6 Questions to Ask Yourself Before Starting a Business
Starting a business might be your best bet for building wealth, doing work you find gratifying and maybe even creating a legacy you can pass down to future generations. As you kick around the idea of launching your startup, dig deep to figure out whether you have the resources and wherewithal to monetize your idea and give your venture a fighting chance. Ask yourself these questions to get started.
1. Why Do I Want To Start a Business?
OK, so you’ve got a business idea that solves a problem better, faster or less expensively than your competitors. Is that reason enough to jump in? If it’s going to save the world, maybe. Otherwise, you’ll need something more to keep you motivated. Here are three huge motivators that might be your reason why:
- Financial Security: With time and a whole lot of hard work, the sky’s the limit for entrepreneurs. Although you’re likely to be disappointed if you’re in it just to get rich, security is a realistic and worthy goal.
- Lifestyle Improvements: You’ll probably spend the early years working harder than you’ve ever worked before. But as your business grows, things might ease up. Do you see your business idea giving you the freedom and flexibility to live the life you want outside of work, in a way that working for someone else can’t? If so, there’s a good chance that starting a business is the right move.
- Passion: Nearly all entrepreneurs experience challenges in the months, and even years, after they start a business. Passion is the driving force that keeps you moving forward no matter how tough things get.
Learn: How Does My Personal Credit Affect My Business?
2. Can I Afford It?
The cost of starting a business depends on what kind of business you’ll have, and you must calculate it accurately to make an informed decision. Manufacturing a product, for example, probably has more expenses than starting an online business. The Small Business Administration lists the following as some of the basic expenses most any business has to pay:
- Utilities
- Communications
- Licenses and permits
- Insurance
- Advertising and marketing
- Website
- Equipment and supplies
- Lawyer and accountant
Unless you’re funding startup costs from your own personal savings, you’ll need financing to get your venture off the ground. And if you’re planning to leave your job to pursue your business full-time, you’ll also need money to live on until your business starts generating income. Consider whether you’re ready to tap into your savings and/or take on funding.
3. Do I Have Time?
Be realistic about how much time you can devote to getting your business off the ground. In addition to forecasting the number of hours you’ll need to work, which includes marketing and managing your business in addition to doing the work customers pay you for, there's more time to account for. Think about whether you can be available to customers, employees and strategic partners while also handling personal, and perhaps other work, obligations. Also, look at how much time you want to devote to your business. Starting a brand new business means your work-life balance is going to take a serious hit — make sure you’re prepared for it. If you're starting your business from home, for example, be prepared for the lines between your home and your office to be blurred. If you can, try working at a coffee shop or coworking space to set boundaries between your two lives.
4. What Are My Strengths and Weaknesses?
Few people are a perfect fit for every role that plays a part in starting and managing a business. A great salesperson, for example, might not necessarily be the right person to crunch the numbers. Take stock of what you can do and how you’ll get the help you need for things you can’t — or shouldn’t — do. You might hire an employee, freelance work out to a consultant or even bring in a partner. There are tons of resources out there — you just have to be willing to pay for them.
5. How Should I Structure My Business?
Your business structure impacts everything from the documents you’ll need to file to launch your company to how much you'll pay in taxes. Here are some common business structures to choose from:
Sole Proprietorship
A sole proprietorship is a no-frills, default structure in which there’s no difference between you and your business when it comes to liability for business debts and activities. You’re one in the same entity.
Partnership
A limited partnership has a general partner with unlimited liability and more control over the company and one or more partners with limited liability and limited control. In a limited liability partnership, all the partners have limited liability.
Limited Liability Company
A limited liability company combines elements of partnerships and corporations. Your personal assets are protected if the company goes bankrupt or gets sued, so this is worth considering if your idea is a risky one. Read: How to Know When It's Time to Expand Your Business
Corporation
There are several types of corporations, but the thing they have in common is that they’re separate entities from their owners. Corporations offer the highest degree of personal liability protection and make it easier to get funding. But they’re also the most expensive and complicated business structure to start and manage. Starting a business is as daunting as it is exciting. Working through these important questions will help you flesh out your idea and prepare you for the crucial next step — writing your business plan .
6. Is Now the Right Time?
Timing can have a huge impact on the success (or lack thereof) of your business. You need to evaluate if the timing is right both for your personally but also economically as well as for the market itself. No matter what, though, if you have the bandwidth, passion and the drive, then it's always a good time to try. But do note that other factors will be at play, some of which you can't control.
The Bottom Line
Starting a business isn't for everyone, but chances are, if you're even toying with the idea then you're pretty ambitious. The freedom and flexibility of starting your business is like no other, but it comes with a lot of hard work in exchange. Ask yourself these five questions to determine if it's the right path for you, then move onto your next step: getting startup business funding . More From Seek
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