Thursday, September 29, 2011

Ask a Businessman: Should I Start My Own Business?

By Karl Sacherman

Dear Karl:

I'm currently employed full-time, but I've always wanted to start my own business. I have an idea that I think would work. On the other hand, I don’t have much money for a start-up, and I'm scared to death of doing something like starting a business in today's economic climate. Should I try it anyway? --Casey S.

Dear Casey,

Starting a business is tricky in any environment. And you are absolutely right - since banks aren’t lending and consumers aren't spending, this could be a terrible time to start a business. But companies like Hyatt, Burger King, FedEx, and even Microsoft got their starts during economic downturns, so it's not impossible. In might even be to your advantage, because if you can succeed now, imagine how you would do when the economy is good!

It's understandable that you would want to start your own business. Even if you are working at a job you like, the pull of being your own boss, making real decisions, taking risks and reaping the executive-level rewards is powerful.

There are 3 general pieces of advice I can give you:

1. Do something you love. Starting your own company will involve lots of work and long hours, but if you’re love what you're doing, that will help get you through it. One of the best paths to starting your own business is to find something you would do for free anyway, and figure out how to get someone to pay you to do it. If you go this route, you might find that instead of starting your own company you can find success as a freelancer or consultant, earning a nice income on the side while you continue to work a regular full-time job.

2. Find a need to fill. Regardless of what you end up trying, you need to be sure you are satisfying someone's unmet need. Fortunes have been made by people who realized that someone needs to make the seat cushions for airplanes, aluminum siding for backyard sheds, the plastic tips that go on shoelaces, or any of the hundreds of items and services we use every day but don't think about.

3. Don't spend money you don’t have. This is maybe the most important piece of advice I can give you. Ever hear a story about some guy who maxed out his credit cards so he could start his wildly successful business? For that story, there are a million others where someone mortgaged their house, took out huge loans, or drained their savings to start their business only to see it fail, leaving them with nothing but crippling debt.

You should NEVER try to start a business by putting yourself into massive debt or a situation where you have no income. The chances of failure are just too great. Don't quit your day job yet, tempting as that may seem. Work out of your house instead of leasing an office. Don't hire anyone or spend on anything other than basic supplies until you have money coming in the door. And when I say money, I mean CASH. Even if you are lucky enough to start making sales right off the bat, IOUs and Accounts Receivable will not pay your bills. You need to make Scrooge McDuck look like a free-spending fool when it comes to your new company's finances.

I hope this helps. Keep in mind that most businesses fail within a year after starting, which is why the most successful entrepreneurs don't hit pay dirt until their 5th or 6th (or later) attempt at getting something going. Work hard, learn from your mistakes, and have fun. Good luck to you! --KS

Karl Sacherman (BA, MBA) is a 20+ year business veteran who has worked at all levels of the corporate ladder, from temp worker to business owner. His column is exclusive to GLI Press. Do you have question for him about business or economics? Send him an e-mail!

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