Considering a New Business? 5 Questions to Ask
However, after doing the day-to-day grind of following the plan they created, another idea may seem very enticing. Not unlike the otherwise well-trained dog who dashes after the squirrel that crosses his path, some entrepreneurs, especially solo business owners who may not have accountability to partners or investors, may lack the discipline to keep on the path. What path? The path that leads to the cash.
To help determine if you’re being seduced by an idea or if it’s worth a long-term investment, ask yourself these five questions before you begin something new.
1. Are you just Business Beer Goggling? For those considering starting a business or new business venture, beware of going on a business bender—where the idea looks a whole lot better to you than it does in reality.
Do you love to bake? Lots of people do. Baking for friends and family is one thing, but owning a bakery is a completely different situation. If you own a bakery, you’re thinking about commercial leases, major equipment purchases, health inspections, procuring ingredients, managing inventory, marketing, evaluating point-of-sale and accounting systems and hiring staff. Your job is running a bakery, not baking.
2. Do you have the knowledge and experience to do/make this? This seems like it might be obvious, but given the sobering statistics about small business success, many entrepreneurs need to view things in the most optimistic way possible (or they never would have started their business in the first place).
If you have been a consultant at a global consultancy, you probably know how to manage and deliver a client engagement. You may even feel comfortable selling the work. But do you understand how to create a compelling brand? Build a website? Write a business plan? Market your services? Hire freelancers or employees to help you? Buy any required insurance? Track your cash flow? File your taxes?
You need to evaluate what support, resources or connections you might have. Do you need to partner with someone or some other company? Will you need to take out a loan? What are the pieces of this puzzle?
3. Would you do it given my “Rule of Three”? My general rule is that it will take three times as long, be three times as difficult and cost three times as much to launch something as you originally think it will. So, here is my question to you: If you had to budget for that, would you still do it? Would it still make sense for your business?
I strongly recommend budgeting according to my Rule of Three. Maybe you can do it for less time and money, but don’t count on it. Consider it a bonus if you come in under.
4. Are you creating a product/service that makes sense with your business? Just because you can do something, doesn’t mean that you should. Usually, small business owners are constrained by time and funding.
If you’re a career transition consultant, providing resume writing and interview question coaching services makes perfect sense. Your clients will need those services, so they might as well buy them from you.
However, if you decide that you want to offer presentation skills training or guided meditations for stress management, your clients also may need that, but it’s a bit of a stretch—and potentially dilutes your brand and the value of your core service offerings.
Unless you’re deliberately launching a different type of offering or targeting a different market segment, the general rule is that your products/services should form a cohesive, whole, serving your ideal clients in your target market.
5. Are you creating a product/service that lets you live the life you want? This is a different variation of just because you can. I had a colleague who started investing in a new domain name, landing page and service offering for a product that he was very qualified to deliver, and it probably would have been successful.
However, when we talked about it, we realized that it would require him to do exactly what he had said he didn’t want to do anymore. Every. Single. Day.
He had said that he wanted to stop doing one-on-one social media training and do more group training and public speaking. And yet, the business he was about to build out would create a sales funnel for one-on-one coaching clients!
Yes, he felt like he was “leaving money on the table” by not following through with this opportunity. But he also realized that he would not enjoy the work he had to do if he did launch the new product.
You spend a lot of time working on and in your business. Make sure that you’re spending it on the right things that will help you achieve your business goals.