Have you had it with your boss? Want to pursue your passion instead of building someone else’s dreams? You’re not alone. According to a recent Small Biz Trends survey, those two notions motivate nearly fifty percent of aspiring entrepreneurs. But are those reasons enough to take the leap of faith and leave your current job to start your own business?
The first few years of running a business can be volatile. And though two-thirds of businesses will survive their first two years, by five-year mark, statistically, only fifty percent will keep their doors open.
You may not be able to predict the future, but you can give your business the best chance at survival if you make sure you’re ready. How do you know? Here are five questions to ask yourself.
Is there a market for your product or service?
Your business can’t exist without a market, so before you make the jump, be sure that you have or can reasonably expect a customer base. Check out industry trends, local and regional demographics, and competition to determine if your business will accommodate a need.
It’s also helpful to determine your target audience, as this can provide further insight into the marketplace and your spot in it.
Have you tried out your product?
First impressions matter, and if you want to make the best one, you probably should have a product or service that delivers. It’s easy to try it out in the comfort of your own home, but before you open your business, consider offering friends and family members the opportunity to test our whatever it is you’ll be selling.
Use their feedback to help fill any gaps and make necessary changes before you present your business to the public.
Where do you plan to open up shop?
Location plays a huge role in your success, but not just for customer convenience. Proximity to suppliers, average rent or real estate prices, zoning regulations, and license and fee requirements are also dependent on location.
All of those factors can determine not only how much traffic your business receives but also how much it costs to do everything from get supplies to store inventory. Don’t wait until you’ve sent in your notice to investigate possible locations.
How will it affect your family?
If you’re entering this venture independently, you may not have to put much thought into this question, but if not, it’s certainly worth mulling over. Can your family afford the loss of an income and potentially any additional benefits, like health care?
In addition, relying on things like personal savings or leveraging homes or automobiles as collateral can also put them in a precarious position if things don’t pan out as planned.
That’s not to suggest isn’t an inherent risk associated with opening a business — there is. But there may be some times or circumstances that are more accommodating than others.
Do you need any permits or licenses?
In many cases, you’ll need to obtain permits or licenses before you open for business. Doing so may involve more than just paying the required fees. You may have to bring your business up to code, undergo training, etc. Find out ahead of time so you can enter into your new business adventure with good legal graces.
How much will it cost and how will you pay for it?
Opening a business takes a lot of time and effort, but it can also take a lot of money. While some business owners may be able to get by with nothing more than a website, phone number, and some basic low-cost operating supplies (postage, printer, etc.), others will need to make a substantial financial investment.
The costs of real estate, inventory, supplies, marketing costs, payroll, utilities, licenses, permits, etc. can add up quickly, and in some cases, you may not be able to open up until all those needs are met.
You don’t need to have cash on hand, of course. Many business owners rely on loans, credit cards, and investors, but knowing how much it will cost and what payment options are available is essential if you want to take the next step.
What’s your credit score?
Thinking of managing startup costs through loans, credit cards, lines of credit etc? Make sure you know your credit score. A good or excellent credit score will open doors to affordable funding. If you have poor credit, however, you may find that those doors are tightly closed or extremely expensive to pry open.
If your credit isn’t stellar, you may want to work on improving it before you dive in.
What’s your plan?
I know — to open a business, obviously. But before you do, you really should have a business plan.
A business plan takes your abstract visions and turns it into a concrete plan for advancement. When properly written, it can help you determine your target audience, product or service definition, monetization strategies, and key financial metrics. It will also help you obtain funding and entice potential investors, if necessary.
Sound daunting? It may seem so, but you don’t need to come out of the gate with a final copy ready. The important thing is that you begin the process of writing a business plan, even if it’s just in a notebook file on your computer for the time being. But, if you’re planning on abandoning your day job, then you likely want to be a bit more thorough.
Need some tips on how to get started? Check out our article on How to Write a Business Plan.
Starting a business is a big commitment, and quitting your job to do so can feel like an even bigger one. If you’re thinking of pursuing your entrepreneurial dreams and making the jump from employee to employer, then do yourself a favor and make sure you’re ready. The questions above can go a long way in helping you determine feasibility as well as next steps.
This article was originally written on May 28, 2019 and updated on July 18, 2022.