Will You Make Money?

Recently I discussed the ways in which you can make money off of your business, but now I’d like to discuss whether your idea will be profitable. Will you make money or lose it? I can’t overemphasize the need to research and test your business idea BEFORE you decide whether or not to start your business. Testing is particularly important if your business idea involves something no one has ever done before. If you have a new fashion idea, for instance, you need to make sure people like it before you spend a lot of money just to see it flop. In my next post, I will discuss some ideas about getting feedback about your business idea without giving it away so that someone can steal it and use it for himself or herself.

But even if what you have to offer isn’t particularly new, it’s important to look into the information that is available on the web. Research companies that might be similar to what you have to offer. Find out their target audiences, how they got started, any money information you can find (such as revenues, profits, market shares, advertising), and anything else that might be useful in deciding whether you can make your business profitable. Too many people skip out on this step and find out later that they never had a chance to see any real money. Restaurants (unless particularly innovative or in a location with no competition) often have this problem, for instance. A quick search on the web will give you the average revenues and profits for restaurants and the number may be a lot lower than you might think.

I highly recommend a quick calculation. Estimate how much money you can get from your product(s) and then how many you think you can sell in a certain time period. This is your expected revenue for this time period. I suggest starting with a year, because this will give you a good idea of how long it will take to start making money which is typically MUCH longer than most people (myself included) realize. Then, consider your costs. There is a lot of paperwork (which I’ll discuss soon) associated with starting a business which depending on where you are located can cost hundreds of dollars. Do you have to pay rent? Will you need to build an inventory? How will you advertise? Will you need a lawyer (this will also be discussed later)? Get a very rough idea of how much it will cost to operate for the same time period for which you calculated your revenue. Now, subtract costs from revenue. If it’s negative, that means you have lost money for that time period. That’s not necessarily a bad thing. Most businesses take some time before being able to return the cash. In the meantime, you need to make sure you can live off of negative funds for at least 6 months. I’ll discuss loans and other options in a future post.

Deciding Whether You Should Start Your Own Business

I’ve decided that in this post we need to step back a little. In past articles, I already got you thinking about what you want to sell and how you can make money, but you should really ask yourself another question first. Is starting a business really right for you?

It is not going to be easy. Money will certainly not flow in right away and it may never happen if you haven’t carefully planned out your business. Can you operate without money and the security of a regular job for 6 months +? Are you able to focus on the opportunity of your business rather than your current status?

In addition to the financial state of mind that you need to be ready for there are many other differences. You need to be willing to learn. There are many aspects that go into a successful business and no doubt that in at least one of these areas, you won’t have much experience. You may have to do some reading. You may want to consider finding a mentor, someone who has been through it already and succeeded and maybe even failed once or twice too. You can learn a lot from other people. Learning from their mistakes can save you a lot of time.

Are you willing to be responsible for an entire company? It’s not something to take lightly. The decisions you make will greatly affect the success of your company. Can you manage others? Different people have different motivations. Can you cater to these, changing your managing style depending on who you are dealing with?

Are you willing to work hard to make your business successful? It may even mean longer hours than you’d put into a normal job, but if you feel strongly about what you are working on, you’ll still love what you are doing.

There is no security and it may not pay well, but if you feel passionately about what you are doing, you will do well as long as you put a little thought into the details. A good idea is to try starting your business part time to see if it's really want you want to do. This is great time to do all of the planning necessary before you actually start.

The rest of this blog is about helping you consider some of the details I’ve run into.

Good luck on this important decision!