Three Things to Think About Before You Start Your Business
Written By: Dan Steininger, President and Co-Founder of BizStarts
As seen on the March 2, 2015 post in Milwaukee Business Journal OnRamp Blog.
So you’ve decided you want to be an entrepreneur and you’re ready to launch your dream.
It sure beats “working for the man!”
Well, more power to you and there is no better time in the history of mankind to be starting a business. We all live in an age where everything is possible because of the Internet and tools that never existed before. BizStarts is a nonprofit organization established to help you, so check out our website and register online- our services are no cost to you.
According to the Wisconsin Department of Economic Development, there are almost 40,000 new businesses started in Wisconsin every year. Nationally, the statistics indicate that the majority of those businesses will fail in the first three to five years.
So here are a few things you need to think about that will help you do a self-assessment before you leap.
1. Can you sell?
No matter how brilliant or creative you are, you have to be able to convince customers to part with their cash for your product or service. What’s your track record in selling things? We always can convince our friends to buy from us but what have you done in your career to prove you can get strangers to buy from you?
You might want to read The Book: To Sell Is Human by Daniel Pink. He outlines the basics required to be successful in selling. If selling doesn’t excite you and inspire you then don’t quit your day job. You have to love sales. Does anyone doubt that Steve Jobs was the best salesman on the planet?
2. Who will be your partners?
There are very few businesses that are a one person show. You need to think long and hard about who you select to work with you in starting your business. There are multiple resources available to get an assessment of you and your partner before you tie the knot in starting a business. Look at the statistics for the rate of success for marriages: 50% will fail and end up in divorce. That can be very expensive and emotionally traumatic. It’s no different when you start a business and you need to take the time up front to determine whether you fully know and understand the partner or partners you will be working with. Don’t become infatuated but recognize that finding the right partner or partners is every bit as challenging as finding someone to marry.
3. Financing the business.
Mark Zuckerberg was able to accelerate the growth of Facebook after receiving a $500,000 infusion of capital from a Silicon Valley Angel investor. That inspires many entrepreneurs to run after Angel money hoping to create the next big thing. That’s a big problem. Only 3% of all entrepreneurs ever receive Angel investment and that comes at a price because you have to give away part of your company. Also, remember that Facebook had almost a half million users by the time they received Angel capital.
Only seek outside capital once you have proven you can generate customers (who are not just your friends). Try to avoid investment capital. Crowdfunding is becoming a far more popular tool and more accessible than Angel financing. Don’t overlook low-cost loans from organizations like Kiva. You want to reduce the financial risk to yourself so if the business fails you can hold your head high and not be crippled with debt the rest of your life.
Let’s face it, starting a business is hard work. But going in with eyes wide open will increase your chances for success. BizStarts is there to help you every step of the way.
About the Author
Dan Steininger is the president and co-founder of BizStarts. BizStarts facilitates the creation of new companies in southeast Wisconsin. He currently teaches courses on innovation for the UW-Milwaukee School of Continuing Education for business leaders. Contact BizStarts >>
OnRamp offers conversation and connections among the entrepreneurs who are shaping Wisconsin’s economy, and brings corporations and start-ups together at statewide events. View other OnRamp blog posts >>