These are the best of times and the worst of times to start a business. They are the best of times to start a business because the economy in the U.S., Canada and elsewhere continues to come out of a deep recession, which will boost demand and create fresh opportunity for the savvy entrepreneur; these are the worst of times to start a business because joblessness is higher than it should be and banks have not exactly thrown open their checkbooks to start-ups. Naturally, you can launch many businesses on a veritable shoe-string doing virtually everything yourself, working out of the house or garage and/or choosing an inexpensive online business option of which there are many.
There is real opportunity to start a business today because many, many businesses that existed prior to the recent recession have gone belly up and left broad segments of markets under-served. Many long-standing client relationships have also been shattered or simply vanished. More than anything else right now, consumers and businesses want the lowest cost, period! This presents a great opportunity for entrepreneurs who want to position themselves in the marketplace as the lowest-cost provider.
But before you get too far ahead of yourself to start a business, ask yourself these 13 questions so that you can take a good look at yourself, your capabilities, your commitment, and your business plan:
(1) Why do you want to start a business at all? Is starting a business really for you? Up until the recent recession and its aftermath, we suggested that you start a business of your own only if you have a real passion and commitment to get out on your own and then do what you have to do to make it happen. Unless you are very lucky or rich, to start a business of your own can be tough sledding for a lot longer than you might anticipate. Today, there is another group of people who likely need to start a business of their own--those in their late 40s, 50s, 60s and 70s who simply cannot find work and are not in a position to retire just yet. Those are the people who have sent out 200, 300 or 400 resumes and gotten literally no response in the job market. For them, their only alternative is to get that new business going and move into the black as quickly as possible and achieve financial independence once and for all.
(2) Where's the money coming from? Start-up business financing is hard to come by. Where will you get a business start-up loan? Bank loans are tough for the newbie, although there has been a change in the banker's tone recently regarding small business that has been in existence for a few years. Two or three years ago, the loan window was closed to you. Today, bankers are looking at you and thinking if you survived the recent recession and you are still here, you must have something special; "come see us about a loan," they might say. If you have a new business, you may want to apply for a loan anyway and get turned down. Then the bank can perhaps help you to go to the Small Business Administration (SBA) about a loan.
(3) What do you know how to do, and what do you love doing? Are you one of the lucky ones who have great skills in the area that is also your passion? You need to decide what direction to go in with this. If you are a great teacher, but want to be in your own business, an obvious business step for you to take is to develop a tutoring business. You can do this on your own or through a franchise company. If you have had it with teaching kids and instead love travel, perhaps you could combine your skill (teaching) and passion (travel) and create a niche learning/travel course featuring the great wines of France or the great foods of Italy.
(4) Do you know how to run a business? Running a business takes different skills than practicing what you know or love. Just becasue you are a great teacher, does not mean you will be successful running a tutoring business because you need two skills...know how to teach and know how to run a business. They are worlds apart. We know two readers who set up a highly profitable home remodeling business--even through the recent recession. The first fellow knew everything there was to know about remodeling a house, but knew almost nothing about running a business. The second man knew how to run a business, negotiate contracts, schedule jobs, buy products and meet and greet people, but almost nothing about the technical end of the remodeling business. Together, however, they are a great team. If you don't know how to run a business, learn how to do it, or partner with someone who has complementary skills to yours. If you want to start a consulting business, for example, and love doing the consulting work yourself, but hate getting on the phone to make hundreds of cold calls to find new business, then partner with someone who will get on the phone and sell the job. You will both do well financially.
(5) Do you have a strong sense of what business you would like to start? If you have a passion for being in your own business, but do not know what business to pick, we strongly recommend that you look into a franchise business for start-up business ideas. A good franchise company will literally tell you all you need to know to be successful in a particular business. It will cost you more than starting a business on your own, but you will be able to climb the learning curve a lot more quickly than you can on your own. Be careful with franchises and know what you are doing before you sign on the dotted line. We like the trend today for people leaving online comments about virtually everything. In the world of franchises, you will find important information in those comments. Are the franchise owners great at selling the concept, but terrible about helping the franchisee. Are they ripping off the franchisee with the costs of goods and services. You have to be careful here, but a good, honest franchise company that sincerely wants to partner with you so that you both make money is a real find and will help lead you to success. Read all of the comments and reviews you can find about franchises in which you are interested and also the industry you are looking into. Just a few years ago, printing franchises were doing well. Now with everything going online, it is more of a struggle to succeed.
