Most employees are attracted by the allure of starting their own business. They fantasize about being their own boss, starting an empire in their field, and watching the checks start to come in as their net worth increases by the day. But prospective business owners rarely consider the risks involved in starting a business or the percentage of businesses that fail within the first year. Here are five factors to consider when starting a new business.
One key factor is a business plan. A successful business plan takes considerable time and effort to craft. Companies must have a business plan both to organize their resources and to secure outside respect and funding from other companies. They must decide how their business will be set up and what business they are going into. A business plan could be critical when determining responsibilities in the company and who is in charge.
Another factor is labor. Who is going to work for the company? Business owners must decide if they are going to sacrifice some of their precious capital hiring many employees or if they are going to do most, if not all of the work themselves. Prospective business owners need to realize that their funds will be limited at first. They may need to spend 12-15 hours per day working seven days a week in the early years of their business to help get it off the ground.
Two factors that work with each other are initial investment and financing. How will the business find the funds to get off the ground? And how will they continue to bring in money as the business begins? At first, businesses need an initial investment for buildings, employees, licenses, and capital. If a person is not independently wealthy, they will need to apply for a loan that is accepted by a bank. Most banks have been fickle with small loans over the past several years and may not pay the desired funds at the desired rate of interest that a business may have planned for.
Finally, one must consider the product or service that the company is offering. Is this product or service sustainable? Will people still want to buy it tomorrow or the day after? How insulated is it from competition? If a restaurant business opens up selling Italian food, another business selling Italian food across the street may take away a significant percentage of its business and cripple it.
Opening a business can be personally rewarding. It can be the fulfillment of a lifelong dream that is more important than revenues and expenses. However, if a person is not willing to go through the time and energy required for a business to succeed, they will only waste all of their hard-earned investment on a business that will be doomed from the start.