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Realities of Starting a New Business

By Edited Jun 19, 2015 1 1


Take this reality check before investing time and money in starting your new enterprise. Your enterprise idea, whether it is reseller web hosting or icecream selling is bubbling away in your head, just bursting to get out but without a realistic appraisal of your skills, emotions and finances, it will be not survive for a week in real world.


The Emotional Realities  

Do you have the support of your partner and family?


You cannot devote the necessary effort into your new enterprise start-up without the support of your immediate family. If you are facing frequent criticism of the 'You are wasting your time type', then your new enterprise will fail.



Neither are blind support and adoration ideal. You need to be able to discuss your new enterprise ideas with family members and have a constructive discussion about them.


Are your friends supportive?


You also need a second support network that is external to your immediate family. Friends are usually more willing to play 'Devil's Advocate' to your enthusiasm, to inject a note of reality into the new enterprise concept.



Ideally you should have sounded out someone in enterprise about your new enterprise concept. Friends are useful, but the analytical approach of a enterprise expert who knows the area you plan to operate in will save you thousand of dollars.



Make contact with local enterprise groups. Some cities have a mentoring facility for new enterprisees, where people planning a start-up business are matched with experienced business people.


Are you ready and prepared to work fourteen hour days for the next three years?


You may have a dream, where your new business allows you to work when and where you want to, but the realities of starting a new business are rather different.



You will need to work seven days a week most weeks, between 12 and 16 hour days every day for the first two years after starting work on your new business. Until your business is earning enough to pay an employee, if something needs doing, YOU are the person who is going to do it.



Are you ready for this reality? The dream is just that, a dream. One day, perhaps in ten years time, you will be able to hand over the day to day decisions to a manager, until then you will have to work your socks off. One of the realities of starting a new business is that you work harder than you ever did for an employer.


Is there a real need for this product?


Have you done any real research into whether people or companies are prepared to pay for your service or product?

Gut feel and asking friends does not qualify as adequate research to justify your investing $20,000 or more.



The Financial Realities 


Have you worked out how much money you will need?


Before you can make any rational decisions you need to know how much money each part of your new business start up is going to need. You can make estimates yourself, but you are more likely to be accurate in your costs if you employ a business consultant.



The cost of hiring a consultant will be worthwhile if your business start-up succeeds. An accountant might be able to give you a rough idea, based on their experience with similar start-up companies.

Without accurate cost estimates your new business idea will fail.


Have you the capital you will need?


Your financial requirements will divide into two types; capital and ongoing.

Banks are unwilling to lend any money to people starting a new business, they were only ever prepared to lend half the capital requirements to start up a business anyway.



The financial reality of starting any new business is that you have to use your savings or to raise a mortgage on your house.



  • Are you prepared to risk your savings and home on your new business?


  • What proportion of your savings are you prepared to risk?


  • What happens if your business does not work out and you lose any money that you invested in it?


  • Will you be able to repay the extra mortgage you took out to finance your business?

Have you a reliable income for the first year?


When you start a new business it will not be earning enough to pay you a salary for at least a year.



  • Will you be able to continue working, at least part-time, for the first year after starting your new business?


  • Does your partner earn enough to pay all the essential household expenses until your new venture is off the ground?


  • What about in the second and third years? Most new businesses only start to make a profit after three year?


Have you a fall back option?


Without a Plan B you could end up homeless, jobless and with no savings if your new business is a failure



  • What will you do if your new enterprise fails?


  • Will you be able to regain employment? If not, where will your income come from?


  • Are you prepared to sell your house to repay the mortgage?


  • Where will you live?


  • Would you be prepared to take a partner into the business, someone who would provide some of the necessary capital?



Skills Reality Check



It is one thing to have an idea. Most people have several ideas over their lifetime. Starting a new enterprise needs a lot more than an idea.



Can you sell?


You will be the company salesman. If you cannot sell whatever services or products your company produces the company will join the evergrowing list of company failures. The ability to sell is not a skill that is easily learnt, that is why salespeople are well paid.

If you find selling or the thought of selling difficult to handle then you MUST factor in the cost of a sales person from the very beginning, because your company must sell to survive.



Forget the idea that your product or service will sell itself because it is better or cheaper than alternative products.

This will not happen.

No salespeople means no sales. No sales means your new enterprise fails and everything you invested in it has gone.












Jul 13, 2010 11:25pm
support of your partner and family is a huge factor. Great article!
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