Preparing for Entrepreneurship: 10 Key Questions to Consider
Starting your own business is one of the most exciting and daunting experiences you'll ever have! It could also be one of the best decisions you've ever made. Before diving in, develop a game plan to set yourself up for success, and ensure you are mentally and financially prepared for the challenge.
Whether you’ve been seriously considering pursuing a side-hustle or full-time entrepreneurship, here are 10 questions to ask yourself to see if you’re ready to take the plunge!
1. What Are You Selling?
A fundamental question you’ll need to answer is: What are you selling, and why do people need it? If you don’t have an answer to this question, you aren’t offering value to anyone, and you don’t have a business. Most entrepreneurs think their own product or service is a good idea, but the real test is figuring out whether everyone else thinks so too.
Put your product out in front of your target market, and get honest feedback from potential customers. Do your homework and make sure there is a viable market of people out there who would actually buy what you are offering.
2. What Sets You Apart From Competitors?
If your product or service is desirable, there are likely many others offering the same thing in the marketplace. What’s the unique factor that makes people want to buy from you?
Is it your years of experience in your industry that makes you a knowledgeable expert? Perhaps you bring top-notch customer service or unparalleled quality with a handmade touch? Often, injecting your one-of-a-kind personality into your brand (quirks and all) will make your business more personable and relatable. After all, people buy from those they like and trust.
3. Is Your Business Idea Scalable?
Many successful enterprises have modest beginnings from a garage or home office. But if growth happens as planned, you won’t be able to fly solo forever. Scalability of your business is what truly takes it to the next level. A scalable business is one that can produce more of their products for incrementally lower costs.
Online and digital products have maximum scalability since the work is put in once upfront, and the product can be sold an infinite number of times at a minimal cost.
If you are selling physical products, you should consider whether your goods can be mass-produced or sold by wholesale. For service-based businesses, you’ll need to create a standard process which enables additional staff to offer the same service to more customers, while maintaining the same quality standards that you would uphold yourself.
4. How Committed Are You to Success?
Entrepreneurs will happily work 100 hours a week for themselves, rather than work 40 hours a week for someone else. Are you willing to invest 100 hours a week for the next two years to get your business off the ground? How committed are you to making this happen?
If you have a family and kids, your life will need some creative juggling — That’s the reality in the start-up phase. It will mean sacrificing plenty of evenings and weekends. It also means scaling back on some luxuries such as vacations, big purchases, or nights out, until your business starts bringing in money.
Having a strong support network in place will make a huge difference in your life. Whether it’s having your parents close by for ad-hoc babysitting, or finding like-minded entrepreneurs to meet up with and share ideas and struggles. Find people around you who will support you, keep you sane, and conquer those times of isolation.
5. Are You a Hunter or a Farmer?
As an employee, you get paid to do your job. You don't have to worry about how the company is run behind the scenes. Goals are set by your higher-ups, and a regular paycheck is deposited into your bank account. If you have trouble, you can call IT, accounting, or HR for help. If you're good at what you do, you'll be rewarded with a promotion. Much like a farmer, you tend to your plot, plant your seeds, and reap what you sow. You take comfort in the predictability of the seasons.
As an entrepreneur, you have to do everything yourself (or hire someone to help you). This includes: managing the finances, marketing, organizing paperwork, dealing with lawyers and suppliers, and chasing clients. You set your own goals and execute them in the best way you know how.
Entrepreneurs are a different breed — they possess the hunter mindset and will constantly seek opportunities that challenge the status quo. They're self-motivated. They don't get bogged down by problems; rather, they focus on solutions. Hunters experience times of feast and famine, similar to businesses having periods of highs and lows, and they plan around unpredictability.
6. How Will You Fund Your Business?
While some businesses require significantly more start-up capital than others (i.e., starting a restaurant vs. opening an e-commerce shop), you will definitely need to set aside some cash before you start operating.
