Starting a small business can be a daunting process, and being underprepared can spell disaster. If you’re thinking about starting a business, ask yourself these questions first.
1. What kind of business do I want?
Do I want to build a small business or be the business? Meaning, do I want to eventually hire employees or do want to run my business as a solopreneur?
Here’s why: The type of business you want to create will affect how you run. Consider which model will work best for you.
2. What is my end goal?
Do I plan to retire from this business? Or do I want to be bought out by a larger company?
Here’s why: Whichever your case may be, it’s a good idea to start a business with the end in mind. Your end goal will help guide your business decisions and also keep you motivated when things get challenging.
3. How much do I need in order to live?
Can I afford to take a pay cut in the beginning of my business and still stay afloat in my personal life?
Here’s why: If you can’t to live on savings of some other income, starting your own business may not be for you. Calculate your current expenses (rent/mortgage, car payment etc.) and look for places to cut back. Once you know how much you’ll need to be making from your business just to live, you’ll be able to look at it’s feasibility more objectively.
Many businesses are not immediately profitable, and it may take some time to break even. If you’re leaving a salaried position to start your own business, as a general rule of thumb, you shouldn’t expect to exceed your current salary for three years from the time you start.
4. Why this business?
Why do I want to start this business?
Here’s why: This question is often taken for granted, but it’s an important one to ask. Many people start small businesses that involve something they are passionate about, and that’s great, as long as it doesn’t cloud your judgement.
Make sure you are looking objectively at your business. Can it be profitable? Keep your answer to question three in mind here. If not, it may be better pursued as a hobby.
5. How much do I know about this industry?
Here’s why: If this business is a passion project, you probably know a lot about the product or service, but do you know about the business side as well? Maybe you’re an avid connoisseur of craft beers and you want to start a brewery. Maybe you have even brewed your own beer at home. If you have never run a brewery, however, you’re going to need some help along the way.
If you are unfamiliar with the business you intend to start you might want to get a job in that industry for six months (or so) to get a feel for how things operate. You may even gain valuable contacts you can use once you decide to take the plunge yourself.
6. What is missing in my business knowledge?
Can I read a balance sheet? Can I create a marketing plan? What do I know about HR or setting up business systems?
Here’s why: Maybe you do know a lot about your industry. Let’s say you’re a craft brewer, but do you know about how make sure your product meets FDA standards? Can you design the label, and handle distribution? Do you understand your tax obligations?
Identify where your weaknesses lie, and develop a strategy to overcome them. This may mean educating yourself on the parts of running a business you don’t know about, or it may mean hiring people who are more knowledgeable than you in a certain area. Whatever the case, make sure you account for the things you don’t know, and include them in your business plan.
7. What are my favorite parts of running a business?
What do I like to do myself? What would I rather have someone else do?
Here’s why: Running a business won’t be all fun all the time. There will inevitably be parts of it that aren’t enjoyable. Are you prepared to do them anyway? Will you be able to do them well?
Maybe you’re a great salesman, but a terrible accountant, or vice versa. Everyone works best when they’re doing something they enjoy. So if you’re dreading certain parts of running a business, you may want to consider finding a business partner who compliments your own strengths.
These questions are just the beginning. Starting a business requires hard work and dedication. For more tactical information on starting a small business the Oregon Secretary of State created a great resource: How to Start a Business in Oregon. You can also explore our Business Design Series.
