Have you ever wondered “Should I start my own business?” In today’s article we start our series on how to start a business with the 5 steps you need to take in order to find out, complete with a checklist you can use as you go through the article.
Step 1: Should I start my own business? Well, Be Honest With Yourself About Why You Want to Start a Business.
In order to know if you should start your own business, you first need to make sure that you are starting a business for the right reasons.
Examples of bad reasons for starting a business:
- You hate your boss.
- You think your salary is too low.
- You lack passion for your job
- You want to work less hours.
Examples of good reasons to start a business:
- You have developed enough experience in an industry that you think you can go out on you own and your clients will come with you.
- You have identified a problem that your potential customers have and think they will pay you for solving it.
- You have leadership experience and want to be in charge
- You want the challenge
Step 2: Determine if You Have the Skills to Start Your Own Business
A mistake that many entrepreneurs make, is confusing their desire to do a particular type of work, with a desire to have their own business.
A great example of this are those who start restaurants because they love to cook. While having great food is one of the things that will need to happen for your restaurant to be successful, it is one of many things. If you are not able or do not want to spend time marketing your business, managing your staff, and dealing with the finances of the business, then it doesn’t matter how good the food is.
Here are the primary skills that you (or you and your partners combined) will need to have at a minimum:
- The ability to market and sell
- The ability to deliver a high quality product or service to your client
- The ability to handle the finances of the business
- The ability to manage yourself and others
Step 3: Determine if You Have the Right Mindset To Start Your Own Business
If you are not willing to get your hands dirty then you are unlikely to be successful at starting your own business. This is especially true when starting out, as new entrepreneurs often hold all rolls from Janitor all the way up to CEO.
This is still true when starting out with a significant amount of capital that you can use to pay others to do the dirty work for you. In the beginning, if you are unwilling to participate at every level of the company, then you will not understand what makes the company tick, and are likely to fail as a result.
Lastly, you have to be willing to put in the hours. While Tim Ferriss’ book “The 4 Hour Work Week” has sold a ton of copies, I don’t know anyone who has found success by working a small amount of hours. The successful entrepreneurs that I know all work their buts off, especially in the beginning.
Step 4: Determine if You have The Means
How much money you need to invest, and how long it takes for a business to become profitable varies widely depending on the type of business. There is one thing that does not vary however: It always costs more and takes longer to reach profitability than the founder thinks in the beginning.
For the initial investment, a good rule of thumb is that you are going to need 2 to 3 times the amount of capital that you estimate in the beginning. As far as earning a living from the business goes, a good rule of thumb for most types of businesses is that you will not be able to pay yourself a salary in the first year. In the second year you will be able to pay yourself a small salary, and the third year is when many businesses actually become successful enough to replace your former salary.
If you do not have the means to support yourself for at least that amount of time, then it may be wiser to either wait until you have more money saved, or start your new business on the side before quitting your day job.
Step 5: Find Out If You Have the Personal Support Needed
You are likely to have many ups and downs when starting a new business so you need to make sure that the people you have around you are supportive of the process. If you are married or in a serious relationship, then does your significant other understand what starting your own business means for you and your family?
Here is a good list of things to make sure your personal support network understands:
- There is a high failure rate among new businesses.
- The hours are long.
- There will be a lot of ups and downs which can affect mood.
- How much spending will have to be curtailed in the initial years.
That’s our article for today. If you have any questions or comments I respond to them all personally, so please feel free to leave them in the comments section below. Also be sure to continue to the next article in this series where we cover how to come up with a business idea in 5 steps.
Want more info on deciding if starting a business is right for you? Here is a list of other great tools and articles on the topic:
- SmallBizTrends: Small Business Failure Rates – Most new businesses fail. What will be the impact on your life if your new business is not successful?
- MarleeWard: The Pro’s and Con’s of Self Employment – and a free quiz to help you determine if self employment is right for you.
- WSJ: How to Decide if Entrepreneurship is Right for You – 5 questions every aspiring entrepreneur should know the answer to before taking the leap.
- About: Starting a Business Quiz – Questions which will help you determine whether starting a business is the right path for you.
- Forbes: 11 Myths of Owning a Small Business – A lot of what you hear about starting a business is just plain wrong.
- Business Owners Toolkit: Do You Have the Right Stuff to Run a Business – An overview of the essential qualities for owners, how to compensate for weaknesses, and the impact of business on your personal life.
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