chapter 1

WANT TO START A BUSINESS?

You've already got the million-dollar idea, but are you the right person for the job? Starting a business can be a risky venture, so making sure that you understand the chances you're taking is never a bad idea. Plus, like we mentioned above, just thinking through the risks and planning for them gives you a much better chance for success when you decide to go for it!
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A few important questions to consider

Before you get started, take an honest look at your goals, your skills, and your finances. Which of them might you need help with? For example, do you have enough capital to start outright or should you get a loan? How long can you run at a loss? What aspects of the business are you not familiar with? No one else can answer these questions but you, so be honest with yourself. Realizing that you don't have enough expertise in one area doesn't mean that you should avoid starting a business. It just means that you might need a little help.

Here are some other questions to consider before you get too far into the weeds:

  • What is your product?

  • How is it unique?

  • Who are your customers?

  • How will you reach that audience?

  • How will you finance your business?

  • What is your exit strategy if things don't go as planned?

  • Will you need employees?

If you're ready to start a business, you essentially have two ways to get the process going: starting from scratch and building your own business or purchasing an existing business.

Starting a business from scratch

Most new business owners start their own business from scratch—be it hanging up the proverbial shingle or starting a website. Running a successful business requires a good strategy; however, for now, you'll want to focus on the basics that your business will need to get started.

Despite the anxiety from setting out on your own, the act of forming a business isn't very complicated. At a minimum, you'll need a name, state registration, and any applicable licenses.

You'll also want to seriously consider incorporating and writing a comprehensive business plan—they often aren't legally required, but they're a good idea. Incorporation isn't just for people looking to start a large-scale company; incorporation can benefit all sizes of businesses by protecting your personal assets and making it easier to get loans. A business plan, on the other hand, helps you think through some of the choices and decisions you'll have to make as your business picks up steam. We'll go over both business plans and incorporation a little later.

Buying an existing business

If you're looking to buy an existing business, then a lot of the work covered in this guide has already been done for you. However, even with that potential head-start, you'll need to be extremely thorough in your vetting of any potential purchases.

Be sure to go over the business' books at length—and consider professional assistance if you're not well versed in accounting. Carefully analyze the company's business plan and make sure that everything is sound. You'll need to answer the same types of questions that any other new business owner does: what's the product, who's the target audience, and how is that product brought to market?

Ensuring that you're making a good investment requires a lot of leg work and many selling businesses aren't exactly forthcoming with negative information. So, if you plan on going this route, be sure to pack a lot of patience and be prepared to conduct a careful investigation of each potential business. Asking a business lawyer for advice is never a bad idea.

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