In the United States alone, more than half a million businesses are started every month. Depending on whether you’re an optimist or a pessimist, this is either really encouraging or a little scary to say the least. But regardless of how full or empty you believe the glass of opportunity to be, you need to be aware that more businesses close than are opened on a month-to-month basis.
Starting a business is one of the biggest financial, personal, and professional decisions you can make, and regardless of the scale of your plan, you need to be sure that the decision is taken with as much information and objectivity as you can muster.
Problem is that when you start investigating the pros and cons of becoming a business owner, you’ll soon discover that there are mountains of information out there. While it can help to read through everything, what you really need is a list of golden guidelines or absolutely essential considerations that you need to make.
And here they are.
Consideration1: Is There a Market?
If you take a step back and do a high-level analysis of businesses that do well – Apple, Uber, Tesla – they all have one thing in common: they met a need. It may feel overly simplistic, but if you have an idea that you think could become financially viable as a business, then put your consumer hat on and ask yourself the all-important question – Is there a market?
You may instinctively feel that any great innovation could capture the imagination of your target market. But as countless failed business owners will tell you, conducting market research before you invest is absolutely crucial.
Start by asking whether or not your product or service is something that people want, or something they actually need. Needs are always more likely to sell – think of essential items that everyone requires. But in the modern era selling desire may be equally profitable. The trick is to be honest. Not everyone wants your weird invention in their living room.
Remember that a Facebook page of people saying they’re interested in your idea means nothing – you need to dive deeper. Ask people you know, strangers and entrepreneurs, about your market potential.
Consideration 2: Is My Business Sustainable?
Once you’ve established, that there is a market for your potential business you need to start thinking long term, and that means facing up to the question of sustainability.
Thankfully the term itself has taken on a dual meaning that may help guide your eventual decision to go ahead or hold back. The first, and arguably most important, definition of sustainability in the modern business environment refers to ecological impact and longevity. Simply put, if your business idea has a detrimental effect on the world around it, it’s going to fail. Explore an environmentally-friendly avenue if you hope to succeed.
The second definition of sustainability refers to the ability to sustain and grow your enterprise in the long term. The question of business sustainability can be broken down into complex equations around value, profit margins and consumer trend analysis, or simply whether or not there is scope to excel and expand.
While there is obviously a lot of financial acumen required to do the math around long-term projections, there are easier ways to work it out. The simplest? Write down a three-phase approach to how you’re going to set up, stabilize, and expand your operation. If you can’t work it out, you’re not ready.
Consideration 3: What’s The Plan?
Remember that paper where you figured out how sustainable your business could be? Grab it quickly. That’s the foundation of your business plan, and without it your business will fail. Creating a business plan for an enterprise or company that doesn’t exist yet is arguably the best way to decide whether or not to take the plunge.
A basic business plan gives you the framework you need to make an informed final decision. You’ll need realistic information around your current capital, the logistics and costs of starting up as well as some kind of market analysis that you can use to forecast longevity. Remember that business plans that are more conservative or slightly less ambitious will be more realistic and effective in helping you plot a course to success.
Becoming a business owner is one of the most exciting and terrifying decisions you can make. Follow these guiding lines and be honest about your position – there’s no harm in waiting until you’re more stable, or better positioned to succeed. Unless you’ve struck gold, in which case strike while the iron’s hot!
About the Author
I am a regular writer for Forbes, Inc., Huffington Post, Entrepreneur Media (among others), as well as CEO and Chairman of Alumnify Inc. Proud alum from 500 Startups and The University of San Diego. Follow me on Twitter @ajalumnify