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US Small Business Administration Twenty Questions To Ask Before Starting a Business
Do Your Homework Before You Start a Small Business!
According to the U.S. Small Business Administration, too many people rush into starting a home business without stopping to think. To help people like you who may be thinking about starting a new home business, they have compiled a list of twenty questions to ask yourself before you get ahead of yourself. Is a home-based business a good idea? That depends in part on how you answer the following twenty questions. Take your time, be honest, and always look before you leap!
The US Small Business Administration's Twenty Questions
One goal of the US Small Business Administration is to give entrepreneurs tools they need. On of these tools is an excellent list of twenty questions that anyone seriously thinking about taking the leap should ask themselves before they make a mistake.
Most Small Business Mistakes Can Be Prevented!
Read this list, which I have "unpacked" a little to provide examples and some additional thoughts, before you commit yourself to a project that might be a mistake.
US Small Business Administration Twenty Questions -- Number One: Am I prepared to spend the time, money and resources needed to get my business started?
People typically underestimate the demands of starting a new business successfully. Especially if you are also balancing the needs of a family, or another job, you need to think clearly about how much you can truly take on.
US Small Business Administration Twenty Questions -- Number Two: What kind of business do I want?
It's too easy to get excited about a new venture, and to picture yourself happily working in your new endeavor, without truly asking yourself, "what kind of home business is right for me?" Try to make sure that you aren't being carried away by the newness of your new field -- because, as we know, newness is the first thing to wear off.
US Small Business Administration Twenty Questions -- Number Three: What products or services will my business provide?
This is similar to the above questions, but it's a good one because you may realize how many additional things you can offer once you start thinking about it. For example, if you decide to start a garage organizing business, you could also offer to refinish the floors of your clients' garages. It's "horizontal thinking" like this that marks the most successful entrepreneurs.
US Small Business Administration Twenty Questions -- Number Four: Why am I starting a business?
And no, the answer "duh, because I need extra cash," is not an acceptable answer. Why ARE you starting a business? Why now? Plenty of potential new small business owners run aground on this question. It's harder to answer than you think, if you are completely honest with yourself.
US Small Business Administration Twenty Questions -- Number Five: What is my target market?
This is where the US Small Business Administration starts getting down to brass tacks. You are now starting to think like a businessperson -- and identifying your target market is the first step of any coherent business plan. Who are your customers, where do they live, and how will you reach them? This is just the start of thinking about your target market.
US Small Business Administration Twenty Questions -- Number Six: Who is my competition?
This is another tough one. There are many people who set out to start a small business, only to discover that someone -- sometimes a LOT of people -- have beat them to it. A quick search online should give you an idea of who and what is already doing what you have in mind. If you have found a niche, then good for you!
US Small Business Administration Twenty Questions -- Number Seven: What is unique about my business idea and the products/services I will provide?
Like the question above, this one is meant to weed out those new entrepreneurs who haven't really thought out their plan. If you aren't offering anything unique, either in form, price, or delivery method, then what are selling, really? People must have a reason to want to give you their hard earned money!
US Small Business Administration Twenty Questions -- Number Eight: How soon will it be before my products/services are available?
If you are going to market a product, or a service for which you need training or specific tools and supplies, then this will be a question you need to answer. If you rush off and print up fliers and business cards, and then have to wait around for five weeks before your product clears the production pipeline, then you need to re-think your approach.
US Small Business Administration Twenty Questions -- Number Nine: How much money do I need to get my business set up?
This, of course, is a biggie. Some people look at it this way: "I'll finance my home business myself, and never pay interest on any loans." If that's you, then wonderful! Most people, however, will need to apply for a small business loan, or at least scrape together funding from other sources. The average cost of starting up a small business is around $7,000 -- more than I have laying around!
US Small Business Administration Twenty Questions -- Number Ten: How long can I have to finance the company until I start making a profit?
A tough question! But an essential one. Given that most companies don't turn a meaningful profit until well into their second year, you need to work out a realistic forecast of time and money spent versus money collected. How long can you keep things going before you have to fold the tent and give up?
US Small Business Administration Twenty Questions -- Number Eleven: Will I need to get a loan?
Again, the most likely answer here is "Yes!" Most small business owners do need to get a loan, but it doesn't need to be huge -- sometimes a couple thousand dollars will get you to where you need to be. The important thing here, as always, is to be completely honest with yourself.
US Small Business Administration Twenty Questions -- Number Twelve: How will I price my product compared to my competition?
