With about 28 million small businesses in the U.S. and thousands more starting every day, it’s a good bet that if you’re not already in business, branching out on your own has crossed your mind somewhere along the way. And that’s good news since small businesses are the economic engines of the economy, creating most of the nation’s net new jobs and employing about half the nation’s workforce. In fact, my job is to help people start or grow a small business and I’m paid by our state legislature to do it. However, as much as I’d like to see my efforts come to fruition, I do have a few words of caution to those thinking about taking the plunge.
In my years of working with aspiring business owners, I’ve heard some reasons or motivating factors, that seem logical on the surface for starting a small business, but as the saying goes “the devil is in the details”
Here’s what I consider the top seven faulty reasons for jumping into business ownership. Statements I’ve actually heard:
1. “I’m tired of working for someone else. I’m going to quit my job and go out on my own.”
Not so fast. You may no longer have your current boss once you start a business, but you’ll probably end up with not one but dozens of “bosses,” maybe hundreds-they’re your customers and they can take you to task as no one boss could. Keeping everyone happy, including shareholders or a board is no picnic.
2. “I don’t need a business plan. I have it all in my head.”
Not having a written plan outlining what you’re planning to do and for whom, where you’re going and how you plan to get there can wind up costing you more than you can imagine. And remember hope is not a plan.
3. “I know there’s a government grant out there for me. I just have to find it.”
Grants do exist, but generally not for a for-profit business. A grant may be available for an industry specific enterprise, high-risk technology business, a non-profit expanding program or a municipality for revitalization. Saving enough money for your start-up will probably take less time than finding a grant, not to mention applying for it and receiving it.
4. “I’ve been unemployed for a while, so I guess it’s time for me to start my own business.”
While for some people starting a business once unemployed can be a solution, for the vast majority, it’s best to have a source of income while getting your business off the ground. Starting a business takes money and it may be a year before you see a profit from your business.
5. “All I need is an investor. Surely they’ll want 10 percent of my profits. That’s more than they’ll make in the stock market.”
Unless you’re in a high-growth technology business and have an exit strategy of between five to seven years it may be tough to find an investor. Also think about how much control of your business you’re willing to give up.
6. “I have a great deal on a location-six months free rent! I need to jump on this right away.”
Letting a location drive you to start a business before you’re ready is one of the quickest ways to go under. Plan the business first then fit the location to it. With vacancy rates being what they are, you’ll be able to find a property owner willing to negotiate good deals. Don’t be lured into a property with the offer of free rent-remember, there may be an underlying reason why the property has been sitting vacant to the point of a free rent offer.
7. “Because I’m successful at (you can fill in the blank about the skills), I’ll be successful as a business owner doing this.”
Yes, passion is good, but keep in mind that a good cook does not necessarily make a successful restaurant owner, just like a great football player doesn’t automatically make a good coach. Having success at one level doesn’t mean success at the next level. Even with passion and skill, you still have to have the know-how of the business side.
Starting a business can be the best decision you’ll every make-or the worse. Whatever your reason for going into business, the most important point to remember is there are a ton of free resources available locally and nationally to help you. Take advantage of them!