Whether you are just starting to dream about having your own business or are just about to make the leap, you need to know about the tough decisions you will have. Running a company isn’t for everyone. Thinking about this list may give you a clue to whether it’s for you.
Here is what you will have to decide.
When to Start Your Business
As many aspiring comedians and singers are told, don’t quit your day job. At least, not until you can answer these three questions:
- Can you build it?
- Is there a use for it?
- Is there a market for it? (In other words, will people pay you cash money to get it?)
Remember: the vision in your head is only the beginning. You need a strong foundation to base your business on and that takes time to build. Until it is in place so you can jump right into selling your product or service, you will need to have an income stream. Oh, don’t forget you will need health insurance coverage, too.
Some things to think about:
- Legal Structure - Will this be a sole proprietorship, a limited liability company, a non-profit? Each designation has its requirements, advantages, and drawbacks.
- Business Name - Be sure to register your DBA (Doing Business As) with your state government. Include registration for a tax identification number, state and local taxes and any licenses and permits.
- Business Location - Brick-and-mortar or online from your home office? Or will it be centered in another location?
How to Fund Your Business
Undercapitalization is one of the biggest killers of new businesses. Don’t underestimate how much it will take and make smart choices on where the money comes from. A good business plan and budget will tell you how much you will need and when you might expect to make a profit.
If you have substantial savings that can see you through the first year, more power to you. Just don’t spend your retirement.
If you decide to accept money from a bank, a venture capitalist, or even your brother-in-law, understand that you have made a commitment to not only pay it back but to show fast progress on a continuous basis. If you don’t, investors get out the pitchforks.
Do your research about where to get your financing. The right investor will help you grow your company and have an active interest in its success. Remember to take a look at all options including government backed loans and research grants if they are appropriate to your business.
When to End Your Business
As they say in the writing world, sometimes you have to kill your darlings. It can be hard, hard, hard to make the decision to shut down your business after investing all that time, money, blood, sweat, and tears to create it.
Don’t make this decision on your own. At this point you are probably way too emotional to be rational about it.
Instead, follow the advice of T.A. McCann, founder of Rival IQ. Set milestones that you must meet in order to continue the business and then enlist a trusted advisor, such as your spouse, to hold you to them. If the business doesn’t meet the milestones, it’s time to end it.
When to Sell Your Business
If you are in the enviable position to sell your business, meaning it is a thriving concern, you still need to plan an appropriate exit strategy. Decide now what terms you would accept in areas such as financial, location, and retention of current employees.
Each time you come to a funding milestone redefine your sell criteria and compare the state of the business to it in the event you receive a buy offer.
Every one of these decisions requires thoughtful deliberation. They cannot be made on the spur of the moment or during a crisis. Successful entrepreneurs are a mix of dreamer and hard-eyed realist. Be honest with yourself about how you will feel about failure and success, the time you will need to devote to build the business, and any financial hardships you may experience. Take into account the impact to your family and friendships.
It’s good to dream. It’s better to plan.
