The 20 Most Common Business Startup Questions
In the months leading up to opening a business, there are hundreds of questions that come up. It’s part of the process to have questions that you want answered; it means your mind is dedicated to the business. With that said, we’ve picked 20 of the most common questions that people ask about the businesses they’d like to open, and we’ve given our answers as well. If you’re in the midst of opening a business, one or more of these questions is likely on your mind.
1. What kind of business should I start?
This is something that only you can answer, but as a rule of thumb you should aim to start something in a field you’re familiar with. Think of any business that you start up as an investment of your own human capital. You could be using your talents to generate money working for another company, but you’ve decided that you’ll get the most return by opening a company. You wouldn’t invest your money in stocks or other investment vehicles that you’re not familiar with, so it doesn’t make sense to do that with your own strengths. Picking a business in a field that you’re already well-versed in will offer the path of least resistance to starting a business, even if it’s not necessarily always a smooth path.
2. Can I operate my business from home?
Like the first question, the answer to this one hinges on the type of business you’re looking to start. If you require a storefront of some sort, then the answer is an automatic no. However, if you’re doing work where you don’t need an area for clients or customers come see you – such as an online business or one where you meet clients in the field – then home is a viable option. It’s actually a great tool to save money, too. Just make sure that there aren’t any licensing laws prohibiting it.
3. How much money do I need?
The ages-old question of how much money is needed to start a business. A good idea is to try to project out what your expenses for the first year will be, as well as how long it will take you to become profitable. There are a lot of failed entrepreneurs out there who took out loans or home equity lines of credit, only to realize that it wasn’t enough and have to begin bootstrapping their business. Although some companies survive such debacles, it’s not one that you want to subject yourself to in the first place. Perform a cost analysis and you’ll avoid this highly preventable headache.
4. How do I pick a location?
This again depends on the type of company you’re starting, although typically the more foot traffic the better. If you’re in a market with a lot of competition and you’re brand new to the scene, sometimes it’s best to be located in proximity to your competitors. There’s a built-in market in the area. However, if you’re in a saturated market that has some major brands in it, then maintaining a safe distance can be a good strategy as well. After all, you wouldn’t open a small grocery store right next to a Wal-Mart – at least not unless you’ve got a great strategy to differentiate yourself. Look at other companies in your field and see how they’re located, then try to reverse engineer the strategy. That will help simplify the location decision.
5. Who will my customer base be?
Hopefully you already have at least a vague idea of the answer to this one. However, it’s not a bad idea to break down the profiles of the typical customers or clients of your business. This type of research helps you break down things such as general preferences, buying triggers and more. In the end, it will make your marketing efforts much more effective and allow you to better target your products towards the people most likely to use them.
6. Should I write my own business plan?
The short answer is yes, and the long answer is yes. Writing your own business plan has a couple of primary benefits. First, it will help you gain a better understanding of your business. Although you may feel confident that you already know how your business will function, sitting down and writing out an entire business plan will prompt you to think about even the most minor details. It will also be beneficial for when you begin seeking investors, as you’ll be able to better articulate what your business will do and how it will become profitable. The Wharton School of Business at Penn State gives a fantastic overview on why you should write your own business plan.
7. Am I better off buying a franchise or starting a new company?
Deciding on this depends on personality type as well as the amount of capital that you have available. If money is no object and you’re looking to begin a business in a market where there is an established franchise, then purchasing a license to open a franchised company can get a very reasonable path. However, franchising is not without its drawbacks. You’ll invest a lot more money in the beginning, you won’t get a choice over a lot of the minor details in your company, and you’ll virtually never able to keep all of your profits. If you’re considering franchising, make sure that you thoroughly review every detail and assess whether you’re okay with giving up that much control.
8. Should I start one company or several?
The best advice on this comes from Dan Martell of Maple Butter. To paraphrase his line of thinking, starting multiple companies spreads your resources thin. Even if you have a few ideas for companies, start with one and keep it basic. You can diversify later on, but the short-term goal is to become as stable and profitable as possible with one.
9. When can I expect to be profitable?
A general rule has always been that it takes around a year to begin turning a profit. With that said, changes in technology and communication make it very easy to start a company with virtually zero overhead, especially in a service-driven economy. This is where the importance of a business plan really shines, as it will let you project when you become profitable.
10. Where can I obtain financing?
For financing your company, you can look to the bank you already do business with. If that’s not an appealing option, then there are a couple of other common avenues. One is “angel investors,” who often invest in new companies in exchange for equity in the business. The other option is to borrow from friends or family who believe in your company, although this is a slippery slope to climb.
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