In the months leading up to opening a business, there are hundreds of questions that come up. It’s part of the process to have questions that you want answered; it means your mind is dedicated to the business. With that said, we’ve picked 20 of the most common questions that people have asked us about the businesses they’d like to open, and we’ve given our answers as well. If you’re in the midst of opening a business, one or more of these questions is likely on your mind.
- WHAT KIND OF BUSINESS SHOULD I START?
This is something that only you can answer, but as a rule of thumb you should aim to start something in a field you’re familiar with. Think of any business that you start up as an investment of your own human capital. You could be using your talents to generate money working for another company, but you’ve decided that you’ll get the most return by opening a company. You wouldn’t invest your money in stocks or other investment vehicles that you’re not familiar with, so it doesn’t make sense to do that with your own strengths. Picking a business in a field that you’re already well-versed in will offer the path of least resistance to starting a business, even if it’s not necessarily always a smooth path.
- CAN I OPERATE MY BUSINESS FROM HOME?
Like the first question, the answer to this one hinges on the type of business you’re looking to start. If you require a storefront of some sort, then the answer is an automatic no. However, if you’re doing work where you don’t need an area for clients or customers come see you, such as an online business or one where you meet clients in the field, then home is a viable option. It’s actually a great tool to save money, too. Just make sure that there aren’t any licensing laws prohibiting it.
- HOW MUCH MONEY DO I NEED?
The age old question of how much money is needed to start a business. A good idea is to try to project out what your expenses for the first year will be, as well as how long it will take you to become profitable. There are a lot of failed entrepreneurs out there who took out loans or home equity lines of credit, only to realize that it wasn’t enough and have to begin bootstrapping their business. Although some companies survive such debacles, it’s not one that you want to subject yourself to in the first place. Perform a cost analysis and you’ll avoid this highly preventable headache.
- HOW DO I PICK A LOCATION?
This again depends on the type of company you’re starting, although typically the more foot traffic the better. If you’re in a market with a lot of competition and you are brand new to the scene, sometimes it’s best to be located in proximity to your competitors. There’s a built-in market in the area. However, if you’re in a saturated market that has some major brands in it, then maintaining a safe distance can be a good strategy as well. After all, you wouldn’t open a small grocery store right next to a Wal-Mart, at least not unless you’ve got a great strategy to differentiate yourself. Look at other companies in your field and see how they’re located, then try to reverse engineer the strategy. That will help simplify the location decision.
- WHO WILL MY CUSTOMER BASE BE?
Hopefully you already have at least a vague idea of the answer to this one. However, it’s not a bad idea to break down the profiles of the typical customers or clients of your business. This type of research helps you break down things such as general preferences, buying triggers and more. In the end, it will make your marketing efforts much more effective and allow you to better target your products towards the people most likely to use them.
- SHOULD I WRITE MY OWN BUSINESS PLAN?
The short answer is yes, with the help of someone that can walk you through it, such as attending a workshop where you can purchase a business plan template. Writing your own business plan has a couple of primary benefits. First, it will help you gain a better understanding of your business. Although you may feel confident that you already know how your business will function, sitting down and writing out an entire business plan will prompt you to think about even the most minor details. It will also be beneficial for when you begin seeking investors, as you’ll be able to better articulate what your business will do and how it will become profitable. You may purchase a business plan template from www.baglalaw.com and attend a workshop to help you understand the business plan.
- AM I BETTER OFF BUYING A FRANCHISE OR STARTING A NEW COMPANY?
Deciding on this depends on personality type as well as the amount of capital that you have available. If money is no object and you’re looking to begin a business in a market where there is an established franchise, then purchasing a license to open a franchised company can be a very reasonable path. However, franchising is not without its drawbacks. You’ll invest a lot more money in the beginning, you won’t get a choice over a lot of the minor details in your company, and you’ll virtually never be able to keep all of your profits. If you’re considering franchising, make sure that you thoroughly review every detail and assess whether you’re okay with giving up that much control.
- SHOULD I START ONE COMPANY OR SEVERAL?
Starting multiple companies spreads your resources thin. Even if you have a few ideas for companies, start with one and keep it basic. You can diversify later on, but the short-term goal is to become as stable and profitable as possible with one.
- WHEN CAN I EXPECT TO BE PROFITABLE?
