4 Questions to Ask Yourself before You Start a Small Business

think
Tuesday, September 9, 2014

Owning and running a small business is an exciting, yet challenging way to make a living. There are many upsides to being your own boss: unlimited earning potential, freedom to create a work-life balance that's suited uniquely to you, and the ability to make your own decisions without compromising your vision, just to name a few. With over 500,000 small businesses started each month in the U.S., it’s safe to say there are a lot of entrepreneurs.

However, striking out on your own also comes with a lot of risk. Here are some questions you should ask when you're pondering making the leap to self-employment:

Why do I want to start a small business? The answer to this question is revealing. In short, you should be starting a small business because you have a great idea, a unique selling proposition, and the passion and dedication to make the business work. On the flip-side, starting a business to escape a bad job is not a great reason to strike out on your own. When you're first starting your business, you'll be working many more hours than your peers who have a regular job. You're going to have to love being an entrepreneur in order to make the leap.

Do I have the skills to run a small business? A great idea isn't enough. At a minimum, you're going to need to know how to market and sell your idea, how to deliver on the service you're selling, how to handle the finances of a small business, and how to manage your own time and eventually, the work of others. If you don't have the foundational skills listed, you can develop these skills through coursework at a local university. And, if you don't have the drive to do the classwork, that may tell you you're not driven enough to run the business. 

Do I have enough money to start my business? The amount of money you will need depends largely on the type of business you're starting. So, it's important to start out with a good business plan. There are resources available to help entrepreneurs vet their business plans, like the U.S. Small Business Administration. As a rule of thumb though, you probably won't be able to take a salary for yourself in the first year. In the second year, you may take a small salary, but it won't be until the third year that you're able to pay yourself a market rate for your own time.

Do I have the support I need? Starting a business will require long hours and most likely, a cut in your personal spending as you get the business off the ground. In addition, the stress of starting a new business can affect your mood. Make sure you have lined up the personal support you will need through your start-up period so you can maintain the energy and drive to see your vision through.

Starting a small business can be exciting, fun, and lucrative, but it's not for everyone. Half of small businesses fail within the first five years. To succeed, it's important that you spend some time reflecting on the realities of starting a business before you begin. 

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