What happens if you have an idea or invention that will revolutionize an industry but you don’t have the money to invest in it? Should you start a business?
The answer is very short. You don’t.
According to the Global Entrepreneurship Monitor, more than 580 million people in the world are starting or running their own business. This includes people who have a low risk tolerance, scarcity mindset, or an unclear business plan.
As a result, Small Business Trends reported only 40% of startups actually turn a profit and 82% of small business failures are tied to cash-flow problems. By year 10, around 70% of startups are no longer in business.
However, if those statistics don’t discourage you from your goal to own your own business and control your future, then it may be time to go cubicle free and become more innovative. If you’ve done your research, and you’re financially stable enough to leave your job, it’s time to check for signs that you’re ready to be an entrepreneur.
Sign 1: You Have The Cash Flow
Before you even step into entrepreneurship, check your financial situation. Don’t start a business when you don’t have the money because it will not solve your money or financial problems. Don’t start a business out of desperation.
It’s like saying you want more time and freedom, so you decide to have a baby. People think a business will give them time and freedom because they don’t have to answer to a boss, and they can work the hours they want. But having a business is like having a baby. You won’t have the time and freedom you dream of.
If you don’t have the money to start a business, there’s a reason why you don’t have the money in the first place. Maybe you have a job but not enough savings. Or maybe you’re still in school and you don’t have a source of income. Either way, think about your financial responsibilities in case your business fails. If you need money, is there someone who will lend you money?
A business costs money to start and maintain. Without money, it’s difficult to start one. Another way to think of it is, it takes money to make money. And once you have a business, it takes money to grow or scale it.
If you don’t have the steady cash flow or an emergency fund to fall back on, you’re not ready yet to be an entrepreneur.
Sign 2: You Have A High-Income Skill
Starting a business is not as simple as putting posts on social media. You can’t just slap together something on Instagram and call yourself an entrepreneur.
From a skills perspective, it doesn’t cost any money to get your business going if you already have a high-income skill. A high-income skill, like copywriting, or high-ticket closing, will give you the income to give you some cash flow to start a business.
At that point, you’re making about $10,000 a month, which will also give you some savings and emergency funds. Once you have that steady income, then you can start to plan out the next steps for your business.
It’s not enough to just develop a product or an invention and introduce it to the marketplace. You’re going to lose money. For example, if you’ve created a recipe, and you’re thinking about opening a restaurant, all you know at this point is how to make food.
As an entrepreneur, you now look for answers about your restaurant business. You want to figure out whether the customer will like the recipe and whether your invention will revolutionize the way people eat. You want to know how much the rent will be and whether there will be a lease. You want to calculate your margin.
Next, you’ll broaden your research to study your competitors and what they are selling and how they are selling it. You want to study proven models like successful restaurants selling similar items to similar clientele.
Sign 3: You Have A Plan For Costs, Customers, And Hiring Employees
When you’re starting your own business, you need to be prepared to be a one-person team, unless you have business partners.
You need to be very good at problem solving and making sacrifices. You can expect to work weekends and evenings, and spend time away from family and friends.
Let’s say you’ve decided you do want to go ahead with your restaurant business. There are several questions you’ll want to think about from where you plan to open your business, to how you’ll find customers, to the operation of your restaurant.
Sign 4: You Have More Than An Idea
If you don’t have answers to all the questions you have about your business, then you’re not ready to start. It’s why ninety-five percent of small businesses fail, because most people are not qualified to be entrepreneurs. They’re usually employees hit by some entrepreneurial seizure. They are struck by a great idea and then they run with it, thinking they’ll become the next successful entrepreneur.
Another way to think about it is this: buying a basketball doesn’t make you into a professional basketball player.
First, you need to develop the skills to generate enough cash flow. Then, when you have the income coming in, then maybe, you can start to work on your business idea and develop a solid business plan. At that point, maybe, you’ll have what it takes to be an entrepreneur.
Those are some of the signs that you’re ready to start your own business.
- You have the cash flow.
- You have a high-income skill.
- You have a plan for costs, finding customers, and hiring employees.
- You have more than an idea.
Steve Jobs has said that, “I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.”
When you start a business, you’ll have the opportunity to constantly learn, turn your passion and beliefs into a business, and push the envelope with your innovation.
Have you started your own business before? Comment below.