Monday morning. The alarm goes off. Time for work. As you’re stop-and-going your way through rush hour to work, it occurs to you, “I’m going to quit my job and start my own business!” Or maybe you have acquired some skills and knowledge and just know that you can do things better than the company you’re working for. Or, maybe you simply have entrepreneurism in your blood, and the timing feels right to hang your proverbial shingle. Launching a business is a big decision, a tough decision. So, how can you make such an important choice? Glad you asked.
Decide if Running a Business is for You
The first step is coming to a real understanding of what running a business, or several businesses, is like. With all of the benefits, like setting your own schedule, unlimited earning potential, freedom to take vacations, and creative independence, it’s easy to see entrepreneurism as a no-brainer. But there’s the dark side to all of this, like late hours, periods with no money, angry customers, broken “promises” by manufacturers and vendors, taxes and bookkeeping, and more. Understanding that the first year or two is going to be very challenging, both financially and personally, is key to making this decision.
A Few Reasons NOT to Start a Business
We mentioned some of the downsides to being a business owner. Here are some reasons that you might NOT want to launch your own business:
- You prefer a steady, predictable flow of income: That’s not going to happen, at least not in the first year or two. You’ll have to be ready to have days, weeks, or months, with no income coming in. Cash flow, revenue, and net income are unpredictable in a new business.
- You don’t believe the customer is always right: Business success is all about happy customers. If your focus isn’t creating “Raving Fans,” then business ownership might not be your bag.
- You don’t really have the skills and experience built up yet: You don’t need to be world-class in your chosen services, but don’t go into this as a novice. Acquire the skills you need to create great products, then launch.
- You don’t have enough ramp funds saved up: You’re going to need way more money than you think in order to survive your first few years. Rule of thumb is that you’ll need 4x the amount of funds and 2x the amount of time to get going. Have a second source of income or strong savings before you launch.
- You’re just not sure you’re ready: Hey, if you’re not 100% ready to go, it might be better to wait until you’ve got the gas to push your way through the tough times.
Ready to Go? Then Write Your Business Plan
If you’ve given any serious thought to launching your business, you’ve come across the idea that you need a business plan. But don’t let it scare you. You’re not expected to be an expert in every area of the business plan. The key here is that you’ve gone through the exercise of planning each area of your business, that you’ve planned for contingencies, and that you truly understand how you’re going to make money. Here are the main areas you need to have in your business plan:
- Executive Summary: This is a two-page (max) summary of the business plan, with a paragraph on each section with highlights. The Executive Summary is like a sales sheet. It’s designed for investors, bankers, partners, etc. to get a quick understanding of your plan and to start to believe in your ability to run this business.
- Company Overview: Describe your background, your market, your products, the business location, address, legal structure, etc.
- Sales and Marketing Plan: This section identifies your target market, measure its size, and lays out a plan to reach them. You’ll also want to itemize your marketing budget here with explanations.
- Operations Plan: Walk the reader through the daily operations of your business. Whether you’re retail, freelance, or manufacturing, paint a picture of how the business creates your products or services for your clients. Include things like checklists, storage, backup vendors, etc.
- Strategic Plan: Here, you’ll do the good old SWOT analysis, competitive analysis, and industry analysis. Check out Michael Porter’s Five Forces Model.
- Leadership and Management Team: You’ll want bios of your key leaders, including their qualifications to run this business. Investors will hone in on this one.
- The Financials: You’ll want to have the good old pro forma Profit and Loss, Cash Flows, and Balance Sheet. It’s also good to have a simple financial model that demonstrates a per customer, per project, per user financial model that show milestones as you grow.
That’s a lot. Don’t sweat it. We can help with the Business Plan part. But you need to dive in and start thinking about these things so that you’re the expert on your own business plan.
If you’re trying to figure out if going entrepreneur is right for you, schedule a time to talk with our team. We have decades of experience helping people just like you make this decision and if that’s what you decide, setting things up and keeping the business on track to be a financial success. Listen, nobody is a success trying this on their own. Get some key advisors on your team. It’ll greatly reduce your headaches.
Schedule your complimentary consultation today.