Got a Business Idea? Billionaire Stephen A. Schwarzman Has 3 Questions to Ask Yourself Before Launching It. If you're going to start a business, it must pass three basic tests, says the CEO of global private equity firm The Blackstone Group.

The following excerpt is from Stephen A. Schwarzman's book What It Takes: Lessons In the Pursuit of Excellence. Copyright © 2019 by Stephen A. Schwarzman. Reprinted by permission of Avid Reader Press, an Imprint of Simon & Schuster, Inc.

I once attended a meeting of student entrepreneurs at a top American university. A professor of entrepreneurship showed a slide illustrating all the steps a startup must take, from hiring people and raising money to developing a product and going to market. His slide showed the business on a predictable, upwardly curving trajectory hitting various milestones. If only, I thought to myself. My experience of entrepreneurship was anything but a smooth, upward curve. It was so grueling that I have never understood the idea of people wanting to be "serial entrepreneurs." Doing it once is hard enough.

By the time the professor stopped talking and passed the microphone to me, I had decided these students needed a reality check. If you are going to start a business, I told them, I believe it has to pass three basic tests.

Three Tests for Your Business Idea

First, your idea has to be big enough to justify devoting your life to it. Make sure it has the potential to be huge.

Second, it should be unique. When people see what you are offering, they should say to themselves, "My gosh, I need this. I've been waiting for this. This really appeals to me." Without that "aha!" you are wasting your time.

Third, your timing must be right. The world actually doesn't like pioneers, so if you are too early, your risk of failure is high. The market you are targeting should be lifting off with enough momentum to help make you successful.

If you pass these three tests, you will have a business with the potential to be big, that offers something unique, and is hitting the market at the right time. Then you have to be ready for the pain. No entrepreneur anticipates or wants pain, but pain is the reality of starting something new. It is unavoidable.

Build the Right Team

Real companies don't just happen. Raising money and recruiting good people is very hard. Even when you are small, though, and your resources most constrained, finding the right people is the most important thing you can do. You typically won't have access to the best, who are working elsewhere at much higher compensation levels. You have to make do with the people you get. That means, at a minimum, you must reduce your criteria to a simple question: Does this person have the same zealous commitment to the mission of this business as you do?

When Phil Knight was building Nike, he hired other distance runners to work with him because he knew that whatever they lacked in terms of business knowledge, they made up for in stamina. They would never give up. They would take the pain and make it to the end of the race despite the difficulties.

When you start a company, you are usually happy to find anyone of quality willing to go on the journey with you. But as you grow, you realize that some people are like wide receivers in football with hands of stone. You throw to them, and the ball just bounces off them. Others have hands like glue. As a decent person you think your role is to coax the 6s and 7s out of 10. If you keep them, you will end up with a dysfunctional company where you do all the work, staying up all night with the few people who can make it happen.

You have two options: Either run a middling company going nowhere or clear out the mediocrity you created so you can grow. If you are ambitious, you have to fill your company with 9s and 10s, and give them the difficult tasks to do.

Be Paranoid

Finally, to succeed as an entrepreneur, you have to be paranoid. You always have to believe your company, regardless of size, is a little company. The moment you start to become big and successful, challengers will appear and do their best to take your customers and defeat your business. You are never more vulnerable than at the moment you think you have succeeded.

Many founder-led companies stumble trying to make the transition from scrappy startup to a well-managed machine. Entrepreneurs often prefer to trust their instincts rather than the more orderly systems that professional managers use. Entrepreneurs often resist any limits placed on those instincts and the energy that brought their company into existence. But eventually it is those limits that create the foundation for the next phase of growth. The turbulence of starting a firm must at some point permit systems to be implemented that allow other people to help drive the organization forward.