Answer These 5 Questions Before You Start a Small Business

Many people dream of becoming entrepreneurs so they can make the rules. However, a lot goes into running a business besides calling the shots. When the buck stops with the owner, the ultimate responsibility for taking care of employees, tax obligations and customer service also rests on their shoulders. Savvy entrepreneurs get mindful before deciding theirs are strong enough for the task.

Deciding whether to start a business is a matter that warrants deep, mindful consideration. A fearless and honest self-evaluation could matter more to eventual success than a winning idea or invention. Asking these five questions before starting a small business can help determine how to build an entrepreneurial dream.

How Firm Is the Financial Ground You Stand On?

Those with a few spare million in “fun” money can begin nearly any small business — an enviable position for folks who inherited a trust fund or live off investments. However, most mere mortals have to worry about keeping a roof over their heads and the lights on while they grow their small business, and risking it all is a dangerous gamble. Coming back from nothing is an uphill battle no one needs and can bring lasting, unwanted consequences.

It’s much easier to start small, even if such efforts initially seem laughably meager. What activities require limited startup capital? Maybe it’s tough to live off the income from occasional BFF weddings and bar mitzvah photos. However, continuing to hone one’s photography skills builds an impressive portfolio, gaining increased exposure. It opens the doors to opportunities that can accelerate entrepreneurial goals through partnerships and connections.

Those with more financial savvy, decent credit and ample time might also consider these potential funding sources for raising startup capital:

• SBA loans and grants
• Crowdfunding
• Venture capitalists
• Angel investors
• Borrowing from friends and family

Use extreme caution when considering funding avenues such as credit cards, home equity loans or lines of credit. Interest rates can reach excessive levels and gambling with the family homestead is a risky proposition, especially while the real estate market is unpredictable. Selling the farm to fund a beauty salon could lead to riches — or homelessness. Consult with a financial advisor or avoid taking unnecessary risks if even that small appointment costs too much.

How Well Do You Know the Industry?

Maybe the business owner comes from a long line of mechanics stretching back to antiquity. Having inside industry knowledge is a huge plus while starting a company, as many fail thanks to a lack of understanding of how things work.

Every new enterprise involves innovation. How can an entrepreneur be sure their idea has merit? Here are four ways to test its viability:

• Use the internet to see what the competition is doing and what’s up and coming in a proposed niche.
• Talk to potential customers who use similar services to gauge their interest. For example, someone wanting to start a landscaping business might speak to neighbors with impeccable lawns about how much they’d pay to reclaim their Saturday afternoons.
• Learn from industry professionals by attending networking events. Chat with them about how they foresee the niche growing and the best ways to increase future profits.
• Test the market, perhaps by knitting Etsy shop creations for friends and gauging their demand in a broader market.

How Much Time Can You Realistically Devote to Growing Your Enterprise?

Unless a budding entrepreneur has enough money in the bank to carry them for at least a year while growing their business, they’ll probably have to start their venture while working elsewhere. How much time can people in such positions realistically devote and what should they consider when deciding? Sit down and write a sample schedule, including factors such as the following:

• Grooming and commuting to a primary job
• Tending to household, family and childcare responsibilities
• Managing time-consuming but necessary practices like grocery shopping, doctor’s appointments and participating in previously accepted community activities like serving on a school committee
• Making time for daily exercise, at least one healthy meal, a little mindfulness and decent sleep

The last one is vital. Entrepreneurs are the lifeblood of small businesses and burnout will ultimately bring negative consequences. If an hour or two is all that’s realistic at first, that’s OK. It won’t lead to riches, but it will begin building positive habits and establishing a brand reputation.

How Savvy Are You About Taxes?

As the old joke goes, the only certainties in life are death and taxes. Unfortunately, running afoul of tax responsibilities buries many a small business owner and can even result in consequences such as losing assets to the IRS.

The good news is individual business owners don’t have to earn master’s degrees in accounting. However, they remain ultimately responsible for tax liabilities, so hiring the right accountant is a must. Many entrepreneurs quickly master the basics of bookkeeping software, but filling out a Schedule C or 1120S and managing deposits and quarterly filing generally requires professional advice.

How Keen Is Your Emotional Intelligence?

Emotional intelligence refers to the ability to regulate and manage feelings positively. It entails multiple aspects of personal and interpersonal functioning, such as:

• Resisting impulsive behaviors and responding mindfully to obstacles
• Handling negative emotions in a way that healthily diffuses them instead of spreading them to others or bringing unintended consequences upon one’s self
• Relating positively with others and relying on empathy, communication, and mutual understanding to resolve conflicts, rather than brute force, lying, or manipulation
• Possessing inner confidence and a firm sense of self that inspires persistence through setbacks

Those who lack strong emotional intelligence do themselves a favor by working on themselves first and developing the ability to weather stormy business seas. There’s no shame — thousands of people seek therapy every day for reasons that have nothing to do with poor mental health. Seeking an outside perspective on overcoming struggles can put a prospective entrepreneur miles ahead of the competition.

Therefore, take a tip from the 12-step gang and perform a fearless moral inventory before starting a small business. Doing so is especially crucial for those whose past entrepreneurial attempts have crashed and burned. Is it tough to examine the reasons behind failure closely, especially if they involve gazing in the mirror? Yes, but the answers can pave the way to future success.

Questions to Ask Before Starting a Small Business

Starting a small business is a dream for many. Asking the right questions before leaping can make the pivotal difference between success and disappointment.

Ask the five questions above when considering starting a small business. Taking a reasonable, mindful approach can help grow a dream, even for those who start with nothing and work toward their goal one day at a time.