Are you starting your first business?
If you are like most people who want to start their own business people, you probably decided to do so because you are an expert in what you do, you believe you can do it better as your own boss, and you want your independence and ability to do it your own way.
Today, this seems even more possible due to the technology that you can use from home or a shared space that allows you to keep costs down when you start up.
While there are even government websites encouraging you (there’s one that has a header “Open for Business: Simple, Fast, Easy) headlines still exist that shout out nearly 80% of businesses close within 18 months of starting – and you can bet most of these are micro, small, and "kitchen table" businesses.
Nevertheless, our enthusiasm as human beings for the life of freedom is boundless, and once you conquer the fear of failure, most of us grasp the chance and plunge in.
The question is not “will you start your own business” but “how will you start your business with least risk of failure”. So here are the 6 things I believe you need, gleaned from over 30 years advising small business.
No. 1: Know yourself!
This is probably the most important advice I can give anyone in business. While we may have a great vision, a great product or service, even a great team around us, there are some aspects of human conditioning that may say we are not cut out to be in business for ourselves, or at least that post warnings about what support we might need on this roller coaster journey. What kind of risk profile do you have and how would that risk profile react to good and bad things happening to the business? How disciplined are you and can you improve this (really)? Are you good with numbers, with people, with annoying? Are you resilient? If several of your responses are in the negative, don’t give up hope! Knowing how you may react up front could mean that you are prepared and can mitigate some of your natural reactions to events.
No. 2: Are your family and friends behind you?
I mean really, solidly behind you – to support you in times of frenetic activity when your family may not see you for days, may even be called on to help physically; to support you with cash when you feel desperate, without judgment; to support you when you make a decision that costs you and them. Research (and my personal observation from real life) shows that your support group is the most important thing you need in a small business.
No. 3: Make sure you have enough capital and then, make sure you have more if it all goes bad, even if for a short period.
Another major issue causing small businesses to fail is that their owners simply underestimate the kind and scale of investment they need. Make sure you prepare budgets and cash flows and prepare “worst-case” scenarios. Have these checked by your accountant with a sceptical eye – this is one great example of how paying someone can actually make you money!
No. 4: Get your legal structure right.
The number of times I have met with a new client who wants to start a new business and I advise her on the best legal structure, and she chooses the cheapest alternative because “I can change to the one you suggest later”. In business, there is often no later – the tax bill will have come before “later”, the transaction where you need legal protection will come before “later”, the split up with your partner will come before “later”. Protect yourself now with the most efficient legal structure for your present circumstances.
No. 5: Appoint a good accountant and a good lawyer.
Have you heard this statement before? “I wish I had known that…” Well, you would have “known that” if your accountant or lawyer had been involved because it is their job to smooth the way for you in transactions, investments and setting up. Have you also heard this before: “I’m only starting and I can’t afford to pay for a good lawyer/accountant”? Interesting, do you hear yourself say “My arm might only be slightly broken and I can’t afford to pay for a good doctor so I’ll bind it myself for now”?
No. 6: Have fun!
Yes, after all that, prepare to have fun, because the reason you decided to go into this is, when it boils down to it, to have fun. If for any moment you feel going into your own business is a chore, is a pain but you have to go through it to be a “success”, you will surely fail. Motivation is all about the right reward and the best reward is having fun in your life. If you are not having fun you will not work at it, goodnight, go home.
Here you go – 6 things to look at before you start a business and only one of them involves dollars, and none involve products or services or markets or customers.
What this should tell you, as I have discovered in my experience, is that your business success is all about your life success.