Thursday, January 28, 2016

Thoughts on Starting a Business

I am astounded how many times clients have come to me interested in starting a business but have zero knowledge or experience about the business they want to start.

Often it is because either 1) they met or "know" someone currently in the type of business who has told them it is "easy money," or 2) from their "observations" it looks like the type of business is a "big money maker."

I cringe every time.

I always advise them to study the business more:
  1. take a job in the business to see it from the inside;
  2. get the "friend" to let them observe the running of the business for a few weeks;
  3. if buying a business already functioning, require the seller train the buyer for three to six months (and have a contract requiring escrow money be held in case the "promises" made about the business were exaggerated).
The majority of the time none of the above suggestions are followed, though one of my clients did agree to the contract/escrow.

Truth About Small Businesses
  • Small businesses fail more often than not, and usually within the first three years.
  • It takes an average of three to five years for a business to become stable and determine if the businesses will (likely) remain profitable.
  • Most businesses need at least six months to "turn a profit" - meaning the owner should not depend on income or profit until at least six months after opening. That is usually true even for an already functioning business purchased by a new owner.
Ambition, asperation, motivation, passion and money are all great for starting a business - but knowledge about a particular business, more than just general business knowledge, is the foundation for how a specific business will fair initially, and maybe even longterm.

Most people really cannot financially afford the costly mistakes of industry specific learning curves. Planning and research can help alleviate a lot of the misinformation and misunderstandings.

That is not to say starting a business is not a good idea or that only people with vast experience should do it. I am just saying do your research, hands-on preferably, for the type of business you want to open.

Then let your ambition, aspiration, motivation, and passion lead you.

Deedra is originally from Arkansas; an attorney in Scottsdale, Arizona; a diversity expert and motivational speaker for The Ambassador Project; and has a blog at where she shares her perspectives based on questions and experiences. Follow Deedra on Twitter @askdeedra

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