1. Keep your current job. By retaining a reliable source of income, you save yourself from the worry of not knowing how you’ll pay your mortgage and from dealing with mountains of potential debt. However, you will have to work harder. Ideally, when your new business begins to pick up steam, you can gradually make the transition from a full time employee at your old job to a consultant or part-time worker. Eventually, you can transfer to your own business full-time. Though in real life this process often doesn’t go quite as smoothly, it’s almost always safer than dropping everything to pursue a dream that hasn’t materialized yet.
- This first step is all the more important if you’re supporting a family. Don’t jeopardize your family’s future by giving up your primary source of income to pursue a personal dream. Though it’s harder to balance your side project with your day job and your family life, it’s much safer.
- If you think you may want to start your own business in the near future, avoid signing an employment contract with a clause restricting your ability to pursue other sources of income. Don’t be afraid to carefully go over your contract with a lawyer.
2. Design a business plan. How will you make money? If you can’t answer this question, you shouldn’t start your own business. The purpose of any for-profit institution is to make money – have a detailed plan for how to do this before you embark on your business venture. Try to answer the following questions – these are fairly fundamental and by no means exhaustive:
- How much will it cost you to provide your product or service to the customer?
- How much will you charge the customer for your product or service?
- How will you increase the volume of your business?
- In what ways will your business offer a better deal than your competitors?
- What kinds of people will you need to hire? Can the work be done without these people?
3. Do a competitive analysis. Who are your competitors? What do they charge for the product or service you’re offering? Can you realistically provide this product or service at a higher level of quality or for a lower cost? If so, congratulations – you may be on to something! Research the market you’re attempting to break into, as well as businesses that have (and haven’t) found success in this market.
- Not all industries are equally easy to break into. Business research firm IBISWorld recommends certain industries to aspiring small business owners for their low entry cost and high growth potential. Among them are: human resources & benefits administration, street vending, online auctioning & e-commerce, ethnic supermarkets, wine/spirit brewing, internet publishing, and more.
4. Research and test your ideas. Preparation and planning is vital before setting out on any business venture. If you can, look for opportunities to perform “test runs.” For instance, if you’re thinking of opening a restaurant, first try cooking for a church or school fundraiser to see if you can handle the hectic atmosphere of a busy kitchen and to judge whether your food is well-received. You may also want to try conducting a survey among potential customers to judge whether they would frequent your hypothetical business.
- Business plans are evolving documents. If the results of your research or testing contradict your current plans, don’t be afraid to change your business plan or even start from scratch. Doing so can be frustrating, but it’s far smarter than risking the failure of your business on an idea that won’t fly.
5. Find opportunities to build skills cheaply. If you have an idea for a business but you lack the skills or training to pursue it, get the training you need for as cheap as possible. Try to make deals with training institutions or companies to have train you in exchange for services rendered. Take on a paid internship or apprenticeship part-time. Look for opportunities to gain practical know-how from friends, family, and skilled acquaintances. You should maintain a source of income while you’re doing this – if this means you need to stretch your training over a longer length of time, so be it.
- If you need to go back to school, apply for every scholarship and financial aid package you’re eligible for. The paperwork can be time-consuming, but the results (in the form of money saved) are worth it.
6. Make the most of your existing assets. When you’re starting a new business from nothing, you should use the resources you already have at your disposal as much as you can. For instance, make your everyday car your company car. Turn your garage into a workshop. Some of today’s biggest companies (most famously, Apple and Facebook) began in humble places – garages, basements, and dorm rooms, for instance. Don’t be afraid to make the most of what you’ve got!
- If you have a home, use it as the initial site of your business, rather than renting an office. This way, you’ll save the money you would otherwise have spent on rent. For tax purposes, you may want to write off part of your home as a home office.
7. Streamline your staffing plans. It’s expensive to pay your staff, especially if you want to hire well-trained professionals. Initially, keep your staff as small as possible to minimize expenditures. The U.S. Small Business Administration (SBA) recommends spending no more than about 50% of your profits on employee wages. If you can do all of the business’s work without taxing yourself to exhaustion, go it alone initially. Otherwise, employ the smallest number of people necessary to do the job safely and professionally. As the business grows, you’ll find a natural need to hire more people.
- Keep in mind that, today, depending on where you live and the kinds of people you employ, you may be required to pay for an employee’s medical insurance in addition to his or her base salary.