Questions to Ask Yourself Before Venturing into a New Business
In 2020 it was estimated that there were 800,000 business startups. Statistics only give a 50% of those a chance to survive over 5 years. The odds are against you. Personally, I have started 4 businesses. Three of them I would consider successful, but one was definitely not. Life is a journey and we learn a lot from failure. However, if I had a choice, I would have preferred to avoid the failure or at least have been able to better manage the damage. Rarely does someone venture into a new business or project with failure in mind.
Think of a business as a boat. Do you know how ocean worthy it is? Do you know if there are any holes? Do you know how to captain it? How do you know which boat will float?
Here’s six questions to answer to see if it this is a good venture fit for you.
- What will it cost to get started or to build the boat? Make a list, with a dollar value, of everything you need to purchase. Include services you need to employ and all the work you need to put in before you earn your first dollar. Note your assumptions, for they will change.
- Once your business is started, what will it cost to stay afloat? Add up all the anticipated monthly bills and labor costs. Include a dollar value of your time.
- What is your best-case scenario? Estimate a reasonable high-end number of dollars the project would generate if everything ran perfectly based on the costs you have estimated. Do your research on similar types of businesses. Define your limitations – market, space, resources, etc. Note that not every business has the same potential.
- How much will it cost you if it sinks? Define how much are you willing to lose. How hard will it be for you to take a loss? Prepare for the worst and see what it might look like.
- What other potential benefits will this business offer to you? Will it provide the lifestyle you desire, optimize your strengths, provide a higher profile, give you a new set of connections, etc.?
- How much would someone have to pay you to hand over the boat? Set the value – if you are successful and someone is interested, what would you accept. In the heat of the moment, we forget why we started.
It’s easy to see the upside of starting a new business. The downside is harder to accept and can be much harder to live with. This list of questions can prepare you for your journey ahead.
You can also use it to improve the results by asking additional questions. How can I reduce the cost to get started? How can I reduce overhead? Can I share the risk to reduce the potential downside? Apply forethought to improve the possible outcomes.
It is difficult trying to stay afloat on a sinking ship. Knowing that a working life boat is aboard can improve your odds.
By Mary Guldan-Lindstrom, CPA