Like many things that could radically change our lives for better or worse, the idea of starting a business stirs extraordinary emotions. On the one hand, who doesn't dream of being one's own boss? Who wouldn't get excited by the notion of building a successful enterprise from scratch? Or the possibility of becoming financially independent while still pursuing your passion?
Of course, that's the best case scenario. The truth is that the majority of new small businesses don't succeed - though failure rates have been dropping recently. Starting a business and making it a success requires negotiating a gauntlet of challenges. Not everyone is cut out for the task.
This week, we're discussing everything you need to know before choosing to start your own business - and one of the first things you should do is ask yourself some tough questions.
Below we've outlined some of the most important questions for you to answer.
What's my animating principle?
After "money," that's the most important word in entrepreneurship. Starting a business is a serious undertaking that requires hard work and sacrifice. Whether it's money or independence, it's imperative that you have a firm grasp on your motivation for getting started.
Am I willing to do what it takes?
Can you tolerate a certain degree of risk? Are you willing to assume a greater degree of responsibility than you've ever had? If the answer to either of these is "no," you may not be ready to pursue entrepreneurship.
Do I have the resources to get started?
Businesses come in all shapes and sizes. Some require serious startup cash; others can be bootstrapped for virtually nothing. Whatever your situation may be, it's important to make sure you are sufficiently capitalized before taking the plunge. If you need funding, get ready to explore financing options, whether from a bank or investors.
What type of business do I want?
Many people come up with a fantastic idea, then decide to become an entrepreneur to make that idea a reality. Others, however, feel the entrepreneurial urge but lack a compelling business idea. If you're in the latter category, focus on two things: your skills and your passion. The common ground between these two areas is often where you'll find a strong business idea.
How will I attract business?
You won't last long if you can't find customers. Formulating a plan to attract and retain clientele is a critical part of an early business strategy. It's important to think deeply about the industry you're in and the competitive advantages you can create. You need to differentiate your product from others already in the market.
Where will I locate my business?
For brick and mortar operations, location is extremely important. If you're planning on opening a food truck, for example, it's a good idea to park it next to a large office park during lunch hours. Think about foot traffic, accessibility and other issues.
How will I handle staffing?
Are you going to be a sole proprietor? Hire contractors? Full-time employees?
How will I handle taxes, insurance, and accounting?
New business owners can get overwhelmed by the need to keep track of their finances. Make sure you have plans to handle taxes, insurance, and accounting in place.
Before you consider starting a business, ask yourself some fundamental questions. Take time to answer those inquiries rigorously, and you'll be in a better position to evaluate your overall business readiness.