Should You Start a New Business This Year? Here are a few tips for ringing in the entrepreneurial new year with confidence.
By Nancy Aichholz Edited by Joseph Shults
Opinions expressed by Entrepreneur contributors are their own.
A bright shiny New Year brings optimism and excitement around new opportunities. New Year's resolutions often include significant career planning or changes that might include starting something of your own. But news stories about the economy, the supply chain and lingering COVID strains can put a damper on that excitement. Before diving headfirst into a new business or shying away from your dream of entrepreneurship there are considerations to take into account.
There will always be reasons not to start a new venture, but calculated risks are deep in the bone marrow of any true entrepreneur. What's critical at the outset is assessing the risks and knowing the difference between death threats and challenges that scream for an opportunistic soul to stare them down. Before moving forward with that big idea, approach the potential new venture in a methodical fashion.
Get your house in order
Conduct an audit of your life to determine if you have the time, space, money and moral support to charge ahead.
Check your credit report. You will need money, and likely at least at first that will be money from a financial institution. You will not be funded if your credit is in disarray. If you do have sloppy credit, find a trusted banker (credit unions are great for this) to help you sort out the situation and improve your credit. It won't take as long as you think.
Conduct a personal cash flow analysis. How much revenue will you need to generate at your new venture before you can quit your day job? How much do you have in cash reserves to invest in your business and/or live on if you leave your job, and are you willing to spend it? I am not an advocate of cashing in a retirement fund for a new venture. I am pretty comfortable with risk but retirement money is sacred in my mind, and generally it benefits more than just one person in a family over the long haul.
Evaluate your time. Literally log every hour and how you spend it for about a week. Find where there is hidden (think wasted) time in your schedule that could be put towards a new venture. Decide what/whom can be deleted, at least temporarily, from your schedule and determine what you can delegate.
Identify your support team. Family, friends, trusted advisors. Who will be there for you when the going gets rough? Who will pick up your groceries when you have a long day? Who will take your kids on a fun outing when you have a critical meeting? Take time to truly understand yourself to determine if you need employees/partners or if you work better solo, tapping into a team of trusted advisors.
Assess the risks associated with your business idea and make sure you can tolerate the risks. It is one thing to invest funds to grow a business, another altogether to carelessly throw money out the window at what could be an expensive hobby.
Related: 3 Credit Secrets Millionaires Use as Leverage
Scan the marketplace
Do some research on the industry you want to enter. Identify other companies with similar products or services. Determine how your concept differs from the rest of the competition. If no one is doing what you want to do, dig in and find out why. If people have tried and failed, what can you learn from their trials and errors?
Define who will be the target market for your great product, concept, idea? Create an avatar that represents your core customer. What are they currently doing to solve the problem that your concept addresses? What will make them change their behavior and adopt your new creative solution?
Test your concept on those you trust in your inner circle. Then test your concept on some strangers. Your inner circle will tell you all the positives because they love you; strangers will tell you the truth. You need to hear both. Document the feedback to refer to later as you develop the concept into reality.
Related: How Entrepreneurs Can Conduct Primary Market Research
Evaluate current events
Understand what the current and near term economic outlook is and how that may impact the industry you are entering. Just because the national economy is shaky doesn't mean that starting a business is a bad idea. A down economy could mean money is cheaper, real estate more available and affordable, employees hungrier. It could also mean, just the opposite depending on the industry, so you will be well served by taking the time to really study the market.
If your business idea requires raw materials, research supply chains, pricing, and availability. You could be put out of business before you have you start because that gorgeous silk fabric is caught in the supply chain backlog or the widget you need to manufacture your product is not available. Make sure you have multiple suppliers if possible, as well as a backup and an alternate solution. If you are a tech founder, finding tech talent may be your biggest issue.
Depending on your industry, consider what is happening in the world. Covid was probably not a great time to start a traditional restaurant but it sure was a great opportunity to pivot and be creative about how we all experience food prepared by the pros! Anything wedding related has a whole new look these days. Election years can be tricky depending on your industry and what the pundits are speculating and how that will impact the economy.
Creating a business requires creativity, tenacity and courage. Attacking these potential challenges and sorting out deal -killers from mere obstacles will put you at the head of the class for this year's new entrepreneurs.
Every founder should be dreaming big. Don't let pessimists, the economy or the weather or anything else drag you down, because after all, you are an entrepreneur which means you are bold, fearless (mostly!) and resilient. Entrepreneurship is not for wimps. It is for strong, bold, capable you, so prepare well and go for it.
