Starting a business seems like the ideal professional goal for millions of people around the world. The ability to sell what one wants to sell, work when they want to work and charge as much as they want to charge are some of the most common reasons people offer when asked why they think starting a business is a good idea. But what does opening a business look like in real life, and is it as good a job as it seems?
Building a business is often satisfying and certainly allows one the freedom to set their own schedule, but that is not the whole story. As with anything, opening a company can be overwhelming and have downsides in addition to benefits. This article will explore the things one needs to know before starting their own business.
According to the US Bureau of Labor Statistics (BLS), nearly 20% of new businesses fail within the first two years of operation. These numbers are even worse over time, with 45% of businesses failing within the first five years of operation and 65% within the first ten. Just 25% of new businesses manage to last for 15 years. If an entrepreneur is opening a business, in other words, the odds are stacked against them. That does not mean that they should not go for it, however, as 25% of new businesses do make it to 15 years and beyond.
Part of these dire statistics might be due to competition. According to the US Census Bureau, in the US alone, nearly half a million businesses formed from November to December 2022. That’s right — in one month, more than 400,000 businesses opened. As one might imagine, these numbers add up to millions of businesses formed in the country every year. Not all of these businesses can survive because there simply is not enough room for them in the market. Instead, the most viable make it a bit further, although most of them fail within five years.
What exactly does all of this mean for an entrepreneur? The good news is that none of this data means that one should not shoot for their dreams. Entrepreneurs who want to build a new business should try and make that happen — they are not doomed to failure. It is most important to understand the factors that influence success and failure. With that in mind, here are the things to consider before starting a businesses:
Questions To Ask Oneself
The first factors to consider take the form of questions. Before starting a business, entrepreneurs should ask themselves these questions and spend some time truly thinking about the answers:
Why am I starting a business?
First, one should ask themselves why they wish to start a business. There are millions, if not billions, of businesses around the world, and chances are that someone else already offers the same kind of product or service. Why would this business be a better choice? If there is no satisfactory answer, one might want to hold off on opening a business. If the entrepreneur cannot understand what they are offering and why it matters, customers probably will not, either.
On the other hand, maybe they can answer this question easily. In that case, good for them! Now they can move on to the other questions to consider.
What am I hoping to get out of my business?
Some people want to create the best products or services on the market. When they are passionate about their industry, the reward is often the ability to improve the field and help customers meet their needs.
Some people have a different approach. These people are opening their own businesses because it gives them the ability to set their own schedules and prices. In this instance, they have to spend some time researching the cost vs. profit numbers for their niche of choice. They are not fully able to set their prices based on their own whims, in other words, because they will have bills to pay and competitors to run against.
Another reason some people open their own businesses is the perceived flexible schedule. Who has not woken up and wished they could just stay home? When working for someone else, that is not really an option. So, we get up and force ourselves to make it to the office and through the day. What if one had the ability to turn off their alarm and go back to bed? Or simply take the day off entirely in favor of some kind of fun activity? It is not difficult to see the appeal in setting one’s own schedule.
The truth is that many entrepreneurs work more when running their own businesses than they did when working for someone else. They might have a bit more flexibility, but not so much that they can afford to take a couple of days off to sightsee. If someone is opening their own business solely for the schedule and ability to charge more for their services, they have quite a bit of research in front of them. One should dig into these areas and be sure that they can make what they think they can make before opening their own company.
What happens if I fail?
This is not a question most people want to ask, but it is an incredibly important one to answer. What happens if the worst occurs and the business fails? If the answer is “I’ll lose everything and file bankruptcy”, one might want to take some time to come up with alternate funding options. Starting a business is a huge risk, and if someone is investing all of their money into it, they stand to lose their entire savings if it fails.
While there is no guarantee that the business will not be successful, one should consider the objective numbers before making a final decision. Nearly a quarter of all new businesses fail within a couple of years. What happens if this business is among them?
These are questions one must be able to answer before they decide to open their own company:
What will my schedule look like?
Many people are surprised by just how much work they have to do to keep their businesses afloat. As we mentioned above, this time often extends far beyond their schedules working for someone else. One cannot simply turn their computer off at five and pick it back up the next morning at nine when they are the only point of contact for their business. They are responsible for answering customers’ questions, communicating with vendors at times convenient for them, and clearing their task list so that they have time for everything that needs to be done tomorrow. Some tasks can be safely shifted from one day to the next, but most things will need to be done on a strict timeline.
If someone is leaving their day job because they hate the schedule and want to spend more time with their family, they might not find opening their own business to be a good solution. They have to understand what they want versus what the reality for new business owners is before they take the plunge.
Other Factors To Consider
In addition to the questions above, there are some factors to consider before opening one’s own business. Here are some of the most important — but one should be sure to also do their own research. There might be industry-specific steps they will need to complete before they can start their own company.
Get the right education
Before starting a business, one needs to have the foundational knowledge upon which to build it. If an entrepreneur has no idea how to market or register their business, the business is not likely to survive. Entrepreneurs with the right education are most likely to succeed when opening their own businesses.
The good news here is that one does not have to dedicate many years of their life solely to studying in order to complete that education. Online work might be the right choice. Exactly how long to get MBA online varies from person to person, but with the right dedication and professional experience, one might be able to complete their degree within just a few years. Just be sure to work with a respected educational institution, such as St. Bonaventure University, to ensure that the degree is valid and worth the time and effort it takes to earn it.
Pick a business location
Some people put this step last, but it is an important factor to consider. Not every community will have the same demand for specific businesses.
An area dominated by heavy trucks might not be the best market for lightweight motorcycles or small sports cars. An entrepreneur’s first step when opening their own business should be to pick the right location for that business. In order to do that, one should look into market research.
Conduct market research
Before opening a business, do some market research. This process allows people to gather information about competitor businesses and potential customers with the goal being to give themselves a competitive advantage. For example, if one is opening an Italian restaurant, they should look into the local population as well as local businesses to find out how many Italian restaurants are in the neighborhood, and how many people potentially eat at Italian restaurants.
The last step is quite important. Even markets with just two competing businesses might not be able to sustain them because people simply are not interested in the food. If a community is heavily vegan, for instance, and one’s specialty is meat-based pastas, they might need to look into a different area.
Pick a name
The next step is to pick a name. There are a few additional factors to consider here before starting to register a business. Names matter, and they should be memorable without being offensive or obnoxious.
If one is certain their business will remain relegated to their specific neighborhood, they might consider some kind of inside joke or geographic reference that will mean something to the people who visit it. If the goal is to have businesses around the country or the world, on the other hand, one should pick something a bit more generalizable.
Register the business
Once the name and location are chosen and the market research is complete, it is time to register the business. The exact steps here differ from place to place and business to business. In general, one will need to register with the federal government along with state government.
It is important to take into account the additional taxes that might be necessary to pay. If a business owner is completely new to this process, consider consulting with an attorney familiar with business law. They can help to navigate the sometimes-complex legal process.
With the above in mind, an entrepreneur is in a good place to begin seriously considering opening their own business. Keep these tips in mind and take time. There is no need to rush through all of these steps at once. With the right attitude and approach, one can be on their way to a thriving business in no time.