Starting a business is not for the faint of heart. When the economy is soft, and jobs are limited, entrepreneurship is often the best way for a young adult to gain practical experience in their field of choice. To be sure, it can be scary, but so can sitting around waiting for a call for an interview for that perfect position.
With that in mind, here are five tips for planning your first entrepreneurial venture.
1. Find your obsession. “Find your obsession” is different from “follow your passion.” Your passion is something you love doing. Your obsession is something you cannot live without doing. And there’s a difference. A passion is sometimes borne from a hobby, for example, photography. You may be passionate about photography, but when the pressure is on to make money with photography that passion can wane in the drudgery of the daily work. Conversely, if you are obsessive about photography, rarely will any part of the work seem like drudgery. Passion will burn out; obsession rarely does. Obsession is what you need when starting a business.
2. Decide on your operational end-game. Once you find your obsession, ask yourself this: Do you want to have a “practice” or a “business?” A “practice” is a business that is dependent on your direct involvement, whereas a “business” can become independent of your involvement and still be successful.
A “business” in this context is one where you can rely on the collective work of others you employ to produce income, or survive as an ongoing concern if you were unable to work in the business on a daily basis. It can be bought or sold regardless of your involvement.
Having a practice means it is difficult, if not impossible, to separate the work output of the business from your personal output. For example, if you have a unique skill or ability on which the income of your business rests primarily on you to do the work (e.g., an accountant, yoga instructor, consultant, or tattoo artist) you are likely to have a practice. It is unlikely this type of business could not be bought or sold without your involvement.
There’s nothing wrong with either option, but it is important to understand what kind of business operation you want five years after you start because it will shape your decisions today. If you know you are going to be happy making a living as a tattoo artist chasing your obsession, then your business decisions will be made with this in mind. However, if your goal is to have a tattoo shop with ten employees in five years, your approach needs to be different. Keep in mind that most small businesses start as practices and evolve. Moreover, those who just wanted to “do their thing” end up trying to manage a business and are no longer working at their obsession.
3. Start your business “on the side.” Many say “jump” into entrepreneurship without a net. Having done it that way many times, I suggest you do not unless you have no other choice. The financial pressure is too high for most people. The pressure to make rent payments, buy food, and put gas in your car will have you chasing business that isn’t worth your time or in your area of focus so that you can survive. You will lose focus of what you are trying to accomplish, and few obsessions can withstand that pressure. My advice: Start your business on the side if you can. Get or maintain a job to have some income flowing. You will feel less pressure and be able to stay focused on our business goals. Then strive for your “choice number” with your business income.
4. Determine your “choice number.” Your choice number is that number which allows you the opportunity to choose between going full-time with your business or continuing to work for someone else. It is easy to calculate: Add up all of your current monthly expenses (all of them, Netflix, Hulu, gas, car payments, rent, food, beer, or concert tickets), then add 25% more to that number. So, let’s say your monthly expenses add up to $1,500. Add 25% more-$375.00-for emergencies, and you are up to $1,875.00. I would suggest rounding up for a little extra cushion to $2,000. So, $2,000 would be your “choice number.” Once your business is generating $2,000 per month, you have enough money coming in to cover your monthly costs and the choice as to whether to keep your day job or go full-time into your business with some financial security is now yours. Bear in mind the choice number can fluctuate some, so remember to revise accordingly.
5. Take advantage of reputable free resources. There are many, many free resources to help new entrepreneurs. My favorite starting point is SCORE. There you can find local resources, webinars, on-demand courses, as well as other resources to help you get started. The U.S. Small Business Administrational also offers many free resources and tips. Sometimes your local community college will offer free or low-cost courses for new entrepreneurs.
Although these tips do not cover everything a new entrepreneur might need to know, they are a good starting point for planning your first step into your own business.