Look at Your Financial Situation
One of the most glaring problems that I often see with potential business owners is their failure to plan properly for the financial transition from employee to business owner. Cash flow problems can lead to unpaid bills, continuous calls from debtors, and emotional stress. Consider your financial situation before starting your business.
- Consider your personal financial situation. If you plan to quit your current job and devote all of your energies to your new business, it is a great idea to set aside enough money to pay your living expenses for at least six months. If you have a spouse or other family members that work, can you live on their earnings? New businesses frequently are not very profitable in the early stages. Prior planning can provide you with a much-needed cushion in case you cannot take any money out of your business for a period of time.
- Think about start-up costs. If you are starting a new business from scratch, do you have the money you have to spend in order to get the business up and running? Think about whether you will have to rent an office, buy furniture, buy equipment, advertise, pay for permits, hire a lawyer, or number of other initial things that require spending money before you make money. Fitness centers and restaurants are examples of businesses that are required to expend significant amounts of money before they open their doors.
- Look realistically at initial sales potential of the business. The opportunities for initial earnings vary greatly from business to business. For instance many service companies can be profitable from the very beginning. If you open a consulting business and have your office in your home, your earnings are limited only by your ability to attract and service clients. Likewise, a landscape or yard maintenance business can earn early profits if it has the right equipment, skilled labor, and customers. On the other hand, most product businesses, cannot earn income until the products are developed or purchased, advertised, and sold.
- If you need a funding, be aware of lender requirements. Get rid of the idea that business capital is easy to get. It is a common misconception that the U.S. Small Business Administration (SBA) and other government entities are waiting in the wings to dish out free money to entrepreneurs with great ideas. Nothing could be further from the truth. What is commonly referred to as an “SBA Loan” is really a loan from a traditional lending institution (bank), but guaranteed up to a certain percentage by the SBA to reduce the bank’s risk factor. In addition to asking for a solid business plan, the bank will require that you have a high credit rating (FICO score), cash to invest in the business, and personal assets (equity) that can be captured in case you default on the loan.
Categories: Business, Finance Tags: Look at Your Financial Situation
Match Your Skills and Interests to Your Business
Skills are the things that you are good at. Interests are the things that you like to do. When you are considering the type of business you want to start, it is generally best to find one that utilizes your skills and that captures your interest. If you are good at something, but don’t like doing it, you will soon find yourself wishing that you were doing something else. Likewise, if you are interested in what you are pursuing, but you are not good at it, you are not likely to stick with it for long.
After you have identified your various skills and interests, you can then begin to identify potential businesses that satisfy both requirements. This is where the true entrepreneur can use the imaginative processing to come up with creative ideas for new and unique businesses.
Examples:
- You know lots about flowers and plants, but you do not like to be outdoors. Don’t go into the landscaping business. However, you might think about providing and maintaining indoor plants for restaurants, professional offices, real estate brokerages, and other commercial businesses.
- You are like working with pre-school children (interest) and you are trained as an elementary school teacher (skill). You might consider opening a day care center that specializes in learning activities and also offers after school care and tutoring.
- You have always wanted to open a clothing store. However, you hate being indoors. Most likely, you will probably always resent being stuck inside. Think about starting some kind of a kiosk clothing business in an outdoor mall or specialize in clothing sold at outdoor sports events, such as car rallies or surfing competitions.
Categories: Business Tags: Interests to Your Business, Match Your Skills
Are You Are Ready to Make the Transition?
When you are contemplating business ownership, it tends to be exhilarating. However, it is common to experience uncertainty as well. Am I willing to invest the time it takes to start and run a business? Can I deal with the emotions that come with running a business? Will enough people use my services or buy my products? Will I make enough money to sustain the business and my desired lifestyle? Am I mentally prepared to give up my current salary and accept the financial uncertainties that come with running my own business? Will I be able to support my family?
In order to be successful in your new business you have to be fully committed to your vision. Instead of working eight hours a day, most new business owners work sixteen hours a day with very few days off for leisure activities. You will indeed be your own boss and the master of your time – but, that does not mean that you will be free. I have always thought that I am the toughest boss that I ever worked for.
Think about it and make sure that the timing is right to make your move from employee to business owner. Review possible threats that are likely to arise and determine how you will mitigate them. Determine what your strengths are and how you will use them to get your business up and running and on the road to profitability.
To complete your reality check, ask yourself the all-important question, “Am I ready accept the responsibilities of business ownership?” If the answer is “yes,” then it is time for you to move forward in a logical way to decide on a business and to get it off the ground and running smoothly.
Categories: Business Tags: Make the Transition, make your move