Speaking personally, this is almost always the most difficult question to answer. You need to consider virtually everything on this list -- what is my competition, what is my product, who is my target market, what are my production costs, and so on. Then you are still pretty much guessing at what people will pay for your product. In addition, as your product becomes more successful, the price will drop due to imitators and "bargains" offered by your retail or device outlets. Pricing is an art form, really, and I sincerely hope it's easier for you than it is for me.
US Small Business Administration Twenty Questions -- Number Thirteen: How will I market my business?
Marketing is essentially the same as advertising, but it includes each and every method you can employ to promote your business. It's all a matter of visibility -- the more people see your business and form a positive opinion of it, the better. Marketing also includes research about individual response to your product, and this is where focus groups and surveys come in. These tools can be expensive, but the knowledge you gain is almost always worth it (assuming you know what to do with the data once you have it).
US Small Business Administration Twenty Questions -- Number Fourteen: How will I set up the legal structure of my business?
There is much debate about when, and even whether, to incorporate your business. There are several "levels" of incorporation, and the trick is to decide which kind of incorporation is right for your small business. You may choose to form a cooperative, which is owned and operated by those using the services -- think CostCo or other membership shopping organizations. If you are working with one or two other people a partnership may be your best bet, and if you want to deflect liability from yourself -- if your business goes bankrupt, you don't lose your house -- then some form of incorporation is probably worth the effort and expense. An LLC corporation is a bit less expensive, and is designed for smaller businesses that are somewhere between a partnership and a full-fledged corporation.
US Small Business Administration Twenty Questions -- Number Fifteen: How will I manage my business?
At first, the answer to this question will be self-evident: you are likely to be involved in the management of your new business to at least some extent. As time goes on and you become more successful, and your business gets more involved, you may need to decide what to deal with yourself and what to delegate to other people in the business. Much depends on how comfortable you feel letting go of a little bit of control in exchange for a little bit of sanity...
US Small Business Administration Twenty Questions -- Number Sixteen: Where will I house my business?
For many people deciding to start a small business, the answer to this is simple: In my house. There are some zoning regulations you will need to check in on, but for the most part the rules are often surprisingly liberal about starting a business in your home. The rules for running a small business out of your home do vary, of course, from place to place.
If you need a storefront, then you will need to do considerable research and site visits before your decide. Do not fall in love with the first quaint little vacant storefront you see! There is probably a reason it's vacant -- location is everything, and it often isn't evident why a business location is good or bad. A bad business location could be due to traffic patterns, parking, foot traffic, visibility, and a host of other factors that you will need time to sort through.
US Small Business Administration Twenty Questions -- Number Seventeen: How many employees will I need to start up?
According to a study by the SBA Office of Advocacy, small businesses created an average of 5.5 jobs in 2004. Your small business may be just you, or a few family members, or several dozen workers, but in any case what the government wants you to consider is how many people you will realistically need to hire, how much you will pay them, what benefits they will receive, and so on. Obviously this can be a complex issue, and the more employees you need, the more complex it gets. Seek advice from other small business owners and learn everything you can from online sources and studies.
US Small Business Administration Twenty Questions -- Number Eighteen: What types of suppliers do I need to contact?
Lost in the shuffle of setting price breaks and designing marketing strategies is the basic operation of providing your business with the raw materials and supplies it needs to function. Obviously without capital goods like machinery and raw materials, your business will grind to a halt -- but too much invested in start-up capital goods can be just as big of a problem. Your product pipeline will depend on a smooth and steady flow of raw material and production -- so your choice of supplier is critical.
US Small Business Administration Twenty Questions -- Number Nineteen: What kind of insurance do I need to invest in?
Offering insurance to employees is just the start of this topic. You also need to consider insurance for your business itself. This can take the form of an incorporation structure that protects you and your personal belongings from bankruptcy and debt caused hard times with your business. You may also need malpractice insurance if you are offering services like test prep or counseling, fire and flood insurance if your business involves warehouses and other structures, and "dram shop" insurance if you are serving alcohol at a bar or restaurant.
US Small Business Administration Twenty Questions -- Number Twenty: What do I need to do to ensure I am paying my taxes correctly?
Finally, an easy question! GET AN ACCOUNTANT. You will be offered a lot of sweet deals on do-it-yourself business accounting, and if you are a single-owner, out-of-the-house kind of business then you might make that work. Anything bigger, though, and you will need a pro. It will hurt to pay the fees they demand -- often over $1000 for business-related work -- but the peace of mind and legal protection is nearly always worth it. The last thing you need is to work and work to get your business going, only to get audited and fined -- or worse -- because you tried to do your own taxes. Be cautious here and you won't be sorry.