3 Things to Consider Before Starting a Business

It may seem like a great idea, but is it the right fit for you?

Daniel B. Kline
Daniel B. Kline
May 30, 2018 at 5:31PM
Investment Planning

Even if you have everything it takes to start a small business, doing so may not be the right move. Let's assume you have a proper business plan, have arranged proper financing, and have removed any major roadblocks to going after your dream. That makes it possible to open your company, but it's important to consider whether doing so is really the right thing for you.

1. Are you OK with risk?

About half of all small businesses fail within five years. Planning and having a well-thought-out business plan can give you better odds, but in most cases, significant risk remains.

Are you the type of person who can accept that things may not work out? Will you be kept up at night worrying about what might go wrong?

Consider whether you have the personality to handle uncertainty. Small businesses are inherently risky and even some successful ones have moments when it appears everything will fall apart.

A woman hangs an open sign.

Opening a small business can change your whole life and not always for the better. Image source: Getty Images.

2. Can you handle being always on?

When you work at a large company or even a small one owned by someone else, you can generally take time off. As a small business owner, you may have days spent outside the office, but at least in the early years, you will probably not get any real time off.

Since the buck stops with you, your presence and decision making skills will be needed. Even empowered employees will only be able to handle so much given that at the end of the day it's your money and your success or failure on the line.

3. Can you take being the boss?

If you work alone then you face a certain set of challenges. You not only have to make every decision, you have to do every job. Of course, you can contract out certain things -- like payroll or accounting -- but you still have to make sure the task gets done.

If your small business has employees that creates a whole new set of circumstances to consider. Are you willing to fire someone or to say no when someone requests a day off? Can you discipline an employee who does something wrong?

Being the boss sometimes means being the bad guy. That's not always a fun position to be in. It can certainly be a lonely place being the owner and having to focus on making sure the business functions well as your first priority.

Consider your life

Owning a small business is in some ways a lifestyle choice. It can offer tremendous flexibility that you have to balance with increased responsibility. If you're out on your own, you have the ultimate responsibility for whether you get a paycheck or not.

That may appeal to you, but you have to balance the risk you're taking and the lifestyle sacrifices that may be involved with the potential rewards. Sometimes a reason that would cause one person to open a new business (perhaps the birth of a child) would be why someone else opts to wait.

This is an intensely personal decision that should not be taken lightly. Consider every factor, not just finances, before you pull the trigger on opening your own small business.