Is entrepreneurship for you? Do you have an idea for a business, or have you invented the next hot product and have visions of it flying off the shelf? Have you dreamed of the freedom that comes with entrepreneurship and owning your own business? Or perhaps you’ve been “offered” that freedom by your employer, and now is the right time to go out on your own.
Before you leap, make sure you have a plan. In fact, it’s important to have two plans: a business plan and a personal financial plan. You’ll want to plan for success, but you should also plan for failure. All success comes with failures along the way, but with a roadmap that answers tough questions before you start your journey, the speed bumps and potholes won’t hurt as much, and those with whom you do business will have more confidence when taking a chance with you.
A Business Plan
Before spending time and money designing logos and building websites, gather empirical evidence that people will pay you for your product or service. Test and validate both your idea and your business model in the market. Just because you have a great idea for a business or product doesn’t mean it will make money. It’s not enough that your mother, neighbor, or barista think you have a great invention or business idea. You need strangers — maybe people who don’t even like you — to be willing to pay for your offering. (Not that there are people who don’t like you!)
Take the critical step of determining the size of your market and how much real customers will be willing to pay for your product or service. What do people need? What is frustrating and challenging for them? Does your product or service provide a solution that doesn’t already exist? If you’re bringing a new product to market, utility and market size are the first discussions your buyer will want to have when you’re pitching. Before you walk into the meeting, know your numbers and know where your product fits into the landscape of that buyer’s assortment.
As a former buyer, the products I was most confident to list were those whose creators or salespeople came in prepared to answer the question: “How does your product offer a solution for the end user and for my business?” It’s OK not to have those answers when you’re first creating. But before you pitch your creation as a business, be sure you’re prepared to answer these questions clearly within the first few minutes of your conversation.
A Financial Plan
The comfort of a steady income keeps many people from starting their own business. When you are working for someone else, you can count on a regular paycheck. Before you take the plunge, you must think about how you will cover your day-to-day expenses. When you own the business, there may be a time when a client doesn’t pay their invoice on time; or when a factory doesn’t deliver; or a truck carrying your product to stores crashes; or when an expected payment for a shipment or service doesn’t come in. Where is the money going to come from?
You need a financial plan that takes these possibilities into account. Your income won’t be steady, especially at the beginning. That’s OK, so long as your plan can get you through inevitable failures on your way to success. Track your expenses from the past few years. Then be brutally conservative with the revenue and profit projections of your new venture.
Are you covered? If not, keep working on it. Have a cushion in place, ready to catch your fall in case you face the unexpected. Starting your own business requires a lot of hard work, persistence and learning. Set realistic expectations, get your plans in order, launch when you’re ready to financially handle the good and bad times, and get set to embark on an exciting journey that can be one of the most powerful ways to take control of your life.
Leila Nosrati is a WIT member and head of Master Retail Advisors, a consultancy focused on helping inventors and entrepreneurs get retail ready. For everything from concept to launch, from financial modeling to perfecting a pitch for retail buyers, Master Retail Advisors is where creators go to get retail-ready.