Our expert columnists provide commentary and analysis on important issues facing modern businesses and managers.
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Last June, more than 425,000 new business applications were filed in the United States, which is more than double the number of businesses that started in the same month 10 years ago. Economists predict that the combination of accessible new technologies and pandemic-era confinement could create many new businesses.
Until this recent shift, the long-term decline in entrepreneurship was an economic concern because startups are a major source of innovation, creativity, and economic recovery. This shift in entrepreneurship will better equip the economy to bounce back in future recessions.
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If you’re feeling the itch to start your own company, you’re definitely not alone, but do some research and thought before you jump in. These four key questions will help you decide if starting your own business is right for you.
1. What problem does my potential business solve?
First and foremost, customers need a reason to use your product or service. If you can’t figure out what problem your business solves, it’s less likely to succeed. Then, once you’ve identified the problem, you need to make sure your solution is unique and not already on the market.
That said, not every business idea is good. Do your research to make sure there is a market for what you want to sell, including looking at trends in your industry and talking to people you know who might be potential customers.
2. Do I have the right team in place?
No man is an island, and businesses are the same. Before starting your own store, it’s important to build a strong team of individuals who share your vision and help turn your dreams into reality. Ask yourself if you have the right people to execute your business plan and the financial resources to sustain operations. Conducting a SWOT analysis will help you assess your team’s strengths, weaknesses, opportunities, and threats. The information you gather can be used to make informed decisions about how to move your business forward.
You may also need to educate yourself about running a business and a team before you start. Identify the skills and knowledge needed to execute your vision, and compare them to your current skills and knowledge to see where the gaps are. Then you can take steps to fill these gaps. If you’re not willing to do this prep work, starting a business may not be the right move for you.
3. How much capital do I need to start?
Before you take the plunge, make sure you clearly understand the costs associated with starting and running your business—and that includes everything from web development to taxes. It’s important to have a realistic idea of how much revenue you need to generate to break even. You can estimate this by creating a simple spreadsheet that plots your expenses and income for the first year. If you need help with this, talk to an accountant or business professional who can help you create realistic forecasts.
The bottom line is that starting your own business is a financially risky proposition. It’s a good idea to bank enough savings to cover living expenses for at least six months if things don’t go as planned. When you are self-employed, your income is not guaranteed. It is important to have some savings to tide you over during lean times; While some months can bring in great income, others can find you scratching your head.
4. What are the risks and potential rewards?
Starting a business is risky, but if you prepare for the worst and have a solid plan, the rewards can be huge. Do the work to understand the risks involved and have a contingency plan if things don’t go as planned. For example, when you’re self-employed, no one tells you when to start or stop working. You need the discipline and motivation to do the work, even on days you don’t feel like it. If you want to be successful in business, you have to work long hours. This can be difficult, especially if you have family or other commitments, but it is often necessary. Plus, if you’re used to working in an office with coworkers, you might find the transition from working from home to being your own boss. It’s important to make an effort to connect with other people, whether through networking events, online communities or coffee with peers.
While it may not be wise to make such a significant decision on a whim, there are many good reasons to start your own business. As Dorie Clark explains in her book, the quest to try something new, pursue a passion, or simply find a stable career is always worth exploring. Reviving you.
Above all, be sure to do your homework first. Answer the four questions and prepare for the challenges of being your own boss – because once you decide to take that step, you’ll be faced with a whole new set of challenges and decisions. Starting your business is just the beginning.