Before you jump in with starting a new business, there are several considerations you must take into account. As much as we wish it was possible, you can’t just wish something into being. No matter how hard you dream about owning and running a successful business, you’ll need to work even harder than that to make it a reality.
You must first go through five different phases before you can even consider starting a small business. We will look at these phases in great detail over the next few weeks to help you decide if you are ready to start a new business.
The five phases we will look at include:
- Assessment Phase
- Idea Phase
- Exploration Phase
- Osterizer Phase
- Concept to Reality Phase
This week, we will look at the Assessment Phase.
The first question you should ask yourself is: Am I capable of running this business?
It’s not a knock on any of your abilities, it’s just that when you run a small business, you are everything in that business.
- Managing director? You.
- Sales team? You.
- Finance manager? You.
- Marketing department? You.
- HR manager? You.
- Odd-job gofer? You.
Find out which tasks you are more suited for and do those ones and (when you can) hire others to do the tasks you aren’t comfortable doing.
Assess Your Ability to be in Business
Research and planning is essential because many business ideas don’t even make it past this stage. A lot of people who believe they have a world-changing idea realize once they start looking into it that the idea will almost certainly fizzle prior to any investments being made.
Here is a simple test for your business idea:
Is it viable financially?
Your product or service should have a sufficiently large audience to make an acceptable profit (even if it’s a niche product or service).
Will it give you the lifestyle you want?
Would you still consider your business a success if you grew to hate it?
Are you starting a business simply to get a job?
A business and a job are not the same thing. A business, by itself, must make an acceptable net profit, plus it also must provide enough profit for you to pay all of your employees, including yourself. If you are working in your business and not earning a wage (as in, you don’t actually pay yourself), then you cannot call it a success. You would not work anywhere else for free, right? And you would not be able to hire someone to come in and run the business for free, either.
The bottom line is that if the business isn’t making enough money for you to pay yourself what you would pay another employee doing your duties, then it is not making an acceptable net profit.
To help you decide if you’re ready to start a company, answer the following questions:
- What are your personal short and long term financial goals?
- Will you earn enough to maintain your lifestyle and meet your goals?
- How much do you have to invest and put at risk?
- Can you financially survive a start-up period?
- Will your venture attract the necessary lenders or investors if needed?
- How much control are you willing to relinquish to investors?
- Will you be able to devote yourself full-time to the business?
- Does your family understand and agree with the sacrifices that are ahead?
- Do you bring the necessary tools to the business for it to be successful?
Next week, we will look at the idea phase of starting a business.
[Main photo courtesy of Johnny Silvercloud on Flickr]