9 Ways To Prepare Before Starting Your Own Business
If you are unemployed, underemployed or unhappily employed, the idea of taking control and becoming your own boss might be sounding pretty sexy right about now. With the unemployment rate exceeding 9 percent, it has become clear that jobs aren't quite as dependable as perhaps we previously thought. However, the success rates for new business are quite scary too, with the majority of all new businesses failing in just a few years' time. While there is never going to be a "sure thing", if you are thinking of leaving your job to hang out your own shingle, there are significant benefits to preparing before you take the leap.
Here are nine ways to make sure that you are prepared before you start your own business, based on concepts from my New York Times bestselling book, The Entrepreneur Equation, so that you can give yourself the best chances to succeed.
1. Define and Evaluate Your Goals
You can't figure out a path to get somewhere if you don't know where it is you want to get to. Plus, once you have that goal, you need to know if your path is the most direct route to achieving what you want. Ask yourself tough questions about why you really want to start a business. Are you looking to get rich quick? Do you want to showcase your talent, new product idea, or service? Are you tired of your boss taking credit for what you do? These kinds of goals might lead you down the wrong path. On the other hand, if you love the idea of running an entity, if you like creating systems and procedures, adore servicing customers, and if you thrive on wearing many different hats and balancing responsibilities, then entrepreneurship could be the perfect path for you.
2. Show Me the Money
The cost of starting a business in many industries has come down substantially. However, that is only part of the story. Businesses often take a few years to gain a solid foundation, so you need to have enough money to start the business, plus operate it while it stabilizes and have enough money to live on in the meantime. If you don't have the money yourself, identify whether you have credible access to capital; the downturn has made it more difficult to secure financing and you don't want to be three months into a business and have to decide whether to keep the business open or pay your rent or mortgage- that's a losing proposition.
3. Gain Relevant Experience
Being able to manage employees and vendors is the type of entrepreneurial skill you'll need to acquire before starting your own business. You'll also need to know your industry inside and out, including aspects you may not be familiar with or may not even like, including marketing, accounting, and more. Don't have the experience you need? Spend time working in a similar company, shadow a business owner in your industry, or take a job on nights and weekends in a comparable business. Test the waters first with a trial run before you start your own company.
4. Build Your Network Before You Need It
Business sometimes comes down to not what you know, but whom you know. If you don't know many people or if you just haven't warmed up your contacts in a while, now is the time to focus on building a solid network. Strong connections can provide valuable business advice and provide introductions to get you more favorable financing, prices, terms, and conditions from business suppliers and professional services. Moreover, connections are your best source of marketing and customer referrals, which is critical for a new business.
5. Do a Thorough Personality Assessment
Do you prefer the "status quo" and like to avoid the unexpected? Can you handle a life of highs and lows - including financial highs and lows? Could your savings and bank account handle financial lows as well? If you are a person who likes stability and control, or if you prefer when things go as planned, the roller-coaster ride of a new business may not be right for you. Be honest about your personality fit before you take the leap.
6. Give Your Lawyer a Ring
If you are going to go into a business that competes (directly or even indirectly) with your current employer or if you plan to call on prior customers or contacts, you may find yourself in a legal bind, depending on the paperwork you have signed with you current (or previous) employer. Check with your lawyer to make sure you are in the clear or to find out what you need to do to avoid any sticky legal situations.
7. Checkout the Competition
Before you leap into entrepreneurship, take a hard look at the marketplace and your competition. Is your market saturated with successful businesses? Is your industry littered with so many bad businesses that it's developed a bad reputation? Both good and bad competitors will influence just how successful your business will be. You will need to market and brand your business to shine above the good competitors and to make up for the bad ones.
8. Test Your Idea's Scalability
The most successful businesses rely on automation and delegation. Will other employees be able to do your work? If not, can you teach others what to do in an easy-to-follow format? If your business relies on your skills - and your skills alone - you might have a successful job, but it may not be that business you are looking for.
9. Sell First!
Too many entrepreneurs spend time and money building out retail stores, manufacturing products or developing service offerings without truly assessing the viability of the market. See if you can garner interest (in the form of purchase orders, deposits, etc.) before you invest too much capital. If you have a lot of interest in your offering, there will be less risk in pursuing it full time. If you don't get any bites, you may want to re-jigger your offering, pricing or business model before investing your full time and effort.
Putting in the time and effort up front to stack the odds in your favor will help you avoid being one of the statistics.
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Carol Roth is a business strategist, deal maker and author of the New York Times bestselling book, The Entrepreneur Equation. She has helped her clients, ranging from solopreneurs to multinational corporations, raise more than $1 billion in capital, complete more than $750 million worth of M&A transactions, secure high-profile licensing and partnership deals and create million dollar brand loyalty programs.
Carol is a frequent radio, television and print media contributor on the topics of business and entrepreneurship, appearing regularly on Fox News, MSNBC, Fox Business, WGN TV Chicago and more. Additionally, Carol’s Unsolicited Business Advice blog at CarolRoth.com was recently named as one of the Top 10 small business blogs online and she is a contributing blogger to outlets like The Huffington Post and Crain’s Chicago Business/Enterprise City.
Ms. Roth holds a Bachelor of Science in Economics from the Wharton School of Business at the University of Pennsylvania where she graduated Magna Cum Laude. Twitter: @CarolJSRoth