9 Things to Consider Before Starting a Business

March 15, 2015

Becoming a successful entrepreneur takes far more than an amazing idea. But you already knew that. Below are nine critical lessons about starting a business that lasts. While these are not necessarily the most essential considerations to the long-term operation of an enterprise, they will improve your chances of success by helping you build a solid startup foundation.

  1. Determine your opportunity costs Start by considering the value of your time. Most entrepreneurs (even successful ones) tend to undervalue their time when attempting to understand the (future) profitability of their business. This should be a cold, hard calculation. What could you realistically be doing instead? How much money would you make doing something else (consider whether money is even the most important factor)? What would the benefits be if you took a different path? Now consider all of those factors against your estimate of how the business you are about to start will change your life.

  2. Figure out long-term rewards for your team Motivational goals are essential, especially in the early stages of a business. All you have to keep the growth inertia is the hope you’ve been able to instill in people about the future of the company and their role in it. You can promise everyone on your newfound team a beach-front mansion if they slave into the nights, but in my experience, only the truly internally motivated will stick around. Those are the ones who would have stuck around even if you set realistic visions. If your promises are outrageous and the company does become successful, be prepared to deliver on those promises. If you really mean that others are in on the “ground floor” of something amazing you are building together, be prepared to share the fruits of your labor. Don’t overpraise and under deliver. Motivational rewards can also be supplemented (and for some time, even substituted) by team building activities – most entrepreneurially spirited folks value an enjoyable work environment just as much as the ability to dream big.

  3. Take risks cautiously and incrementally Barbara Corcoran would probably disagree with me, but I think there is a way to build a great business by hedging your bets every step of the way. There is nothing wrong with dreaming and planning big, but you don’t have to bet the farm at every opportunity. Plant a few crops and see what grows. When I started my first business, I took all my savings, went to a Western Union and sent it to a seemingly very nice Chinese business man who promised me quality products in return. Although the products did arrive and a crucial relationship developed that grew our business to profitability, I should have thought about the alternatives of sending cash (preferably in a way that would have allowed for at least some recourse if things didn’t go as expected). We hear more about these kinds of success stories, but there are plenty of cautionary tales to counterbalance those. Think through your options – you’d rather make a strategic move that considers the risks and rewards than to have a chance at a cool story on how you were so brave and lucked out. If you must be brave, test your concept on a smaller scale first. Build trust with business partners as you build your business, carefully (not necessarily slowly) inching up your bets.

  4. Understand how you’re actually going to make money Though this seems intuitive, many forget to really think the business model through. What they have is a “great idea” – not a profitable one. Your understanding of how you’re going to make money appear in your bank account should be bullet proof. And no, it’s not enough to say that you’ll create an online store and sell things.

  5. Focus on team culture Building collaborative and effective teams takes careful consideration, so don’t be hasty with your personnel choices. Early on, many companies are tempted to hire or work with those who have the skill requirements for the job or who will work for the right price, even if personality traits may not jive with the rest of the team (or your vision for the team culture). Reject the temptation of anyone who is the wrong cultural fit, even if with them you could get your organization off the ground sooner or you think you could grow your company faster. Sometimes we underestimate the incredible tangible impact a single person’s attitude can have on the morale of an organization. I would rather hire the right person and teach her new skills than have a culturally unfit but skilled team member. Of course, if you are a neurophysicist and require a team with highly specific skills, take this point for what it’s worth to you, but for the most part, aim to work with people who seem like good company for the hard working days as well as a beer after work.

  6. Know what failure looks like There’s no need to dwell on this or ask yourself daily if this matched your vision, but you need to know ahead of time what results would be reason to call it quits. Ending a business venture is not failure – it’s a notch of experience in your belt, and there’s nothing to be ashamed of. What’s important up front is recognizing the conditions under which you would determine your idea didn’t work and it’s better to move on. In the day to day, it will be harder to see or imagine this without excuses, so knowing up front is fair to you and anyone you went in with. That said, circumstances change and ideas evolve, so if things don’t look as you expect at a certain point, you’re entitled to reevaluate, but bring in outsiders for an honest opinion.

  7. Evaluate the scalability of your business A hint of success early on can make you feel invincible and naturally excited about all the prospects in this world. Those can be distractions, though, when you should be focusing on your core concept. Ensure that your business has a big enough market and can be scaled, and consider early on how much more time you’ll get back by taking some of those steps early, like outsourcing your fulfillment or investing in a simplifying piece of software. If you love making one item by hand and you’re selling it at a profit on Etsy, that’s all well and good, but that doesn’t mean you also have to pack and ship it yourself. At some point, you’ll need help if your business is going to grow.

  8. Keep tabs on the pulse of your market When things get off the ground, and even in the concept-development stages, it is easy to start focusing internally on how things are going and what you can improve. You should never, ever extricate yourself from the heartbeat of your market. Follow your competitors, the trends and competing concepts. Stay attuned to your customers even as you hand customer service duties off to someone else. Be your own best competitor by bringing disruption to the marketplace on your terms!

  9. Assemble a trusted group of advisors This is the single most important lesson. When starting my business, I had a limited understanding of how the business world worked and I was aware of that. I had infinite passion and drive and I thought I could learn anything! I wasn’t shy to ask either – I met with friends and business contacts to learn about running a business. What I failed to understand at the time is that, though these professionals from my network were tremendously helpful, they did not follow my business from the ideation stage into full scale development. They listened to my enthusiastic questions and plans and offered some point-in-time advice to take with me. What I needed earlier on was industry professionals – lawyers, tax advisors, business consultants, and others whose advice early could have made a huge difference. Over time I am grateful to have assembled such a team, but in the early stages this is invaluable. Find those you can trust to help you build a business solidly from the beginning.