This is a guest post from Chad Otar, CEO of Excel Capital
A successful business can set you up financially– for life, with some grit and a little luck.
And that’s in addition to the fact that starting a business around your passion is one of the most effective ways to find happiness. There’s nothing like waking up in the morning to do what you love and get paid in the process.
But starting a business takes work– a lot of work.
And there are certain factors you must consider before starting your business.
Don’t prepare properly based on these critical elements and you’ll almost certainly handicap your business’ growth at the onset.
At worst, you’ll be sealing your business’ fate before it ever has a chance to get going.
So, what are these critical factors?
There are five primary factors you should consider before starting your business:
1. Time
How long will it take you make a living from your business?
Better yet, how long will you go without a salary?
Many business owners forgo a regular salary in the beginning to help jumpstart the business, living off savings or keeping their day job or a side job while the business grows.
In addition to this, how will you track your own time?
One of the most common challenges of new business owners is staying self-motivated, not only structuring your time, with a set schedule that allocates the majority of your time to the most important tasks (see the ‘80/20 rule’ or Pareto principle) but sticking to that set schedule.
And how long are you giving yourself to get the business off the ground?
How long will your savings last you and what is the time frame of your major goals?
This might seem like a lot, however, each of these time-related questions is critically important if you hope to launch a successful business.
2. Capital
Every business needs funding.
Nowadays, you can start certain businesses online with very little personal capital; however, most businesses– including car dealerships, liquor stores, and restaurants– still require a large initial investment to get off the ground.
In addition, all businesses– even if they only require a small initial investment– need funding for marketing. And the more money you have for marketing, the more effective your marketing can be).
With that said, do you know where your capital is coming from?
Will your business be bootstrapped (self-funded) or will you acquire funding? And, if so, will you be acquiring funding via one of several types of business loans or look to acquire investors?
Bootstrap
If you’ll be bootstrapped, you need a plan for how much money you’ll need saved, or generated, to not just get the business off the ground but to take a competitive place in the industry in a relatively short time (preferably).
Debt financing
If you’ll be acquiring funding via a business loan or what is called debt financing (which is easier than ever with alternative financing), you’ll need to find out what the minimum requirements are to be approved for such a business loan and work to get those things in order.
Equity financing
Alternatively, if you’ll be looking to acquire investors through equity financing– be it venture capital or angel investors– you’ll need to know where to get those investors.
You’ll need to know what you’ll need to have in place to present to those investors to convince them to invest and what is required of you moving forward as far as regular communications and reports given to investors.
Read Part Two next week.