So You Want To Start A Business?
A No-Nonsense Initial Evaluation Of Your Business.
Okay, this is my typical no-nonsense article, and I hope for the best for my readers. If you really want to go ahead with your business plans, please do.
Here we go.
So You Want To Start A Business?
Wow.
1. The Question Is Why?
There are tons of reasons why people start businesses. Some of the top reasons are: 1) To make lots of money and 2) To work for yourself / Flexible Hours / No 9-to-5 job.
Well, lets understand the concept of risk and reward. With more risk, the higher the chances of you failing and the higher your reward.
If you think going into business is the easy way out of life, then you’re wrong. Not because you won’t succeed. I hope you do. But rather, you’re taking a lot of risk. You should ask yourself if you’re willing and able to take that risk.
Factor in all things that can go wrong and will go wrong.
Start a brick-and-mortar shop selling ____(insert product idea here)____? Sign a two-year lease and hold $20,000 worth of stock? Assume that’s $100,000 and two years of your life as costs, and you make $80,000 revenue, that’s a loss of $20,000 plus your opportunity cost.
Start an online store doing dropshipping ____(insert product here)____? Spend 3 months setting up payments / website / suppliers then try selling for the next 9 months? Thats $2000 + inventory costs + one year of your life, and making $500 in revenue.
If you’re a college student with no opportunity costs because its a side gig, or rich enough to dabble in it, then that’s fine.
But if you’re hoping to live on the income from the business, or worse, have to feed a family, then that’s an awful lot of risk. You are not guaranteed to make money from business.
The hours of a business is daunting. That’s 24/7 on the job, which might not pay.
2. Why Are You Special?
So yeah, just because you want to do it doesn’t you should. You should be in a business that you have the highest probability to succeed. And we all know that if you have an unfair advantage, then you’re more likely to win.
I’ve had people asking if they should set up a business selling handphone cases. My question to them was: “Why You?”. They were educators, with no special connection to suppliers or customers. They looked at other people, and wanted to do what they were doing.
If your model doesn’t drive a Lamborghini, then don’t copy their business model. There is just too little upside for the risk of a low-margin, high-competition business plus no comparative advantage.
Without comparative advantage, you have to re-evaluate your business model. Which could be differentiated by perhaps USP? But it had better be really really unique.
3. Are You Really Passionate About It?
Just because starting a business is the ‘in’ thing right now doesn’t mean you should. People tell everyone when they’re starting a business. When they close one, they tell no one.
Don’t start a business because everyone else doing so. Start one because you feel it in your bones. Because you can’t sleep at night as it’s on your mind. Because it wakes you up in the morning. Because you smile while working on it.
Running a business is dirty work. It eats up a lot of your time. It may not pay. Forget all those images of relaxed people working on a laptop running their business. Its either 1) They have gone through the pain and are now enjoying the fruits of their labour or 2) They took the easy way of doing business, which makes it easy to be disrupted as well (“Easy Come, Easy Go”).
Conclusion
Starting a business is easy. Maintaining one is hard.
Do your math before jumping onto the bandwagon. Many people don’t realize that they’re no better off or worse off financially because of the opportunity cost.
Do it when you have evaluated the above and still want it.
All the best.
