Enterpreneurship 101 – What to Ask Yourself Before Starting a Small Business

So, you like the idea of being the boss. You work hard and want to reap the benefits of that hard work. You know you can be successful. But how do you do it? We’ve been in your shoes. And there are a lot of questions to ask yourself upfront before starting a small business or buying an existing business. Let’s start with a few basics:

1. What are your real objectives? There is a set of criteria you must consider when starting a business. From the basics like industry and location to the more specific financing options and time/risk positions, it is important to outline some concrete search criteria. Financials don’t need to be your only qualifier. Consider your personality and purpose.

2. What do you ultimately want the business to do for you? From the beginning, you need to outline what you want to accomplish with running your own business. This is a long-term perspective of how you want your hard work to pay off in the future. For example, are you in it for the long-haul to support yourself and your family over many decades? Or do you want to build it with an exit-strategy in mind like selling your business to a larger player down the road?

3. What can you really invest? How do you obtain financing? Taking a look at your financial situation. There are many options when it comes to financing but you must think about your choices and what you, as a business owner, are willing to put up as collateral. You may want to go ahead and meet with loan officers from several local banks to discuss a loan and get an idea of terms each lender may be able to offer. Or maybe you decide you really want to find a company that will offer seller-financing. 

4. Do you buy an existing company or do you start from the ground-up?
There are advantages and disadvantages to both. Starting a small business is inherently risky, but it can also be exciting. There are often unknowns and stumbling blocks when starting a business that can slow down the process. And start-ups usually go through a tough period without income. So this type of entrepreneur must be patient and not expect success right off the bat. But starting your own business also means you (and your team) created the value of your company. There can be an enormous sense of pride and satisfaction that comes when it is successful.

Buying an existing business means the financial rewards begin right after the closing if the company is already making money. It typically is easier to obtain financing for an existing business purchase. But remember when buying a business that financials don’t always show the whole picture. Many other things should be considered during the due diligence phase like competition, vendor relations, customer relations, company culture and more. You also need to make sure that you do not overpay for the business or it can affect cash flow and the ability to invest in the company’s improvement.

Ultimately starting your own business or buying a business depends on analyzing all of these things from both a financial and personal perspective. And simply put, we believe you should be doing what you like and liking what you do!