If you are unemployed, underemployed or unhappily employed, the idea of taking control and becoming your own boss might be sounding pretty sexy right about now. Plus, the past decade has shown us that jobs aren’t quite as dependable as perhaps we previously thought.
However, the success rates for new business are quite scary too, with the majority of all new businesses failing in just a few years’ time. While there is never going to be a “sure thing,” if you are thinking of leaving your job to hang out your own shingle, there are significant benefits to preparing before you take the leap.
Here are nine ways to make sure that you are prepared before you start your own business, so that you can give yourself the best chances to succeed. These are adapted from my bestselling book, The Entrepreneur Equation.
1. Define and evaluate your goals.
You can’t figure out a path to get somewhere if you don’t know where it is you want to get to. Plus, once you have that goal, you need to know if your path is the most direct route to achieving what you want.
Ask yourself tough questions about why you really want to start a business. Are you looking to get rich quick? Do you want to showcase your talent, new product idea or service? Are you tired of your boss taking credit for what you do?
These kinds of goals might lead you down the wrong path. On the other hand, if you love the idea of running an entity, if you like creating systems and procedures, adore servicing customers and if you thrive on wearing many different hats and balancing responsibilities, then entrepreneurship could be the perfect path for you.
2. Stash some cash.
The cost of starting a business in many industries has come down substantially. However, that is only part of the story. Businesses often take a few years to gain a solid foundation, so you need to have enough money to start the business, operate it while it stabilizes and also be able to live.
If you don’t have the money yourself, identify whether you have credible access to capital. The downturn has made it more difficult to secure financing and you don’t want to be three months into a business and have to decide whether to keep the business open or pay your rent or mortgage — that’s a losing proposition.
3. Get relevant experience.
Being able to manage employees and vendors is the type of skill you’ll need to acquire before starting your own business. You’ll also need to know your industry inside and out, including aspects that you may not be familiar with or even like, including marketing, accounting and more.
Don’t have the experience? Spend time working in a similar company, shadow a business owner in your industry or take a job on nights and weekends in a comparable business. Test the waters first with a trial run before you start your own company.
4. Build your network.
Business sometimes comes down to not what you know, but whom you know. If you don’t know many people or if you just haven’t warmed up your contacts in a while, now is the time to focus on building a solid network.
Strong connections can provide valuable business advice and provide introductions to get you more favorable financing, prices, terms and conditions from business suppliers and professional services. Connections are your best source of marketing and customer referrals, which is critical for a new business.
5. Know yourself.
Do you prefer the “status quo” and like to avoid the unexpected? Can you handle a life of highs and lows — including financial highs and lows? Could your savings and bank account handle financial lows as well?
Related: Why There Aren’t More Entrepreneurs
If you are a person who likes stability and control, or if you prefer when things go as planned, the roller-coaster ride of a new business may not be right for you. Be honest about your personality before you take the leap.
6. Visit your lawyer.
If you are going to go into a business that competes (directly or even indirectly) with your current employer or if you plan to call on prior customers or contacts, you may find yourself in a legal bind, depending on the paperwork that you have signed with you current (or previous) employer.
Check with your lawyer to make sure that you are in the clear or to find out what you need to do to avoid any sticky legal situations.
7. Stalk the competition.
Before you leap into entrepreneurship, take a hard look at the marketplace and your competition. Is your market saturated with successful businesses? Is your industry littered with so many bad businesses that it’s developed a bad reputation?
Both good and bad competitors will influence just how successful your business will be. You will need to market and brand your business to shine above the good competitors and to make up for the bad ones.
8. Test your idea’s scalability.
The most successful businesses rely on automation and delegation. Will other employees be able to do your work? If not, can you teach others what to do in an easy-to-follow format?
If your business relies on your skills, and your skills alone, you might have a successful job, but it may not be that business opportunity you are looking for.
9. Sell first!
Too many entrepreneurs spend time and money building out retail stores, manufacturing products or developing service offerings without truly assessing the viability of the market. See if you can garner interest (in the form of purchase orders, deposits, etc.) before you invest too much capital.
If you have a lot of interest in your offering, there will be less risk in pursuing it full time. If you don’t get any bites, you may want to rejigger your offering, pricing or business model before investing your full time and effort.
Putting in the time and effort up front to stack the odds in your favor will help you avoid having one of those businesses that ends up in that percentage of failures.