information about rival logistics services, the Big River team stored inventory with companies including FedEx. Other targets, according to an internal document, included UPS, DHL, Deliverr and German logistics company Linther Spedition.

FedEx in 2017 launched FedEx Fulfillment, a competitor to Fulfillment by Amazon, for offering logistics to sellers. Big River was accepted into the FedEx Fulfillment program as an early customer, and the team received early details about pricing, rate cards and other terms as a result of the partnership, according to the people. FedEx had several phone calls and email exchanges with Big River team members who represented themselves as Big River employees and didn’t disclose their employment at Amazon, according to some of the people.

The team presented its findings from being part of the FedEx program to senior Amazon logistics leaders. They used the code name “OnTime Inc.” to refer to FedEx. Amazon made changes to its Fulfillment by Amazon service to make it more competitive with FedEx’s new product as a result of the information it learned from the partnership, according to one of the people.

For such meetings, the team avoided distributing presentations electronically to Amazon executives. Instead, they printed the presentations and numbered the documents. Executives could look at the reports and take notes, but at the end of the meeting, team members collected the papers to ensure that they had all copies, the people said.

Big River became a customer of FedEx’s fulfillment program, a competitor to Fulfillment by Amazon. Above, a FedEx facility in Queens, New York. PHOTO: GABBY JONES FOR THE WALL STREET JOURNAL

Amazon took other measures to hide the connection with Big River. Staffers were instructed to use their second, non-Amazon email address—which had the domain @bigriverintl.com—when emailing other platforms to avoid outing their Amazon employment.

“We were encouraged to work off the grid as much as possible,” said one of the former team members, about using the outside email.

Amazon’s internal lawyers reminded Big River team members not to disclose their connection to Amazon in their conversations with FedEx, according to an email viewed by the Journal.

Staffers, who worked in private areas of Amazon offices, were told not to discuss their work with other Amazon employees who weren’t cleared to know about the project. In the early days, some Big River team members had to take time away from their Amazon desk jobs to go to the warehouses to fulfill orders and pack them in boxes to send out.

When gaining access to rival seller systems, Big River members were instructed to take screenshots of competitor pricing, ad systems, cataloging and listing pages, according to the people. They weren’t allowed to email the screenshots to Amazon employees, but instead showed the screenshots to the Amazon employees on the Marketplace side of the business in person so they didn’t create a paper trail, some of the people said. Amazon then made changes it believed improved the seller experience on its site based on the information.

The Amazon spokeswoman said the team was secretive so that it wouldn’t get any special treatment as a seller on Amazon.com.

Still, there were telltales. Registration documents filed with the Washington Office of the Secretary of State for Big River Services, while not mentioning Amazon, list a management team made up of current and former Amazon employees, including lawyers. The management team lists its address as 410 Terry Ave. in Seattle, which is Amazon’s headquarters.

Corporate filings for Big River in the United Kingdom and other foreign countries also named officials who are senior Amazon employees and lawyers. In one U.K. disclosure, Amazon is named as owning more than 75% of the company.

Amazon officials felt confident that competitors wouldn’t look up filings to see who was behind the company, some of the people said.

A Las Vegas conference

Some team members were uncomfortable with the work they were doing, according to some of the people.

Among the anxiety-inducing activities was representing themselves as employees of Big River in person while attending conferences thrown by rivals. For instance, team members attended eBay’s Las Vegas conference for sellers, according to some of the people. EBay describes the event as a way for sellers to meet with eBay management and learn of planned big changes coming for sellers and “exclusive information.”

Benchmarking-team leadership ordered up what Amazon calls a PRFAQ that would outline what to do if competitors or the press discovered the project. In the event of a leak, leadership was to say that the group was formed to improve the seller experience on Amazon.com, and that Amazon pays attention to competition but doesn’t “obsess” over it. They were also told to act like this was normal business behavior in the event of a leak, according to one of the people.

In 2017, Amazon formally changed the name of Project Curiosity to the Small Business Insights team to make it sound less cryptic, some of the people said.

The Big River team invented its own brands to sell on the competing sites, including “Torque Challenge” and “Crimson Knot.”

Teams often changed the brand name once they sold out its inventory, creating new brands when they received new products.

In India, Amazon gained access to e-commerce giant Flipkart in March 2018 with the Crimson Knot brand, around the time rumors of a Walmart acquisition swirled in local media. Walmart bought a majority stake in Flipkart in May of that year.

Crimson Knot makes wooden home goods, with its website’s “About Us” page saying: “Based in a small wood workshop in Bangalore, our dedicated team of 8 skilled craftsmen work consistently to handcraft each piece from scratch, transforming them into stunning showstoppers.”

Crimson Knot still lists products on Flipkart and stores them with Flipkart’s logistics services.

The endeavour wasn’t designed to make money. In 2019, for instance, the Indian Big River team projected revenue of $165,000 while it expected costs of $463,000, according to an internal company document.

Each of the five countries operated a little differently to better test different programs. Globally, in total, Big River gained access to rival marketplaces including Alibaba, Etsy, Real.de, Wish and Rakuten, among many other platforms. In 2019, the team set a goal to get onto 13 additional new marketplaces, according to an internal company document.

The Amazon spokeswoman declined to comment on the number of rival websites Big River operates on.

The Japanese team went so far as to create a streetwear brand with its own website and custom-designed products. They called it Not So Ape, saying it was founded in Tokyo in 2017 and “inspired by the street style we see everyday.”

Not So Ape—which isn’t related to an upscale Japanese streetwear brand called A Bathing Ape—says on its website: “Our name stems from our belief that creative expression is what truly separates us from primates.” Not So Ape has Instagram and TikTok accounts, and its site continues to offer products such as $50 knit beanies and $95 hoodies.

Not So Ape is sold on Yahoo Japan’s marketplace, Zozotown, and uses rival payment services from Shopify, Google and Meta platforms. Its U.S. website is hosted by Shopify—which was the target of a previous effort by Amazon, code named “Project Santos,” to replicate parts of its business model, the Journal has reported.

Not So Ape’s English-language site’s terms of service says it is operated by Big River and lists a Seattle contact address of “2300 7th Ave, Ste B100, Back Entrance”—a building adjacent to a main Amazon campus.