Do you have an idea that you’d like to take the place of your full time job? Or maybe a hobby that could possibly take over as a primary source of income? Before fully launching your business idea, it is critical to set a strong foundation to ensure your new business venture will start smoothly.
Read. A lot.
Before launching your business, it is critical to really get to know the current market. Learn what people need, prefer, and value. Understanding the choices your customers have at their disposal and the elements of your business idea will help you focus your message to the market.
In addition to knowing the market and your customers, it is equally important to build a strong business acumen. Knowing how to communicate your ideas effectively, market your new business, track financial results, and build a business strategy in response to what is happening in the market. Some recommended sources of information include HBR, Stanford Business Magazine, the Economist, the Wall Street Journal, NY Times, and Kellogg Insight.
Follow the 2-prong approach.
If you are employed full time, don’t up and quit your job, especially if it provides the income you need to pay rent and buy food! An entrepreneurial venture may be exciting and tempting to throw all of your energy behind, but don’t dive in before it would be able to support your basic lifestyle.
Build up the business on the side, develop your shoe-string budget that you could survive on, and figure out what kind of revenue you would need to make in the new business before you are confident enough to launch on your own. Make sure your new venture is a proven concept before you risk your financial wellbeing! Making the jump too soon could also put your new business venture at risk if you would have been able to provide a much needed cash infusion.
On average, the time it takes for a new business to become profitable ranges. Shoestring startups with minimal capital requirements can reach profitability within a year or two, while others that require more capital investment may take much longer. So, be sure to do a quick Google search for a break even calculator to get a rough estimate of time it will take to get to profitability. This will give you a good estimate of how long you should consider operating the new business as a side business.
Avoid debt if possible!
Low capital businesses are can be more flexible and present lower financial risk to the owner and/or investors. Without financial obligations, you can reinvest revenue back into the business and into paying yourself.
Obviously if it capital is required to get your business up and running, then by all means seek out loans and investors. Just be sure to do your due diligence beforehand, minimize any debt obligations, and you will be well positioned to get your new venture up and running quickly.
Start with cash you’re willing to lose.
Along the same line of thinking as limiting initial debt obligations, you should only be prepared to put up cash knowing the full risks. It is always possible that the new business you launch will not pan out as expected.
File for legal protection
When getting the new business set up, you should examine all methods available to legally protect your business. These include finding a trusted attorney and advisor, registering your company as an LLC or corporation, and protecting your intellectual property.
If your business involves a novel product or service, then filing for patent protection would be wise to consider. Also, any business branding or trademarks can also be filed with the appropriate organizations so that your new business will be protected from day one.
Find a mentor.
Everyone can benefit from having a trusted advisor. Someone who has extensive business or industry experience, who has launched a business before, and who you trust can provide invaluable insight to help you succeed!
Best of luck! If you have experience with launching a business you’d like to share, please do so in the comments below!