Starting your own business may be one of the biggest risks you will take in your life - and the statistics confirm it. According to the Small Business Administration (SBA), two-thirds of new businesses survive for a minimum of two years, with only 44 percent surviving at least four years.
Yet, in good and bad times, the dream of being your own boss and pursuing a for-profit or non-profit business venture can be an enticing one. In fact, when the economy struggles, the number of non-employer small businesses tends to increase at a higher rate than the number of employer businesses (Source: SBA Small Business Advocate, July 2009).
But how do you make that dream a reality and take the plunge into the risky waters of small business ownership?
No doubt there is a lot to wade through - tight credit, fickle consumers, and oftentimes stiff competition. Then there are the personal risks - the loss of a steady pay check, finding health care insurance, and so on.
These and other reasons are enough to make many potential entrepreneurs fearful of taking the plunge. But given the right preparedness, planning, and financing, many entrepreneurs do take the plunge and succeed.
Here are some tips for making these three factors work for you as you consider starting your own business:
1. Is Business Ownership Right for You?
When you get the calling to start your own business venture, it can be a compelling one. For some it's layoffs, for others it's the dream of taking a unique product or invention to market.
But there is a difference between a calling and preparedness. Being a successful business owner requires at least four fundamental qualities:
- Diligence - Aside from being one of the seven holy virtues, diligence in business drives methodical work methods and an active rather than a passive approach.
- Determination - A determination to succeed, no matter what conflicting advice you receive or doubts that you may have, must be there.
- Hard work - This is the DNA of the successful business owner. You get from your business what you put into it.
- Adaptability - As a business owner you must be able to shift with the market, learn from your mistakes, and change your business plans accordingly.
Take this quick Small Business Start-Up Assessment from the SBA to help better understand your readiness for starting a small business.
2. Do you have a Plan?
Many start-ups put writing a business plan on hold until they find they need to get a business loan. But, without a plan, taking the plunge into business ownership will surely end in disaster.
A strategic business plan should include a review of your strengths and weaknesses; an understanding of the market opportunity and threats; proposed sales and marketing strategies; as well as a clear plan for business ownership, management, and funding.
The government offers a great deal of advice to prospective and existing business owners on the subject of planning. This 'Write a Business Plan' guide for small businesses from www.business.gov includes tips and free training on how to write a business plan, offers hundreds of sample business plans, and more.
I also can't emphasize enough how important it is to talk to a representative or attend business start-up events at your local SCORE, SBA, or Small Business Development Center (SBDC). These organizations provide invaluable help and advice when it comes to business planning. Find one near you here.
3. Financing your Start-up: Low Risk Options
Financing can be a major road block to starting your business - not only do you need capital to get started, you also need a cushion to cover the ebb and flows of cash flow.
If you are reticent about taking on a large financial risk as your start your business, here are four options to consider:
- Start from Home - Home-based businesses (approximately 50% of small businesses are home-based) require a lot less investment than operating out of a leased or owned business property. Read more about 'Starting a Home-Based Business'.
- Start Online - Another option is to start your business venture online. Granted, not all businesses can operate online, but for retailers and some service providers starting an online business is a low-cost entry into business ownership. Read 'Starting and Growing an Online Business - An Entrepreneur's Checklist' for tips.
- Start Part-Time - If you are currently employed, can you alleviate some of the risks of starting your business by venturing into it on a part-time basis? This is oftentimes a great option for freelancers who can build a client base while still maintaining a full-time job.
- Government-Guaranteed Loans - When it comes to government-backed loans, the SBA's Microloan Program provides very small loans (up to $35,000) to start-ups. Read more about the Microloan Program and other SBA loans here.
Note: Hyperlink directs reader to a non-government Web site.