A general rule has always been that it takes around a year to begin turning a profit. With that said, changes in technology and communication make it very easy to start a company with virtually zero overhead, especially in a service-driven economy. This is where the importance of a business plan really shines, as it will let you project when you become profitable.
- WHERE CAN I OBTAIN FINANCING?
For financing your company, you can look to the bank you already do business with. If that’s not an appealing option, then there are a couple of other common avenues. One is “angel investors,” who often invest in new companies in exchange for equity in the business. The other option is to borrow from friends or family who believe in your company, although this is a slippery slope to climb.
- AM I REQUIRED TO HAVE A LICENSE TO START MY BUSINESS?
A lot of businesses surprisingly require very little licensing, but you’ll want to ask directly, nothing sinks a business faster than finding out that it’s operating illegally. Make a visit to your local city hall and find out exactly what permits are required, if any.
- WHAT SETBACKS SHOULD I ANTICIPATE?
Common first year setbacks vary from business to business, but one of the most common is not meeting revenue expectations. This can often be attributed to a lack of proper foresight when projecting the amount of business that your company will bring in. Another common setback is the loss of talent. If you’re starting the business by yourself and have intentions to run it as a sole proprietorship, then this isn’t as big concern. However, if you’re going into the company with a few partners, it’s a speed bump that nearly every company experiences. The best way to handle something like this is to have an exit plan in place for if any of the primary partners ever decide to part from the company. That way there are no hard feelings, and you can continue with business as usual.
- WHAT KIND OF COMPETITION WILL I FACE?
Lots. That’s why it’s important to put together a thorough business plan. Many times, new business owners feel like the product or service that they’re offering is unmatched that their product is so unique that there are no substitutes, or that their service is so one-of-a-kind that other companies won’t compete. The truth is that there are bound to be many direct competitors to your company, and not knowing who they are just means you haven’t researched your industry thoroughly enough. Make sure that you understand the difference between inferior and complementary goods, too, in an unstable economy, it’s critical to be aware of both.
- IS MY PRODUCT OR SERVICE VALUABLE?
That’s for you to determine. Someone is bound to find it valuable. The bigger question is how you will convince people that your company is providing value, and that comes back to making sure that you market yourself effectively.
- WHO WILL HELP ME?
An obvious answer here is your business partners, but chances are that you’re looking beyond their scope. Depending on the type of help you need, you can find it in many places. Friends and professional acquaintances can be valuable if you’re just looking for initial feedback on your idea, simply because they’ll be able to offer feedback from a fresh and neutral perspective. If you need advice on something such as the financial aspects of the company, then it will serve you well to find and consult with a CPA or other financial professional.
- HOW SOON IS TOO SOON TO MAKE RADICAL CHANGES IF I STRUGGLE AT FIRST?
To put it simply, it’s never too soon if the change is going to be positive. Even established companies with multimillion dollar brands at stake make sweeping changes to their business model, only to renege if it doesn’t go over well.
- IS IT A GOOD IDEA TO FINANCE OUT OF POCKET?
To a certain extent, yes. If you’re just planning to operate a small consulting service out of your home office, then there’s no need to take out a business loan to buy a laptop and some pens and paper. However, when you’re talking about a business with large start-up costs, it’s typically not wise to finance out of pocket. First, you’re putting a lot of money at risk when most small businesses take their time on becoming profitable. Second, financing out of pocket means you skip investors. Interestingly, these are one of the best fail-safes for your company. Think about it, investors are the ones who really understand money and business. If they approve of your business, it’s a good sign that you have everything in order. If not, then it may be time to head back to the drawing board.
- HOW SHOULD I PAY MYSELF?
It’s advisable to pay yourself a flat salary that falls in line with how your business is performing. Do not stop paying yourself under any circumstances that’s a fast way to let your business go under if it struggles while leaving you with no recourse.
- HOW WILL I ATTRACT TALENT?
Paying a competitive salary is always a solid idea. However, if that’s not a possibility, then think outside the box. Offer growth bonuses, or try to attract younger talent who would like to put experience launching a business on their resume.
- WHAT IF I FAIL?
If you fail, you go back to the drawing board. Lots of successful entrepreneurs open and close a few small businesses before opening the one that they get right. The failed companies serve as learning tools that provide experience – something that can’t be taught in a classroom or read about on the Internet. With that said, some people also decide after one failed business that they don’t have any interest left in owning a company. The decision is yours, but the best way to avoid it is to prepare thoroughly for your company’s opening and get it right the first time.