10 questions you should ask yourself before running a business
Starting up a business is an idea that many people have toyed with over time.
The notion of being able to build this personal empire that not only funds your own retirement but provides a nest egg for your children is an attractive one. In addition, it means you can add to the local economy and help others into meaningful employment – not to mention the always enviable notion of being your own boss.
But is starting a business right for everyone? For all the benefits noted above, there are also big risks present as well. Official figures say that 20 per cent of businesses fail within the first year and 50 per cent don’t manage to see their three-year anniversary. The outlook is much more favourable in franchising, according to the latest bfa/NatWest franchise survey:
- Every year for 20+ years, around 90 per cent of franchisees report profitability (in 2015 it was 97 per cent).
- In 2015, 93 per cent of newer franchisees (up to two years) are profitable. It rises to 97 per cent after five years or more.
- Franchisees’ satisfaction with their franchisor has never been higher, with 91% saying they are ‘mainly’ or ‘definitely’ satisfied.
- Banks in the UK have typically favoured lending to franchised businesses over other stand-alone small businesses on the basis that they were much less likely to fail; supported by an established brand and following a proven system of working.
Even so, any failed business venture is a disappointing and expensive experience for those involved.
So with that in mind – and to prevent you from becoming another negative statistic – what questions should you ask yourself before taking the plunge and running a business?
1. Is running a business something I will love?
This is a lesson that’s taught right from the beginning of school age – do what you love, as this will most often be what you’re most successful at. As such, entrepreneurs, start-ups or franchisees should only get involved with businesses for which they have an affinity.
2. Am I good at running my business?
Like the point above, the best chance of business success is to rely on your strengths. Whilst some inventors simply have a great idea that resonates with the masses, many more have to rely on their entrepreneurial skills – attributes which prove more prosperous when it’s a familiar business or subject.
3. Am I a business person?
Of course, not all business people are the same, but many of the most successful exhibit certain traits. For example, successful business owners are self-starters who enjoy a challenge. They solve problems creatively and have an often intractable drive or determination. On a day-to-day level, owners are also likely risk takers and can handle their pay cheques not being the same every single month. You don’t need all of these traits to run a good business, but some of them will certainly help.
4. What are my business strengths (and arguably more important, my weaknesses)?
Knowing your strengths and weaknesses is key to running a successful business. Playing to your strengths will give your business a good chance of success. More importantly, though, is to know where your gaps in knowledge or experience lie and not be afraid to hand over responsibility. This can be in terms of accounting, managerial skills or a commercial understanding. A business may well be your baby, but it has to be put in other people’s hands once in a while.
5. Is there a market for my business?
Whilst this shouldn’t be such an issue for franchisees (as the brand is often a recognisable one with success models from which to work), start-ups have to deal with the issue of finding a home for themselves in the marketplace. This is no mean feat, as market research will only give you a guide – and one that’s flawed by issues such as observation bias and people simply telling you what they think you want to hear. Businesses live and die on the basis of their market, without the latter there will be no former.
6. What remuneration can I expect?
Let’s not be evasive, the main reason many people get into business is the money it can offer. That said, selling up and living out the rest of your days on a yacht in the Bahamas is still a long way off even for many successful business owners. Instead, attention must turn to more immediate remuneration.
As noted above, most business owners in the early years have to deal with some sizeable fluctuations in their pay cheques, along with the prospect of not knowing when the next upswing will come. Find out in advance how much you can expect to take home and lay all the relevant groundwork in advance.
7. Do I have the financial resources or access to lending?
Although you won’t want to spend forever living out of the bank’s pocket, they provide vital financial support for many businesses starting out. Arguably before anything else, would-be business owners need to guarantee they have access to the money needed to make their venture work. This brings with it some serious questioning and soul searching, with some of the most dedicated even putting their house on the line to secure funding. These risks need careful consideration before getting carried away.
8. What is the end goal of running my business?
The benefits mentioned at the start (being your own boss, build a future etc.) are certainly worth consideration, but you need an end goal. Is the aim to build an empire that you can pass on to your children for them to run – which they can then pass on to their own offspring? Or instead is it something you’ll build up only to then sell to an investor when one comes along with the right price? You might decide that you simply want a regular salary out of running your own business.
These need to be considered because they relate to funding. For example, some investors will only get on board with business owners looking to sell, as this will be the time at which they get a tidy sum back on their shares. Impossible as it may be to see into the future, having an idea of the direction for the years or decades to come could influence decisions taken today.
9. What will I do if my business fails?
Despite Tesla boss Elon Musk claiming he thought his business would fail during the last recession, few start-ups hit the ground with such negative thoughts in mind. Those official figures on business failures might be there for all to see, but owners cannot kick off their venture anticipating a flop, otherwise it could well become a self-fulfilling prophesy.
That said, being prepared for failure is different to expecting it. Business owners must have a solid plan B otherwise the effects could be dire. Either it will end with a deep depression or the business owner will continue to drive their ailing business further into the ground – only to exacerbate the issue long after they should have cut their losses. Having a backup, however, should help prevent this from being the case.
Buying a franchise is an excellent way to reduce the risk of failure. Many franchise opportunities provide a support network full of experience to tap into and learn from. According to the most recent bfa/NatWest survey, 97 per cent of UK franchised businesses (including new businesses) are profitable.
10. Will I have emotional support?
All of the above questions have focused on the cold, hard-boiled aspects of business. Arguably more important than all of this, however, is the mental and emotional support business owners will get on their journey. Some will see it as a way of providing for their family’s future, but need to relay this to their loved ones otherwise it may seem a wholly selfish move – especially if there are countless hours to be spent toiling in the office.
Successful business owners often say the support of those nearest to them helped more than anything else – so it’s sensible to look at all the factors, both hard and soft, ahead of making a decision.
Starting a business will be a step into the unknown for most people, so it’s ok not to know the answers to all of the above questions. Simply preparing for them and asking yourself the toughest, most pressing queries ahead of time, though, should help ensure you know deep down this is the right move – and one in which you should most certainly invest.