WESST Blog

A man stepped into my office seeking business-startup assistance. The frantic look on his face and his uneasy demeanor caused me to label him as ‘desperate’ (the worst position to be in when starting a business).

Automatically, I went through a series of questions regarding his business idea: did he have experience, money, and a passion? I also wanted to know about his personal finances – was he expecting to support himself right away from the business or did he have a “day job”? Within 30 minutes, I had learned that he believed the world would end in 2012, he had lost his job (according to him, because of the economy and huge cut backs), his wife had left him, and he had needed a way to support himself (until the world ended). The man appeared to be depressed.

I proceeded to tell him that most businesses do not make a profit within the first two years and in a poor economy, the number could be larger. I also told him that it would be best to find another job to pay the bills, so to speak, until his business took off. Yet, at the back of my mind, he made me ponder (not about the world ending) about if 2012 would be a good year to start a business and, if so, what would be the three most important elements to consider.

Three Important Things to Consider When Starting a Business

After sharing my insight with him, his demeanor changed. He threw out a couple of ideas for his business and I smiled. There was life in the poor fellow! We continued a dialogue based on the following three most important elements to consider when starting a business:

1. Do your research!
a. Is this the best business for you? Do you have experience and a love for it? Can you do it alone in the beginning? What support system do you have in place to help you achieve your goal, or to back you up in a pinch? Can you start from home (lower your overhead costs)?
b. How much money do you have to make to live and how can you make that money while building the business? How much money will it take to open?
c. What does your customer really need and want (not what you want them to have)? Who else is doing this type of business and are they successful? Why? Where and how are you going to reach your customers?

2. Make a plan!
a. Write everything down in a business plan format.
b. How much money will it cost to open?
c. Create a year of financial projections (be realistic and conservative). What if you can only sell three items a week for the first three months?
d. How much money will you need to operate the business for a year?
e. What do you need to buy to start the business (supplies, equipment, furniture, materials, etc.)
f. Do you have money to invest?
g. Will you need a loan? What collateral do you have to cover the loan?
h. How is your credit?

3. Go over the management and operations of the business very carefully.
a. Who will do “what” in the business? You cannot be all things or something will fall through the cracks!
b. Everybody plans to have the “best customer service in town” but very few do. Why? If the owner does not have a clear understanding of what good customer service is, neither will the employees.
c. Who will handle the books?
d. How will receipts and invoices be handled?
e. What about follow up? Who will be responsible for checks and balances?
f. The list goes on and on. You, as a business owner, need to think about all that can go wrong and “fix it” first on paper.

After about two hours, we had discussed everything from his personal life to his ambition. He finally admitted that being self employed at this particular time was not a good idea, not because of his belief in a 2012 Doomsday, but because of a lack of desire. Likewise, he was able to identify his strengths and weaknesses, recognizing that working alone was not something he liked or wanted to do.

We talked about employment options and where he could start his job seeking venture. During our conversation, he realized that his circumstances were not as bad as he had first imagined, and he felt he could easily find another job.

With that said, 2012 is not a lot different than 2011. We hear daily on the news that consumer spending is up and that the future looks brighter. I read once about a man who started a real estate business during the depression (imagine that). He grew that business and became one of the most successful men of his times. The truth is that the same effort is required in 2012 as has been for any other year. It is not an easy task but those with an entrepreneurial spirit can find the task rewarding.

I recommend that, above all, you have a passion, do your research, and create a plan. Make sure you have enough money to start the project and that you have some business acumen before you embark on your endeavor. If you do, and you manage your money and the business well, success will be your reward. Those who do not plan or manage resources well, could face a doomsday of their own making.