Deciding to open your own business is a huge step. Just by having the idea, you’re putting yourself on a different platform to almost everybody else. The majority of people you’ll meet in life will spend their entire professional career working for somebody else’s business – with a boss – and then retire without ever knowing what it feels like to answer to nobody other than themselves. It’s an enormously liberating feeling – but it can also be a terrifying one.
The hard truth is that the majority of startup businesses fail. What seems like a great idea on the day you have it turns out to be unfeasible, impractical, or just not as attractive to other people as it is to the person who’d had the idea. When a business fails, the impact can be devastating on the person left carrying the can. They can end up in debt, worried about where the next mortgage or rent payment is coming from, and struggling to support themselves and their families. Often, the situation could have been avoided if a few basic checks had been carried out before they invested their time and money. We’ve put together five of the most important basic checks for you to carry out here in this article. If you’re thinking about starting a business, make sure you’ve ticked all of these off before you proceed any further.
1- Who Are Your Competition?
This isn’t just about finding out who else is doing what you intend to do, and how you can make your proposition more attractive than them; it’s also about understanding your potential audience. What constitutes competition will depend a little on what your business plan is – if it involves opening a physical shop or service in your local area, then your competition will only come from the businesses which cover the same geographic location as you. If you’re planning to enter the world of e-commerce, your competition might be the entire world.
If your business idea is a good one, what you should find is that you have a healthy amount of competition. If it isn’t, something will be wrong with the numbers. Finding thousands of companies who already do whatever it is you want to do is probably bad news because you’ll struggle to make an impact in the market. Finding no competition, though, might actually be worse. A lack of competition might mean that there isn’t a market for whatever you want to sell. You should find a company that specializes in surveys and polling and gather evidence that you’ll find a demand for your business before you launch it.
2- Is It Future Proof?
Nobody knows what’s around the corner. Because of that, no business can say that it’s one hundred percent future proof. That doesn’t mean you can’t negate the risk of your business suddenly being made obsolete by a change in technology or buyer habits, though. You should take the time to study how technology might impact your business plan over time, and whether developing technologies might take away whatever need area you’ve identified in the market.
A solid example of this is casinos. Opening a casino in a town or city that didn’t have one would have represented a very solid business plan in many parts of the world twenty years ago. Now, mobile slots websites like Amigo Slots have eaten into the casino market aggressively. Because one website can contain hundreds of mobile slots, it’s impossible for a land-based casino to offer the same range. Also, because the overheads of operating a mobile slots site are lower, the ‘house edge’ tends to be lower too – making them more attractive to players. As virtual reality technology progresses, casinos are likely to be feeling the squeeze in ten years’ time even more than they are now. You don’t want this to happen to your business.
3- Does It Provide A Residual Income For You?
Doing what you love for a living is one of life’s greatest joys. It means your work never feels like work. Even if you adore what you do to earn a crust every day, though, you can’t do it every day of every year. You’ll inevitably have to take time off due to illness at some point. There will be vacations you want to go on or social occasions you can’t pass up. Every now and then, you’ll simply want a break to take some time for yourself.
If you’re running your own business – and especially if you’re a sole trader – taking a break can be a problem. If your business model relies on you selling a product or service, it might not make any money if you’re not there to making sales. Can your business plan make money when you’re physically not there? If not, can it be adjusted, so it does? If it can’t, it might not be a good idea.
4- Does It Pay More Than You’re Earning Right Now?
Only the luckiest among us enjoy going to work every day. The rest of us work because we need money to provide for ourselves and pay our way through life. The work we do pays for us to do the things we love when we’re not at work. That means that we often resent going to work, and so it’s easy to allow ourselves to be seduced by the idea of quitting tomorrow and starting that microbrewery we always dreamed of opening.
This is only a good idea if you can see a way to make at least as much money out of your chosen new role as you are right now. If you don’t, your quality of life will suffer. That will impact your happiness and your sense of fulfillment. In turn, we feel less positivity towards our new business, and begin to wonder if we’ve made a huge mistake. There’s nothing wrong with taking a small pay cut to start a new business, so long as you’ve built up savings to carry yourself through until the company starts paying for itself. If you can’t definitely state when that point will arrive, you have a problem.
5- Am I Truly Good At This?
Sadly, there is a big difference between loving something and being good at it. Lots of people love singing, for example, but the opening rounds of any television talent show provide plenty of proof that not everyone is good at it. Even if you’ve always dreamed of running a bar, or a hotel, or any other form of business, it doesn’t mean you’ve got the relevant set of skills to do so successfully.
A good business idea is one which you can comprehensively demonstrate that you have the tools to execute to a high standard. You should never launch a business in an industry you have no experience in. Ideally, you should already be working in a similar role to the one you envision yourself taking, and you should be outperforming the majority – if not all – of your colleagues within the role.
If reading the above has dampened down your idea of kissing goodbye to office life and dramatically changing your horizons, we apologize – but there is a reason for all those startup business failures, and it often boils down to people not thinking things through before they dive in with both feet! If, on the other hand, you can find positive answers for all of the above, you might just turn out to be the one who bucks the trend.