Four Questions to answer before you start a business

At least a dozen people have come to me in the past two months for coaching and advice on how to start a business. This used to terrify me, but no more. On the one hand, I don’t want my own scars and frustrations to discourage them from taking the leap. On the other hand, I don’t want to encourage them to chase a dream if they’re either unready or incapable.

I’ve learned through these conversations, however that I have tons more wisdom and perspective than I’ve been giving myself credit for.

So I decided after all these conversations to collect four of the top questions my clients find meaningful as they think about whether or not they’re ready to start a business.

1. Why do you want to start a business?

Too many of these conversations begin with some version of “I am feeling unfulfilled in my current job.” While that may be a good final straw that gets you to ditch your comfortable W2-with-benefits employment, rarely is it sufficient to take such a big leap.

Wanting to get out of a bad situation can be a motivator, but if that’s what’s primarily driving you, you may be falling prey to magical thinking about how easy success will be, or you may be lacking imagination about more appropriate ways to find purpose in your work.

When someone ask why you want to start a business, you should be able to answer these questions easily and with confidence:

• What is the product or service you want to sell?
• Why is that important to you?
• What most excites you about selling that product or service?
• What are the other demands on your time like family, leisure, school, caregiving, etc.?
• Imagine success in five years. What does your life look like then?

These don’t even address the viability of your future business—questions like market size, existing unmet demand, existing and potential competition, long term and short term threats, capital investment and credit required, time to profitability, etc.

Before you even get to those questions, you need to be able to clearly articulate your fundamental motivation.

2. What are your strengths, and where are your gaps?

We are all subject to magical thinking, in different ways. Being in “I’m going to start a business” mode, however, seems to create its own special brand of magical thinking.

Even people who are incredibly self-aware tend to gloss over important questions they don’t know the answers to. Whether it’s a programmer who hasn’t thought about how hard it will be to find clients, or a long-time executive who’s never had to pay his family’s healthcare premiums, or an extrovert who wants to build an online community, we all have a tendency to trust that the parts we don’t know very well will just kind of magically work themselves out.

They almost always don’t.

The best way to combat this kind of magical thinking is to get very clear on and honest about what you’re good at, what you’re bad at, what you enjoy doing, and what you hate to do. There are lots of tools and resources to help you do this. Here are some of my favorites.

• A time audit
  Do a time audit, keeping track of where you actually spend your time right now. Keep track of the to-do items that never seem to get done. Make sure that success in your new business doesn’t rely on you personally accomplishing a lot of those tasks.
• A strengths assessment
  My personal favorite of the many available is StrengthsFinder. None of these assessments is flawless, and they are not prescriptive. But they do provide a very good opportunity for self-reflection. They also can help you be more intentional about finding people with complementary strengths to cover your gaps.
• Friends and mentors
  Share your business idea with people who know you well, and ask them to tell you where and how they think you will fail at it. Most friends won’t want to discourage you or put the friendship at risk by being brutally honest. You need to make this safe for them, and listen without ego. If you are not ready to do this and learn from it, then you may not be ready to start a business.

3. What is your most realistic timeline?

When you say you’re going to start a business, most people ask about your timeline for success. But every time I’ve asked this question, I’ve gotten a best-case answer.

About one in four new businesses fail in the first year, and nearly half don’t make it five years. Compare that to the 43% of first marriages which end in divorce, at an average of eight years.

Everyone who says “I do” at the altar expects they will be in the “successful” 57%. The same is true for every entrepreneur who says “I do” to their Secretary of State when they register their business. But half won’t make it.

While these are two very different types of journey, in both cases people tend to gloss over the future psychological pitfalls that await them. This leaves them with a lack of resilience when the going gets tough. Whether that’s a disappointing quarter, a health setback, a competitor’s dominance, whatever.

Resilience in those dark moments is what will keep you going… if you’ve planned for it. Here are the things I’ve found that help:

• Write down your “north star.”
  Whatever inspired you to start a business in the first place needs to be front and center every day. Be mission oriented—that is, know why you’re doing this and ensure that you make decisions in service of that goal.

