Thinking about Starting Your Own Business?

"I'm thinking of starting my own business."  

This is the statement I most often hear from people who want to talk to me. It is an honor when people ask for my opinion, but sometimes I feel inadequate in offering thorough advice. There are so many different considerations for a person. Financial. Psychological. Legal.  Are they capable? Is their idea a good one? Do they have risk tolerance? Every situation is a little different.

Below are some random considerations. This is not a complete list by any means.  However, if you are seriously considering starting your own business, there might be an area here that you haven't thought about.

But for now, here are some thoughts in no particular order of importance:

• I would never advise you to go into business if your only desire to be your own boss. You need a business plan with an understanding of how you'd make money. Plus, you need to have confidence that there is a market for your business idea. If your main thinking is "This is why I want to be my own boss", you need to pause. If your main thinking is "This is how I can offer a product or service that people want.", you are thinking in a more healthy way.

• Do you need a big salary right away, or can you go for a year or so without a paycheck? If you need a salary immediately, I'd recommend against starting your own business. You need to be in a healthy enough financial situation where your next personal paycheck isn't your largest priority.

• If possible, you want a business with a moat, which means there are limited people who can do it or are willing to do it. Another term for this is "barrier to entry". Yes, it is the same word as a moat around a medieval castle. It is a barrier that offers protection.

Examples of moats: Let's say you want to be an independent truck driver. The fact that you have a commercial driver's license, and 90% of all drivers don't, provides you a small moat. Having specialized knowledge in IT and software engineering may provide you a bigger moat.  Having a certification like a CPA, or being a certified welder. These are moats. They give you value that others don't have. 

Another type of moat example: God given gifts. You may have musical talent. Or mathematical genius. Some great physical ability. God given abilities separate you from most people. Your number of competitors is greatly reduced.

Let me tell you about some other God given gifts and talents that lot's of folks don't really think about. Being good with your hands. Having an intuitive financial understanding of a situation. Having a strong work ethic. Being comfortable and natural at sales and personal interaction. These really are gifts. Nobody has all of them. Astute business owners understand their strengths, and use what they have to their full advantage.  

• I’ve never known anyone who really succeeded in owning a specialized business on the side. You can own real estate on the side, or you can have kind of a hobby business on the side, but it is hard to have a specialized business unless you give it your full attention.  I'm sure there are a few exceptions to this, but most of the time your business needs your full and complete attention.

*Avoid this dangerous line of thinking:  "I'm going to hire a manager to run the business."  In the most general sense, the point is that a manager is not going to be able to figure out strategic things that you don't already know.  There's a lot of nuance to this point, and I expand on it in a "Learn from My Mistakes: What a Manager Can and Cannot Do".

• The most successful entrepreneurs are usually people who start businesses in a new marketplace or a new technology. If this is an area of your expertise, you've got an advantage. I'm not saying you can't succeed in an existing marketplace. (example: opening a restaurant in an established neighborhood.) I'm simply saying it is harder when you have established competition.

I can help if you'd like to talk through some of these considerations. It pays to think things through ahead of time.