In the last couple of years, people have been starting businesses at a feverous pace. Some are doing it because of the poor job market. Others are doing it because it enables them to make extra money each month. Still others decide to start businesses because after working for someone else all their adult lives, they decide it's time to do things their way.
Whatever reason motivates you to take the plunge, there are some fundamental steps that will ensure you don't become one of the majority who fail. Fortunately, the rate of small business failure has declined in the last 10 years from 62 percent to 51 percent. That said, if you miss a few of the important steps early on, your chances of being in the winners circle after five years is dismal.
Here are 6 essential steps that every closet entrepreneur should think about during the early stages of starting a business.
1. Incompatible state of mind
Much of your ability to go the distance until your business transitions from start-up to a stable operation has to do with how you think about what you have chosen to do. If you left the employment world to start your business, you’ll need to shift your thinking from "I work for someone else who pays me" to "I run the show, make all the decisions and generate my own pay." It might sound subtle, but it’s what will keep you focused and support your desire to get through the usual ups and downs of starting a business.
The other mindset change that you’ll want to hone is thinking strategically vs. tactically. Much of getting a business off the ground involves knowing where you are going and what needs to be in place before you get there. It requires a level of foresight and confidence to take the necessary risks associated with getting your business to a sustainable level of revenue. Tactical activity is necessary for getting things done but too much tactics leads to a loss of focus and the feeling that your journey is just too much to handle.
2. Lack of planning
Most people who are bitten by the "I want to own my own business" bug jump into their new venture because what got them to that point was driven by emotions. Take some time to think rationally about where you are going and what you will need to get there. First, do you have a plan? There are plenty of resources online to help you with a business plan. Business plans need not be complicated; they just need to be specific and directional. This will be your roadmap for the near future. Second, research the market or industry you plan to enter. A lot can be learned by the people who are already there and what they focus on. If you know someone who is in this industry, pick their brain.
3. Financial Acuity
Unless you have investors to support your launch, you will need money! Trying to finance a business while you are working full time somewhere else will only prolong your ability to become self supported. If you have money in the bank or access to funds, you should think about having 18 months of capital to work with. This includes the cost of operating your business as well as money needed to live on. Once you have a budget, stick to it! Lack of financial discipline is one of the top reasons businesses don’t make it. In fact, it ranks #2 and #5 on the list of reasons identified by the SBA.
What makes this area so difficult for business owners is the need to balance their desire to grow with their ability to make sound decisions about what to invest in and when. Always remember, cash is king in small business and when you run short, you limit your ability to be flexible and take the appropriate actions.