Thinking of starting a business?
You are not alone. Most people think of starting a business at some time during their lives but very few ever follow through on it. Ever wonder why? It is usually because a person doesn’t know where to start. So, let’s take a glimpse into the process of starting a business.
The first and most important thing is to not jump into it. Do not run out tomorrow and quit your job. This also applies to your spouse or partner. At least one regular paycheck can mean the difference between surviving or not – not to mention maintaining your sanity and your marriage!
Starting a business at home can keep your costs down considerably. While some people still view home-based businesses as not being “real” businesses, this attitude is quickly disappearing. Nowadays, as much as 25% of all businesses in a community may be home-based.
Running a business and keeping a job may involve hiring staff to man the store or office while you are working at your paying job. While some people shy away from paying out wages to someone from the start, it is an option that can work quite well. Keeps the cash flowing into your home.
Working capital is critical. What is working capital? This is the money you are going to use to buy stock, advertise, and pay suppliers, staff, rent and yourself among other things. If you think you can go to the bank and they will give you a blank check to cover your startup expenses you really are dreaming. No matter how many banks advertise that they are there to help small businesses, the reality is they are very careful whom they lend money to and new businesses are not high on the list. Getting credit from suppliers for a starting business is virtually impossible. So…where is your money going to come from? As a side note, don’t assume your family will lend you the money. The very subject can send family members into seizures.
The next thing to do is your homework. Yes, homework. The chances of a business succeeding go up dramatically if the right and enough research are done. Emphasize “the right” and “enough”. It is one thing to do research but if it is not the right research and not enough research is done, chances are you will make some wrong choices.
Talk to your banker. If you do not have a banker establish a relationship with one. Banks do have valuable information and, believe it or not, some of that information is free of charge.
Take heed to what your banker says. If you cannot get financing, that can be a good indication that your business venture is flawed. Another hint is if the bank requires a ridiculous amount of security (yes, it can seem as if they want everything plus your first-born as security!) or the interest rate is high. The more demands the bank makes, the riskier they view the venture to be. This can be a good indication that you also need to review your business idea as to how viable it really is.
Establish a relationship with an accountant that is experienced at helping businesses start up. Many people make the mistake of waiting until the business is established before talking to an accountant. The right accountant can provide you with information and guidance that can save your months of research and help you avoid common pitfalls.
Access government services that are free or come with a minimal cost.
Do a business plan. In my consulting work, I have yet to deal with a financially troubled business that has done a business plan. Yes, there are successful businesses that have never done a business plan but there are more failed businesses that have never done a business plan.
In the meantime, if you are considering starting a business take heed of the three golden rules:
- don’t rush to quit what you already have (job);
- get the cash behind you (working capital); and
- research, research, research.
It may slow your dream of having a business but it will help ensure it is a successful dream.