Thinking About Starting Your Own Business? Answer 5 Questions First!
When you start thinking about opening your own business a key part of the process is to examine your heart. This means that as a potential business owner, you should take the time to honestly consider your current situation, your capabilities, your preferences, and your own personal management style.
Not having the structure of an established company to rely upon means that you, as the business owner, are responsible for everything. Every customer, every request, every piece of supply and inventory that needs to be ordered, every complaint, every dollar coming in and going out, not to mention every employee and every tax return, become your responsibility.
Are you ready not to take a vacation for a couple of years? Do you have the self confidence, the unbounded enthusiasm, and the discipline needed to make decisions and solve problems every day? When you are on your own, there is no boss telling you what to do or giving you the evil eye for arriving late. Do you have the self confidence to manage the company's finances, complete a budget, manage cash flow, and post journal accounts to your accounting software?
Here are 5 key questions to consider when contemplating your jump into the entrepreneur's pool:
Is your business concept sound?
Your business idea must be able to meet customer needs and do so at a profit. This question can be answered by doing a feasibility analysis. During my years as a business advisor, I hear many great ideas. In fact, I can't remember a bad one. But some of those ideas are presented by people who tell me that "No one else is doing this." Well, the reason no one might be doing it is because no one wants the product or service or maybe it cannot be produced at a profit. So you can see that pre-venture market research to see if there is a demand for your product or service is critical.
How will you finance your start up?
Here is a hard, cold fact. Lenders do not like to make loans to start up companies. Now this doesn't mean they do not make loans to a new business venture but you should have an alternative source of funds other than a traditional lender. Even before you think about how you will finance your business, you need to know how much cash is required to get you through, at least, twelve months of operations.
Who are my competitors?
When I hear "I have no competition", I think that the person has not done their research. Every business has a competitor. You want to identify businesses that provide similar products or services, of course, but you also want to learn what potential customers are doing instead of choosing products or services like yours. For instance, say I want to open a bagel shop in a strip mall. There might be no bagel shops within a five mile radius. Can I say "I have no competition"? Well maybe there is a donut shop at the end of the strip mall. I think you see my point. And if your product is available on the internet, your competition can be located anywhere in the world!
How will you let people know about your business and how much will it cost?
Before you can develop a marketing plan the owner of the business needs to do quite a bit of research. First, what makes your product or service unique? What value does my business provide? How will I compete? And please, do not say price. Next, you need to determine who your customers are and where they live or work. Just as "I have no competition" is not credible, when defining your target audience, the statement "Everyone is my target customer" is not believable either. Finally, a creative, branded marketing plan that encompasses every which way a customer comes into contact with your business can cost money. Little things like signs, business cards, websites, uniforms, etc. need to be developed and priced out.
What are the critical risks to my business?
If you get critically ill, who is going to run the business? If a supplier goes out of business, how will you get inventory? If legislation is passed regulating my industry (e.g. tanning salons) how will it affect my customers? How will you place your next order for inventory if your major customer is late with a payment?
So while leaving the office and your bossy boss might seem like a greener pasture, opening your own business might leave you longing for the mindless gossip and office politics of days past. But if you have what it takes to become an entrepreneur, then it could be the best decision you ever made.