How to Start a Business: 5 Questions to Ask Yourself
It seems like it should be simple, but to start your own business and set up the basic working environment is more complicated than it seems. From naming your company to designing your logo to developing your website to picking an office space the list goes on as to what you need to do. Not to mention, all of this more than likely happens before you make your first sale. In fact, many people think that the most critical things you do are these things that you undertake to launch your business. It is actually the things you do before you start your business that are even more important.
Once you start a business, it will be your oxygen — you will need it to breathe. You will think about it day and night. It will excite you and frustrate you. So before you make the leap, it is important that before you do things like choose an entity, or open a bank account, to take the steps that prepare you to be successful. This requires you to ask some key questions and to give some honest answers. So here are the questions you should be asking before you start your own business.
“Once you start a business, it will be your oxygen — you will need it to breathe. You will think about it day and night.”
- Why do you want to start a business?
Before we get into what it takes to start a business, it is important to know why you want to start a business. After all, you are going to put your heart and soul into this and if you are going to do so, you should make sure you are in it for the right reasons and your goals are clear. Too many times we see entrepreneurs that have the passion and an idea, but don’t really think about what they are trying to accomplish.
First, what is your goal? Is it to make $1 million? Is it to improve your lifestyle? Is it to sell your company for $25 million? Is it to leave your job in corporate America (or somewhere) and create your own income stream. The path you will take — money you invest, risk you take, products you create and people you turn to — will all be influenced by your goal. If your goal is to create a sustainable job outside of the corporate world, you might become a limo driver. If your goal was to make a $1 billion, you might create Uber.
If you are not clear about your goals, it is hard to take your time, effort and energy and apply it toward those goals. As you can imagine, if your goal is to improve your lifestyle, then it is unlikely you are going to sell your company for $50 million (unless you figure out how to clone yourself). Making decisions about which goals you are going to pursue (and which ones you are not going to pursue) is the first step in setting yourself up for success when starting a business. Once you do this, you will have much more clarity on why you are doing what you are doing and how to make sure your effort and money is directed in the right place.
2. How much capital do you need to start a business?
The sexy part of starting your own business is thinking about bringing your passion to life. It makes us dream and think about all the places we can go personally and professionally. But it is the not-so-sexy stuff — the nuts and bolts of what makes a business successful — that entrepreneurs don’t spend enough time thinking about. And at its core you need to understand how much money you will need to get it off the ground and sustain it until you start generating revenue and “break even” (bring in as much cash as you are laying out). It may be just you leaving your corporate job and starting in your bedroom. Even so, you will need to lay out dollars to get yourself off the ground. If you are opening a jewelry store or a technology center, it is more complicated. In all of those cases, the money you will need to get started and keep going is a critical question to ask and answer.
It is not just how much money you need to get started. It is how much money will you need to support you when you may be losing money each month. For this you should prepare a cash flow statement — which simply shows how much cash is coming in and how much is going out.
3. What is your plan when you start a business?
As they say in the famous book, The Art of War, “every great battle is won before it is fought.” There are great debates on whether or not a business plan is worth the time when you start a business. Some argue that the world moves too fast and that the plan is obsolete by the time you finish it. Others argue it is a critical tool to set the path for your business. I am in the second camp and not only because it sets the path for your business. Just as important is the fact that writing a business plan makes you think about and make decisions about the various parts of your business. This includes your:
- Market Opportunity
- Unique Value Proposition
- Pricing/Revenue Model
- Product or Service
- Go-to-Market Strategy
Thinking about these decisions will force you to take a hard look at competition, hone in on your target customer, and perhaps even change your mind about how you price and how you position yourself.
4. Why haven’t others started your business?
You want to think long and hard about what makes you different. You don’t have to be the next Facebook. Even if you are baking cookies, you want to be clear about why your cookies, or the way you talk about or package or deliver your cookies, are different. At The Lonely Entrepreneur, we like to call this finding playgrounds where no one else is playing. In other words, in a world where there is always someone with more money and resources than you, how do you stand out from the crowd?
The effort of finding this playground where you are the only one to fill the need is not easy. It will take all of your entrepreneurial creativity. When you start a business, if you don’t take the time and energy to really find this playground, you may struggle to bring your vision to life. This playground can be a new way of distributing (e.g., Dollar Shave Club) or a new market segment (e.g., a car club for women in Nashville). These are both real life examples of playgrounds that didn’t exist before entrepreneurs had an idea and build a business. .
5. What are the things you are good at and you like (and the ones that you aren’t good at and don’t like)?
Running a business is a little like conducting an orchestra. There are many different parts of the orchestra that have to work in unison to make beautiful music. Even if it is just you, you need to know how to take your idea and to merge it into a business. You will learn that ideas and passion have to be married into business plans. As you learn these things, you will come across things that you like and that you don’t like and things that you are good at and not good at.
It is essential that you identify these areas. You may love the creative process of designing dresses, but hate accounting. You may love writing code, but hate selling. If you spend your time on the things that you like and that you are good at, the entrepreneurial journey can be up-lifting. If you spend time on the things that you don’t like or are not good at, the journey can feel like running in quicksand. A “coder” will write code all day long with a smile on his or her face but cringes at the site of one spreadsheet.
I know what you are thinking — when I start a business, I don’t have the luxury of not doing the things that I’m not good at or don’t like. That’s true. But if you identify these areas, you can use your efforts to find resource that complement you so you don’t get dragged down by these. Knowing this before you start your business can start you off on the right foot.
Ok. Now you are ready to start a business.
Anyone can give you a checklist of things to do to start your business. Things such as:
- Pick the right type of entity
- Set up your bank accounts
- Get a Tax identification
- Getting insurance
- Launch a web site
- Start your social media channels
- Choosing the basic software you need (e.g., accounting)
And so on. In fact, we have a whole section of The Lonely Entrepreneur Community just on this topic. But more important than these steps are the things you do before you set up your business. Trust us, we’ve been there and know the right — and wrong — steps to take to make a successful business.
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