• Be realistic about your timeline.
  Look out three years and draw yourself three timelines: The first, your stretch goal, is if everything goes well. The second is your minimal survival performance—what do the next three years look like if you’re barely hanging on. The third is what you think is most realistic. When the going gets tough, it’s a lot easier to keep going if you compare your progress to your minimal survival line than to your stretch goal. This will help you stay in the “I’m still okay” mindset instead of falling into the “I’m not where I hoped to be” mindset.
• Be realistic about your finances.
  A lot of people who’ve been W-2 employees are shocked by certain business costs they’ve never had to pay before. Self employment taxes. Estimated tax underpayment penalties. Healthcare premiums. State franchise taxes. Get to understand the true expenses and cash flow of your business to know how much cushion you will have. There’s very little that’s more emotionally difficult than watching your savings keep dropping month after month… even if you’ve planned for it.
• Identify various go/no-go milestones, and your criteria for failure.
  When you understand your finances and timeline in their minimal, realistic, and stretch versions, then map out some points over the first few years as go/no-go decision points. These are dates on which you’ll reflect on your progress and assess whether it’s better to keep going or better to quit. Having go/no-go points in the future serves you in two ways: First, a deadline can be a strong motivator and can bring priorities into sharp focus. Second, putting milestones in the future can let you focus on the game instead of constantly watching the scoreboard. This can reduce daily anxiety and stress, and you might get out of your own way and execute better.

4. Who’s in your network?

A lot of the people I talk to who want to start a business are thinking of making a fundamental change, whether in role or industry. I did this when I decided to go into coaching in 2021. I’d been in corporate or nonprofit roles for 30 years, so going solo in a whole new field was quite a leap.

Being a solopreneur can be a lonely experience, doubly so if you’re jumping to a new field. Having a strong network can help combat that loneliness, and it can also be critical to your business.

Yet a lot of people who are going solo for the first time haven’t necessarily built up strong networks or even the skills to build their network. When you’re in a regular day job, a lot of your networking tools are built into your job.

Here are four ways to take this on yourself and begin building your new network:

• Find people you already know
  When I started coaching, I assumed I didn’t know any coaches. It turned out I was wrong. And, when I looked beyond my first-level connections, I found a wealth of experience, expertise, and goodwill to tap into.
• Participate online
  Use social media to find voices that you find interesting in your intended field. Follow them. Read what they post. Then, comment. Don’t just drop a “great post!” on them. That’s just noise. Contribute something new or valuable to their conversation. This takes effort and time, but it will be worth it. Be patient. Building authentic connections takes time. If you find this too uncomfortable, perhaps you’re not ready to start a business.
• Attend webinars
  It’s almost guaranteed that someone is doing webinars in the field you’re thinking of pursuing. Attend them. But don’t just attend them. Participate in the chat or Q&A. Look out for other interesting attendees and connect with them. Connect with the speakers. Be intentional about participating. If you find this too uncomfortable, perhaps you’re not ready to start a business.
• Participate in person
  Even if your business is fully virtual like mine is, there can be tremendous value in participating in your local community. Most chambers of commerce have social and networking events. Professional networking groups are eager for new members. If your finances allow, consider getting an office in a coworking space to take advantage of their social and business networking events. Volunteer or join a nonprofit board of directors.

Are you ready to start a business?

It seems like everyone wants to start a business. The idea of a flexible schedule, being able to pick who you work with and what you work on, the opportunity to be your own boss, and the feeling of being in control of your own destiny are all attractive features of going out on your own.

Being a professional athlete, a rock star, or a movie star also sound great. Don’t they? But no matter how much I might want to have the fun parts of those lifestyles, they all require talent, dedication, commitment, and sacrifice I am either incapable of or unwilling to do.

Running your own business is no different. If you want to be in the half of entrepreneurs that stick around longer than five years, you need to understand the risks, investments, and sacrifices you’ll make in addition to the good stuff.

So, are you ready to jump into the dream (that is almost certainly doomed to fail?) If you are, then I only have one more piece of advice for you:

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