Starting a small business is no simple feat. While the process can eventually lead to great reward, extensive preparation is a must in order to stand out and succeed in a market where over 514,000 businesses are born annually. Potential entrepreneurs must dig deep to deliver innovative products and services that will survive the dreaded 90% failure rate.
Still ready to go for it? Good. Now up your chances of success by asking yourself these 8 crucial questions before taking the leap into small business ownership:
1. Why am I really doing this?
Before you launch your “big idea” out into the world, think through what triggered you to want to take this leap in the first place. Are you motivated by passion, wealth, success, a need in the market, a distaste for your corporate job? Perhaps what’s driving you is a combination. Regardless, there will come a time when you want to give up. Having a solid foundation to serve as your roadmap will help you stay on track, even when it gets hard.
2. Am I ready to be a business owner?
Starting a business can be thrilling – your entrepreneurial gears grinding away, dreaming of the possibility and potential of your new venture. Launching and maintaining a profitable business, however, requires a reality check and a bit more elbow grease. While there will never be a time you’re 100% ready to dive into entrepreneurship, you can increase your chances of success with some self reflecting and being truly honest with yourself: Am I financially ready to go without pay for a while? Am I emotionally ready to face the ups and downs of entrepreneurship without breaking? Am I prepared to take the risks necessary to succeed? Am I ready to fail? Down the road, these questions will present themselves, you don’t want to feel surprised by them when it happens.
3. Who is my ideal customer and what do they need?
One way to encourage small business success is to foster a solid understanding of your ideal customers and what they really need from day one. According to CB Insights, 42% of startups fail because of the lack of a market need for their product. If you think they do but are not sure, start by interviewing at least 50 unique people and businesses about what they think of your idea. Tell them to be honest and don’t ignore the responses they say no, dig deeper and figure out if your idea is validated or needs tweaking before getting started. acknowledge your ideal customer profile early on and build your efforts around their current needs.
4. Will my business require funding?
You won’t get far with your startup efforts without proper financial planning. How much capital will you need to fund your venture? Will you be bootstrapping or will you need to seek funding elsewhere? How much capital will be required up front to get started? According to Wells Fargo Small Business Index, $10,000 is the average amount of startup capital required by small business owners. This number completely varies depending on your business, so seek financial guidance on this matter early on.
5. How will I know it’s time to make my first hire?
While going solo comes with its own unique advantages, the ability to scale is not one of them. At some point in the life of your business, you’ll need to hire some extra help. Initially, most startups rely on contractors or part-time employees. Whether you’re having to turn down work or you’ve uncovered a new revenue stream opportunity, you’ll know when it’s time to bring on a full-time hire. Regardless, be sure to read up on the latest regulations for businesses working with independent contractors.
6. Should I consider bringing on a partner?
Before starting your business, decide whether bringing on a business partner would make your business more or less valuable. The answer will be different for every entrepreneur. For me personally, I know that I’m much more effective as an entrepreneur with a team by my side to bounce ideas off of. It takes self-awareness and a good idea of your workstyle to know what choice will work out best for you. Also, as great as you are, no one is an expert at everything. Look for a partner that provides complementary strengths. If you are great at development, find someone that is amazing at sales and operations. And having a partner or co-founder can have even more benefits – it is often a priority to investors to know there are two people fully dedicated to the businesses success.
7. What other partnerships will I need to establish?
Finding partners you trust early on will help your startup thrive. Depending on the type of business you’re planning to start, you will likely need to establish solid relationships with the following: an attorney to help you incorporate your business and get all legal obligations squared away (paper-up is one of our best pieces of advice!), a tax CPA who specializes in working with small businesses and entrepreneurs and a bank that will help you establish a line of credit or manage your financially accurately from the beginning. Quick note – there are financial organizations that cater a bit better to small businesses, so do your research.
8. Do I have the long-term support needed to succeed?
Regardless of the type of business you’re starting, don’t do it alone. Seek out community and support early on, even if you prefer working solo. Putting yourself amongst other business owners and entrepreneurs is invaluable for those just starting out on this journey. Join a formal organization like Entrepreneurs’ Organization or search for local meetup opportunities in your area.
Looking for more guidance on your entrepreneurial journey? Get inspired with more tips, tricks and tools you need to build your business. Or, set up some time to chat with a financial expert about how Acuity can help you get started strong.