(6) How will your business start, grow, and prosper? You may read this question and respond…"How the hell do I know? I haven't started it yet!" Exactly our point! You do not need a formal business plan to start a business and to grow a business, but we will tell you that it is a lot easier going forward if you "force yourself" to sit down and come up with a realistic plan. Creating a real business plan is hard work and a pain in the neck for the entrepreneur who "wants to get going." But it is hard work that will be rewarded. It forces you to think past rationalizations that we all tend to make and come up with something real and doable. Remember: if you fail to plan, you are planning to fail. That's not an overused saying, that's the truth! The very best entrepreneurs bring something else to the table besides a business plan...they know how they will start, grow and sell the business. Recently, we interviewed two entrepreneurs who are starting their fifth company together and they are in their early 30s.When you read about great athletes and those who have achieve phenomenal success in other endeavors, many will tell you that they visualized their success before they ever started the endeavor. They throw the ball until the motion becomes second nature and perfect. They feel the ball leave their hand with just the right spin at the right speed and watch it as it speeds past the hapless batter and crashes solidly into the catcher's mitt. If your job is customer acquisition, you must practice your presentation until it is perfect. You must anticipate every objection and see yourself overcoming the objection without getting defensive or making your prospect feel like a jerk. Get it down until it is perfect.
(7) Why do you think your business idea will work? Do you think your business will work just because Joe or Jane down the street are making a similar business work? Do you have their skills and talent? How do you know? We are not being negative or pessimistic, only realistic. What is that entrepreneur bringing to the table? Do you really understand why his or her business works? One stark example we know of is a highly successful local party planner. A would-be entrepreneur who attended one of her party functions said to herself, "I could do this!" Absolutely--the new would-be entrepreneur could plan and execute a party, no question. What she did not realize at that moment was that the successful party planner could indeed organize a good party, but the key to her success was her ability to network almost constantly with high net-worth individuals in her marketplace who had the bucks to hire a pricey party planner. If you are attracted to a successful business, you need to really understand what makes that business tick.
(8) Can you layout in a step-by-step fashion, what you need to do to get the business off the ground and running? We are not talking about a written business plan here. We are talking about your ability to visualize the business being successful and the key steps you need to take to make it profitable.
(9) Do you know the applicable laws that apply to your new business start up? If you are going to run a business out of your home, are you allowed to by law to have a business there? Can you have employees working out of your home? Can you legally store supplies in your garage? Can you have trucks in your driveway? You need to figure out what you can do and what you can't do.
(10) If you are new to business, do you have a mentor for business start up advice? If that sounds all touchy-feely to you, it is not. You need someone you can talk to. You need a "been-there, done-that" kind of person.
(11) Who can you turn to for help to set up the business in the most effective way? There are a number of different ways to organize your business...sole proprietorship, partnership, corporate or LLC to name just a few. Do you know what is best for you? Figuring that out now, will save you money, time and effort in the future.
(12) What about issues like taxes, payroll, and insurance? Where will you turn for help?
(13) What about setting up an office? What is the most effective way for you to do this? What about buying a computer system and small business software?
(14) Are your prepared to do a "pre-mortem" of why your new business failed? Sounds nuts, doesn't it? New businesses fail at an incredibly high rate. After a business fails--and many do within the first year--the sad, broke entrepreneur could do a "post mortem," the way a coroner does on a dead body, of why the business failed. But why not do a pre-mortem? That is, imagine that the worst has happened and the business has closed its door or gone into legal bankruptcy proceedings. Now, come up with the main reason that the new business failed. Do not say to yourself--"I would never let that happen." Instead, imagine that the worst has happened and write down what happened; why it happened. Once you get that reason down, add a second and a third reason, until you have accumulated eight or 10 reasons why that the business failed. Now, you have an incredibly valuable tool and you can go over your business plan and strengthen it. A powerful way to strengthen the pre-mortem process even more is to tell those around you who know you and the business plan about doing the pre-mortem. Ask them to come up with one or more reasons why the business failed. Promise them you will not be insulted or hurt that you really need this information. Ask them to finish this statement..."The reason that the XYZ Company (your company) failed within its first year of operation was because....." Like it or not, friends and family know your weaknesses, just like you know theirs. Don't be insulted, let them help you avoid failing.