4 Tough Realities of Starting Your Own Business
The American Dream of owning a home might be on life support but the dream of owning a business is certainly alive and well. After years of unemployment frustration, almost nine million Americans started their own business in 2010.
Every business owner still wants the same thing; to succeed. Planning for success, however, means more than just knowing there's no health insurance, a 401(k) plan, or paid vacation time coming your way. It means accepting some key realities.
One of the luxuries of working in a corporate setting means someone else is responsible for the marketing, the accounting, the mail, the IT problems, and the legal hassles, leaving you free to do what you were hired to do. This all changes when stepping out on your own.
[To learn about the variety of retirement plans for your small business, read Pension Plans and Three Other Retirement Strategies for the Self-Employed.]
"Estimate the amount of time you think it will take and immediately double it," agrees Kevin Cho, co-founder of MidtownRow. "I came from a corporate environment where I had dozens of people supporting me and could take a lot of things for granted. Starting your own business means... you suddenly have to do a hundred little tasks that you've never had to worry about before."
Grant DiCianni, president of Tapestry Productions, advises new business owners that they need to understand the amount of time it can take to get compliant with state and local business regulations. "It can take as few as five to six hours ... all the way to 120 hours" depending on how business-friendly your state is. "And expect twenty of those hours to be spent on hold."
Those planning to test business ownership waters on a part-time basis should have the mentality of a marathon runner. "When I started my first business, I was working 15 hour days," remembers Aliya Jiwa, . "Nine hours at my corporate job and another several hours when I got home. It was exhausting." of The Spunky Stork
Startup Reality #2: A Successful Startup Doesn't Need a Lot of Money
"Our ecommerce marketplace was not expensive to create," says Cho. "No franchise fees, no inventory -- so costs for us were basic operating (buying a web domain, renting server space, printing, gas) and personal living expenses."
Cho also recommends avoiding the business licensing and incorporation expenses pitfall. "A lot of people spend thousands talking to lawyers about incorporation. That's usually not necessary, unless you're creating a complex business or one that's heavily regulated." He advises tapping your personal network to talk with those who have already started a small business, research information on the internet, and to consider using Legalzoom to handle any required legal documentation.
"Being broke truly tests your entrepreneurial skills," states Anthony Ronga, . After all, understanding the costs of a first start up is never easy. "You can always make charts and projections on how much you will spend on labor, legal, marketing, etc., but if you can run your business on little to no of Intothedarkroommoney, you can be prepared for quite a bit."
Startup Reality #3: Business Networks Don't Work for Everyone
Thou shalt maximize every business network opportunity is a commandment generating mixed feelings among many entrepreneurs. "Whether it's looking for advice or getting a foot in the door, using business networks like LinkedIn or attending conferences is an effective way to get in touch with the right people," says Cho.
DiCianni disagrees. "In my direct experience, they do not work," he says. "When I started my first business 15 years ago every deal came from personal relationships. Today, I'm turned down by so called 'best friends' because my competitor had a better price."
"Network the heck out of your local community because these are your customers," says DiCianni. "Any time you can see your customers, this is valuable."
#-ad_banner_2-#Startup Reality #4: Your Family Life Will Suffer
In a nutshell, starting a business puts immense strains on personal relationships. "To think that family and friends are not going to be somewhat ostracized is foolish," points out Jiwa. "I'm single, but I can say with certainty that I have unknowingly sabotaged a handful of important relationships because I was too focused on my business.
"If you have a family that depends on you to pay the bills and you're putting them at risk by starting a business, think twice about whether you're willing to take on that responsibility," adds Cho. "On the other hand, even if you have a financial cushion, not having your family's support can also be challenging. The last thing you need when you're working eighty hour weeks and doing everything you can to get money in the door is to come home to a spouse who's negative about your efforts."
"A startup can consume you if you are not careful," advises Ronga. "The more you work, the more money you can make. The more you are with your family, the less you miss. Everyone has to make their own decisions on what's important in life."
The Investing Answer: Few realize that the effort required to launch any new company demands much more time, effort and patience than they ever dreamed. However, if you have the personality and stamina to pull it off, running a successful startup can grant a sense of freedom and self-confidence one rarely obtains from a typical 9-5 corporate job, something these four business owners can attest to.
Thinking about going into business for yourself? Read about the benefits in InvestingAnswers' 5 Reasons Why You Should Be Self-Employed.