I’ve been in business nearly 20 years and in that time many people have called me asking for advice about what they need to know to start a business. After being about asked how to transition from employee to entrepreneur over a hundred times, I was inspired to write my bestselling book, Become Your Own Boss in 12 Months. Over the years, surprisingly my answers have stayed fairly consistent. Here are the 7 Questions to ask yourself before starting a business.
- Why do you really want to start this business?
Often people decide they want to go into business, because they have a terrible boss or they are really tired of corporate politics. That is not a good enough reason, just get another job. It’s hard to start a business, you will take on 10-12 jobs all at once including CEO, Secretary, Payroll Clerk, Chief Salesperson and social media manager to name a few. You need to make sure that you have completely considered what it takes to put of a sign that says you are open for business.
- How are you going to finance your dream?
Here’s the deal: The money to start your business is going to come from your right or left pocket. Banks do not loan money to start-ups. At best you may be able to qualify for microloan of $10K-$35K from a CDFI Community Development Financial Institutions or Women’s Business Center as a start-up, but that’s only if your credit is decent (650 or higher) and you have a well-researched business plan. We could also participate in pitch competitions around the country, but it’s expensive to travel and register for events to pitch.
- What skills do you have and need to run your business?
It takes a lot of different skills to run a business including sales, marketing, HR, IT, social media, managerial accounting, project management, vendor management, etc. Are there any skills you know that you don’t have? You may be able to get your current employer to pay for some training before you leave your current company, so maybe you need to invest in sales training on your own dime before you leave. There is big difference between selling pies to friends and co-workers at the holiday and running a year-round bakery. Go work for a business like the one you want to start so that you can really learn the inside scoop on what it takes to become your own boss.
- What strategic partners do you need?
No one starts a business without help and relationships. Hopefully you’ve already started reaching out to your network to let them know you’re about to open your business. You’ll also need to pull together a kitchen cabinet of advisors as you launch your business. This is a confidential sounding board of people who are investing in your success. It’s typically 5-6 people including an existing entrepreneur, a potential customer, a mentor (who may not be in your industry), a lawyer and an accountant.
Now, if you went to college you probably know someone who is a CPA and someone who is an attorney. If you don’t have a mentor you can get one through the non-profit SCORE.org. If you have a business savvy spouse or significant other, you might also want to all them to the group. I call this group a kitchen cabinet if advisors because these people will work for food. They will not send you a bill when you call to ask a question, but remember the most valuable thing anyone can give you is their time. If you call a cabinet member and ask for advice and then don’t take it you will might damage your relationship.
- Who will be your niche target customer?
It is extremely important that you know who your paying customer is before you start a business. People get distracted by their new marketing, their logo, their website, even the invitations to their grand opening event, but it’s critical to have a specific niche target customer. To often people start businesses with products or services that people need, but that is not enough. You need to sell solutions people want, and more importantly are willing are to pay for.
- Do you have a team in place to help you?
You are going to need help with your new business. At a minimum, you’ll need a bookkeeper, and a lawyer, but what about other team members you’ll need. Your first employee will likely be a virtual assistant to help with administrative tasks, or a marketing person to help get the word out about your new business. Then you’ll need sales support. It will also be good to get assistant from other complimentary businesses who might be willing to make referrals for a modest fee. Going to network events or your industry association will likely bring you the relationships you need.
- Do you have a business plan?
Yes, you do need a business plan. You must plan for success, it will not just happen to you. Do not make the mistake of spending more time planning your family vacation than you do planning your family’s financial future. Use business plan software to help you such as enloop.com or liveplan.com. Also check out bplans.com they have hundreds of sample business plans you can refer too.
Let me know if these questions are helpful. I would love your feedback.