Columnist Phil Hardwick lays out some considerations for those thinking of starting their own business in the New Year.
Is 2024 the year you will break away and start your own business?
If so, you probably won’t be alone.
Twenty percent of adults are in the process of founding a business or have done so in the past three and a half years, according to the Global Entrepreneurship Monitor, an annual report by Babson College released this month.
During the pandemic, millions of people have decided it was the moment to chase their dreams.
In 2021, applications to start new businesses hit 5.4 million, up from 4.4 million the previous year, according to the U.S. Census Bureau. Only about 30% of those applications were for businesses considered likely to hire employees. If you’re one of those who is thinking about taking the plunge, there are several considerations to consider. Let’s assume you have already decided what your new business will be.
Do you have the time? Perhaps you have decided that you will stay with your present job and stick your toe in the water so to speak. If so, consider how much time it is going to take. For example, if you are going to be a consultant and offer your expertise to clients, will you be able to meet their schedule? If you are going to go full-time, then it is suggested you budget more hours than you think it will take. The number of management consultants in the United States has also grown significantly, reaching a workforce of almost 810,000 in 20222.
When I started my real estate appraisal and consulting business many years ago, I first worked out of my home. As my business grew, I needed to hire an administrative assistant and another appraiser. This resulted in the need to rent office space, which was a good thing. However, I could not have afforded the office space expense if it was just myself. So, plan on where your business will be located at the beginning and where it will need to be as it grows. Also, consider coworking office space. These spaces offer many amenities, including conference rooms and administrative support.
It’s been said that when one finds an occupation that aligns with their passion they don’t have to work anymore. That sounds good, but it might not be the best strategy for someone starting their own business. It’s better to do something you’re good at rather than what you’re passionate about. Nevertheless, if your business purpose is something you are passionate about and good at, your chance for success is improved. The bottom line is you want to avoid starting a business that you don’t like, even if it is successful.
Will starting a new business allow you to be financially successful? Not just your business, but you personally. If you haven’t done so already, check out the Small Business Administration website. It is an excellent source of information for someone thinking about starting their own business. There is even a break-even analysis tool. Be sure to use it.
New business owners should not go it alone. There should be someone outside of the business they are accountable to. When I had my own business, I asked several people to serve as a volunteer advisory board for my business. On this board was a CPA, a lawyer, and two business owners. Each quarter I would treat them to a nice lunch or dinner and give them an update on the progress of my business, including my financial information. They gave me good advice and guidance as my business grew and kept me on track. They even sent referrals. It was the best expense I ever made.
Think about the people you will be dealing with in your new business. Are your customers and clients the kind of people you want to be around? If you dread interacting with a certain type of people, it will add stress to your life. A new business owner told me recently that the thing he hated most about his retail store was his customers. I have a feeling his days as a small business owner are numbered.
How will your new venture affect your family and others you care about? Will the time invested in your business take away from your relationships with them? A life well-lived is more than a business that succeeds.
Finally, consider what will happen if your business fails. After all, most small businesses aren’t in business after only a few years. According to the SBA, only 50% of small businesses are still in business after five years.Will you be able to find a job or go back to your current employment? This is certainly not a recommendation to plan to fail, but a suggestion to take an honest look at your future.
If the most effective way to make money likely requires a lifestyle you don’t want to live, then maybe starting your own business is not for you. On the other hand, owning your own business might just be the most effective path that fits your desired lifestyle.
Whichever option you choose, I wish you much success.