Starting Your Own Business? Consider the Pros and Cons

Almost everyone has probably thought about starting their own business at some point in their lives. Whether it used to be a childhood dream to open a candy store, or you’ve had ambitions of creating a greeting card empire for as long as you can remember, there’s definitely something to be said for turning a hobby or a passion into a profession. Not only would you be your own boss and get the flexibility of creating your own hours and making all of the business decisions, but a successful business can also be a very lucrative enterprise.

Unfortunately, the numbers are grim. Statistics show that most small businesses fail within the first five years of opening their doors. While there are a variety of reasons this can happen, the most common pitfalls involve poor planning before the business is even launched. Keep in mind that passion for a given market – selling fishing tackle, opening a salon, or building websites – can only take you so far. At the end of the day, making a small business run takes hard work, countless hours, and discipline.

Evaluate the Market

One of the first things you should consider when exploring the possibility of opening your own business is your market and your target consumer. You could have the best idea in the world and could offer a unique, innovative product, but if consumers don’t want it, don’t need it, or can’t get access to it, you’re out of luck. A business will not thrive on ingenuity alone. So, think about the type of person that would choose to buy your products or services. What would their interests have to be? What kind of money would they need to have at their disposal? How would these consumers even find out about your product? If you can’t answer these questions, or the answers still feel fairly undefined, ask yourself how you could tweak your business idea to better fit into a niche market or meet the needs of consumers.

Crunch the Numbers

Get a realistic sense of how much money you’ll need to open your business. Most entrepreneurs, except for the very lucky ones, need to take out a loan to get their businesses up and running. However, taking out an extremely large loan can often sink the ship before it even leaves port. Try to keep your loan small, but realistic. Also, try to keep your over head as low as possible, keeping in mind that many small businesses don’t even turn a profit for the first few years after beginning. Several common ways that new business owners often misallocate funds is by hiring employees they don’t need or by renting office space they shouldn’t justify.

Construct a Business Plan

Keep your business plan simple and straightforward. A business plan is not a manifesto or a motivational treatise on why your idea is great. Rather, it is an outline for what you will sell, why you will sell it, and who you will sell it to. Some questions that you should answer in your business plan are:

• What does your product or service cost you?
• What will you charge customers for your product or service?
• How many services or products must you sell to generate a profit?
• How will you market your product or service?
• How will you deliver your product or service?

There are as many different business plan templates out there as there are business plans, so there’s no need to get bogged down in the idea of the “perfect business plan.” The important thing to keep in mind is that the business plan must clarify your objectives. It will likely change as you get closer and closer to launching your business, but your plan should be revisable and somewhat flexible. Asking a third party to review your business plan for an unbiased point of view is always a good idea.