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5 Questions to Ask If You Plan to Start a Business in the New Year
By Jessica Thiefels, Honest Body Fitness - December 27, 2017
The new year is a great time to take the first step toward starting your own business. These tips will help you decide if you’re ready.
In 2017, it was almost as common for people have a side gig or small business as a Facebook page. That’s not going to change in 2018, with the number of entrepreneurs in the U.S. and around the world growing each year. The Global Entrepreneurship Monitor found that there are 25 million in the U.S. alone, wiWaTth twice as many Americans reporting that they see an opportunity to start a business than in 2009.
If you’re one of those Americans, the new year is a great time to take that first step. Before getting ahead of yourself, ask yourself the following questions, which will help you decide if you’re ready.
1. Is My Business Needed?
The best way to be successful as an entrepreneur is to fill a gap—create the solution for a current challenge or need. This makes it valuable, if even to a small niche of people within the consumer or business market.
Make this question simpler by answering: My product or service will solve [BLANK].
Think broadly as you consider this question, suggests Jess Ekstrom, Entrepreneur contributor: “When you think of solving a problem, you usually think of functionality. For example: A coffee mug that keeps your coffee hotter longer. Or luggage that compresses to take up less space. However, a need can also be something less obvious and still have value. For example: The app Offline Media tells you what’s going on in your city, if you live in North Carolina. The need it’s filling is getting people ‘offline’ and outside.”
2. Do I Have the Network I Need?
Starting a business takes a tribe—you can’t do it alone, and if you do, you’ll wind up burned out, stressed out, and ready to throw in the towel. As you run through your network Rolodex, make a list of the people you’ll need on your side. Perhaps you want to talk money with a finance professional and are hoping to get support in IT; are there people in your current network who
can help with this?
If you find your network is running low on the resources you need access to, set up a few opportunities for the first month of 2018, whether you have coffee meetings or buy tickets for a few formal events. With a list of needs and networking opportunities scheduled, you’ll be able to find those who can help you get your business off the ground.
3. How Much Money Do I Need To Start?
The key word in this question is “need.” If you can get away with zero funding, late nights and a temporary coffee habit, do it. The SBA offers a great checklist for estimating the costs of starting a business, which is a valuable resource if you’ve never done it before.
If you find that you do need funding, remember that there are many avenues for this, including: crowdfunding, angel investors, a bank loan or your own savings. Borrowing from friends and family should always come last, as this can become a challenging situation to manage. If the latter is your only current option, check out these loan contracts. Putting something in paper, and working with a lawyer, if possible, is the best way to avoid disputes in the future.
4. What Kind of Insurance Do I Need?
You need to protect yourself as a business owner, even if you’re working from your living room. Insurance is the smartest way to reduce your liability personally while mitigating liability with your product or service. Here are the most common and important insurance types for startups:
General liability insurance: This insurance covers you in the case of an accident or injury that happens at your place or business or with your product. When working with your insurance contact, be sure to specify what you do and what you might need protection for; there are many exclusions with this insurance and you want to make sure you have comprehensive coverage.
E&O insurance: Errors and omissions insurance protects you from angry customers and negligence. If you’re starting a tech product, like an app, don’t forget to add cyber/network liability insurance to this as well: “If a network goes down or private information is leaked and money is stolen from private accounts, cyber/network liability insurance will protect your assets,”
according to USA Business Insurance.
Workers Compensation: If you have an employee, you’re required to have workers compensation insurance. This is a law in all states, with the exception of Texas and Oklahoma, according to the NAIC.
Other insurance options to look at, include:
Business interruption insurance
Life insurance (some banks require this)
Business auto insurance
Directors and officers insurance
5. Am I Ready to Start This Business?
There are plenty of technical questions to ask before starting a business, but it’s also important to dig a little deeper personally. Challenge yourself and your idea to determine if you can actually give this project your all, which is necessary if you plan to earn an income from your business—even more so if it will be your full-time job. Anything less than 100% will not yield the same results.
As you look ahead, check the calendar for other obligations and commitments. Will your schedule will be conducive to long days, emotional ups and downs, and the daily stresses of a business owner? Be honest with yourself when answering this one. If you’re uncertain, pick a date to sit down and reconsider. It may even be possible to maintain your full-time job a few months longer and continue working on your business on the side until you’re ready.
Now, Ask Yourself: Is It Time To Start?
Now that you’ve answered these questions, do you think you’re ready to start a business in the new year? Be honest with yourself—if you start too early, you’ll burn out fast, potentially losing your motivation to continue after all the hard work you’ve already put in. Instead, start when you’re ready and all the pieces are in place to set yourself up for success.
Sonoran Consulting and Finance offers general business advice regrding taxes and general mangement practices. Robert Ferguson ,our founder, has many years of business experience and two degrees, a Bachelor of Science in Electrical Engineering and a Master of Business Administration in Finance and Management.
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