You may have a great idea for a new product or service with the potential to become a thriving business. But how do you know if you are ready to start a business?
Here are four questions to ask yourself as you turn your business idea into reality.
1. How do I define financial security?
Before quitting your full-time job and striking out on your own, you'll need to determine what your financial security needs are. Do you have a hearty savings account? Are you in debt?
Bilawal Gul, CEO of The Fashion Jacket, an online retailer, suggests evaluating your current income and deciding if this new venture will require leaving your full-time job. And if so, will you be able to make a better income?
"Let say you have a high-paying corporate job," says Gul. "You should be asking yourself questions like will this new business require me to quit my well-paying job? Or will it provide me a better income than this job?"
Having a solid financial foundation for your new business is essential, and you'll need to have either your own funds or investors to make sure you can sustain it. Determining how much of your own funds you're willing to spend is also important before you move forward.
Mark Hayes, head of marketing for Kintell, an online advice service, suggests being over-prepared for unexpected costs.
"Make sure you set aside 15% of your capital for emergencies and setbacks," Hayes says. "If that means taking a little extra time to save, then so be it. It's more than worth it for long-term success, and you'll be thankful you took the time if you end up needing it," he adds.
2. Do I have a business plan?
The start of your business plan can be as simple as a paragraph you write down so you don't forget your brilliant idea, but a finished and complete business plan should be a well-thought-out document that illustrates the purpose of your business, as well as how your business will operate.
Tom Scarda, CFE, CEO, and Founder of The Franchise Academy, spent 13 years as a NYC subway conductor before resigning to start his own business—and he now advises others on making a similar move.
According to Scarda, "A well-thought-out business plan will help you to not make drastic mistakes and miscalculations."
Creating your business plan won't be a quick task. Brady Kirkpatrick, Founder of Gun Made, a website for gun enthusiasts, recalls spending a significant amount of time on his business plan, and he says that you'll need to evaluate how much time you're willing to commit to the task.
"You will spend countless hours creating a business plan and making it all happen," Kirkpatrick says. "And if you aren't willing to put in the time, you will end up wasting a lot of money and effort on something that most likely won't come to fruition," he adds.
3. Is there a market for my business?
Is your idea completely new or are you seeking to improve on an existing idea?
To determine whether you should move forward and start this new business, you should spend some time looking at Google Trends and seeing if your idea will address a need.
Michelle Owens, CEO of Healing Crystals Co., a company that sells mindful breathing jewelry, says, "If your concept is reflected in upward [Google] trend lines over the last 1-3 months, you may have caught onto something early which may continue to rise in popularity and demand."
She also says, however, that an exception to this would be any new idea. "Do not be discouraged if Google Trends does not support your concept, especially if your concept satisfies a new want or need."
Another possibility is to test demand for your business creatively.
Jacob Rosenberg, president and founder of Tajima Direct, a sunglass lens replacement service, recommends creating a "beta program" for customers to try the product or service.
"One simple way is to create an MVP—minimum viable product—or basic prototype," Rosenberg says. "Make a simple landing page website that explains the pain point and how your business solves that pain. By testing demand in that way, you can push off the huge time and monetary commitment of starting a business (with infrastructure and supply) to make sure you have an audience who will pay for your offering, and determine if it's a viable business or not."
4. What is my exit strategy?
Before embarking on a new business, you need to know what you plan to do if your business is successful or if it ultimately isn't.
While you may never be fully ready to take the leap of faith required to start your own business, you can minimize the risks by having contingency plans.
Stuart Cooke, founder of Levity Digital, an SEO agency, says, "Many people assume that if their business fails, they will be doomed to poverty, when in reality it will often be quite straightforward for them to get a job at the same level as their current one."
In addition to planning for failure, you should plan for success. What is the goal you're trying to achieve?
Chris Post, President of 2M Locating, an underground utility locator company in Sacramento, Calif., says to ask yourself, "Do I want to sell the company, grow it nationally, pass it down to my kids, and at what point would I consider it a failure and throw in the towel?"
These answers will depend on your own circumstances and business arrangements, he says. "That is a huge question to answer, especially if a business partner is involved."
If you can answer these four questions confidently, it may be time for you to take the plunge and start the business you've always wanted to.