Figure out how much money you need to start and where the funds will come from:
Borrowing from friends or family
Credit cards — Use with caution! Due to high-interest rates, and the risk on your credit score if you're not paying off your balance monthly, credit cards should be used responsibly, and only if absolutely necessary.
Bank loans — Some banks are willing to extend business loans, but they will likely be assessed based on your personal credit. It'll be even tougher to qualify for a loan if you're not employed and can't show a consistent source of income.
Angel investors or venture capital — These are the scenarios you see on Shark Tank. In reality, only a very small percentage of businesses end up getting funded — only if they're building something very unique and scalable or already have a history of strong revenues. This might be something worth considering down the line, but don't get too caught up about it from Day 1.
Equity — Giving up shares of your company may be involved in a venture capital investment, but it's the most expensive option. While this option may make sense for a company that is looking for a large cash investment to scale quickly, most businesses don't go this route early on.
Bottom Line: Bootstrap the business as much as you can with your own money. Set aside at least 3-6 months' worth of estimated operating expenses so that you have a comfortable amount of starting capital.
7. What Are Your Financial Projections?
A surprising number of people start businesses and avoid thinking through the numbers, hoping that their passion alone will keep their business afloat and the money rolling in.
I hate to break it to you, but numbers don't lie. It's too easy to underestimate how quickly you'll burn through your money. That's why 50% of businesses end up failing within their first 5 years.
Before you go all-in, do yourself a favor and paint a financial picture of your business over the next 3 to 5 years. Estimate all your business expenses including registration costs, your phone & internet bills, utilities, rent, online services or memberships, and bank fees, just to name a few! I guarantee that once you see this total on paper, you'll be surprised.
The reality is that most businesses don't start making profits until 2 or 3 years in, so you'll need to have a clear picture of how much money is needed to stay in the game. That's not to say making money quickly isn't possible, but you'd be lying to yourself if you think that you'll be able to quit your job 3 months into your business. It's always better to estimate conservatively now than to be shocked later when things don't work out as planned.
8. What's Your Game Plan?
We're all busy people juggling multiple commitments in life. But when it comes to embarking on a life-changing journey, there's no better time to start than NOW.
Change is hard — It's easy to come up with a thousand reasons why you're not ready to do something, but all you need is that one good reason to take your first step. That's what differentiates the go-getters from those who never make it out of the gate.
To increase your chances of success, be realistic about your situation, and what you're willing to do.
If you've got personal financial obligations such as a mortgage or a family to support, you may need to start your business part-time for extra stability before going all-in. However, hustling at your day job and working on your business in the off-hours can be taxing, and it will take longer to get off the ground.
On the other hand, your business might be more successful if you focus more fully on it. When you get to the point where you've built up a significant emergency reserve (such as 1-2 years' salary) or have gained several steady clients or many customers, you may be ready to take the plunge full-time.
When you're on the other side of your dream life, looking back on all you've accomplished over the last few years, you'll only wish you began your journey sooner.
9. Have You Built a Network?
Building a strong network of connections is crucial for the success of your business. These connections can be fellow entrepreneurs, mentors, or industry experts who can provide valuable advice, resources, or potential partnerships. Don't underestimate the power of networking – it can open doors to opportunities you may have never considered.
Attend industry events, conferences, or join online forums to connect with like-minded individuals. Reach out to people in your network for advice or referrals, and be prepared to reciprocate when you can.
10. Are You Prepared for the Emotional Roller Coaster?
Starting a business can be an emotional roller coaster, filled with high highs and low lows. It's essential to prepare yourself mentally for the challenges that may lie ahead. You will likely face setbacks, rejections, and moments of self-doubt, but perseverance and resilience are key.
Surround yourself with a support system – friends, family, or fellow entrepreneurs – who can offer encouragement and guidance when needed. Celebrate your successes, learn from your failures, and remember that the journey is just as important as the destination.
In conclusion, before diving headfirst into entrepreneurship, take the time to ask yourself these critical questions. By honestly assessing your readiness, you can lay the groundwork for a successful and fulfilling business venture.