Questions To Ask When Starting A Business
The thought of entering into entrepreneurship is electrifying, but it can also be incredibly daunting. You think you need tremendous knowledge to start your business But you know what? You don’t need to know everything from the start. And that’s why I want to help you.
I’ve been a lawyer for over two decades, an entrepreneur, and an educator. I understand those feelings when you think you are not ready. And today, I will provide the essential information you must have before starting your business.
You must ask these questions to understand where you stand today and how you can proceed. So, let’s dive right into them.
What are you going to call your business?
That’s one of the first and vital questions you need to answer. You might have already picked a name and are planning to buy a domain. But do you know that your business name must be unique? So, it’s crucial to do your due diligence and avoid any unnecessary hassle in the future.
The way trademark law works in the United States is that the party using the name first has all the rights. The rights belong to them even if they haven’t registered a trademark. So, check before you pick a name, and here’s how to do it.
- Search the web to see if anyone is using the same name.
- Check the USPTO database for possible matches.
- Check for corporate names and LLCs filed in your state.
You can also check my course on LinkedIn Learning[link to Understanding Trademarks] to cover this part in detail. Now, let’s move ahead.
Are you going to have business partners?
The next crucial consideration is whether you’ll fly solo or have partners. What will they share, and what must they do to earn it? Initially, having an equal share for all seems logical, but you must think it through.
Imagine you start a business with two of your buddies, all having equal shares. But one of the three friends plays golf instead of working. Now, what can you do? Even if you want to remove him, he still owns the share.
My advice on this matter is to have everyone involved sign an employment agreement to ensure they stay involved. This way, you’ll be protected.
What type of business entity do you want to form?
This question might scare you as well. The answer is straightforward: you might not need an entity. If you start a business with no partners and your income, just file a fictitious business name or DBA. You can operate this way but must form an LLC or corporation if others are involved.
Both are common ways to let you share ownership with others and can shield you against liabilities. Let’s explain them a bit. For individuals without partners, your options include having no entity or forming a single-member LLC. With the latter, there’s no separate tax filing; income and expenses are reported on your 1040 Schedule C.
For those in small, highly profitable businesses, consider forming a corporation and electing S corporation tax treatment for tax advantages and precise shareholder arrangements. Startups seeking angel or venture capital usually opt for C corporation status despite potential double taxation.
Now you know everything and can consult your accountant, attorney, and advisors to choose the correct entity for your needs.
What’s your money situation?
What’s your money situation, and how much will you lose? I know it’s an investment, and you can build wealth, but you must also realize you might lose. So, you must create a budget based on the money you are willing to lose.
I’ve had businesses I have funded entirely out of small savings I was willing to lose. I’ve also used money that seemed to fall into my lap, maybe a payout from a different business. So, here’s my advice: If you have never been in a company, just use your savings, don’t raid your 401(k), and avoid debt.
If you have a job, don’t quit it until the business is stable. If you want to grow, have enough money to support that ambition. If you are experienced and want to accept angel investors, make sure you have the backing of legal and accounting advisors.
What’s your time situation?
As they say, time is money. Starting a new business will take time, and you must be ready. What if you have a job? Start your new business part-time. Here are some extra tips.
- Consider paying for low-cost jobs like building a logo or your daily personal tasks through Task Rabbit and Upwork or Fiverr.
- Unless it’s an emergency, say no to anyone asking for anything.
Manage your time efficiently and use it wisely to grow faster.
Do you have access to capital?
Where will the money come from for your new business? That’s something significant to consider. The answer depends upon what kind of business you want to start. Is it a nail salon or a software application company?
For the nail salon, you can talk to a local bank or take loans from family. However, you’ll need funds from the beginning for the software application company. Fundraising is your primary option.
The first round is from friends and family, where you take loans in return for equity in business. Then, a seed sound from wealthy individuals and a Series A where you lose your 20-40% equity from established investors.
Do you know your customers?
It seems like a fundamental question, but thousands of businesses ignore this idea. Who are you appealing to? You must sketch their avatar long before starting your business. It helps you in targeting the right people for the right product.
If your business appeals to everyone, then it’s a bad idea. You can’t market your product to everyone. Your customers must have specific attributes you know about that you’ll use to sell your products.
What is your skill?
Let me ask you something. How well do you know your business? More specifically, what’s your skill? Many people make the mistake of diving into a company that’s outside their existing skills. It’s a big mistake to do something they don’t know about.
Let me tell you that the primary reason for a business failing is not knowing what you don’t know. Keep in mind that your skills are your biggest asset. They’re your unfair advantage. So, rather than doing something you have little to no idea about, try to do something you already know.
What is the worst that can happen?
It’s such a simple question, but it sometimes reveals everything. It’s the question my mentor asked me 30 years ago when I was starting my coffee shop. I answered, “ I lose everything.” She replied, “ So, are you willing to take that risk?” I said, “Yes,” because it was worth the risk.
Now 30 years later, I realize that I lost most of everything and that business closed after sucking up my savings. However, it’s not always gloom and doom. Sometimes, the worst situation also has an upside.
What is your backup plan?
You are not planning to fail if you have a backup plan. You are just being clever, and it’s an intelligent way to move forward. Many young entrepreneurs fail to realize this and end up getting stuck. So, ask yourself, what’s your backup plan?
If going back to your original job is the plan, then make sure not to upset your friends at work. Don’t burn those bridges to pursue what you believe in. If that’s not the plan, then look out for friends who have an easy gig and can help you take that.
Remember, entrepreneurship is about improvising. Many big companies were something else in the beginning. So, always embrace a positive change, and you mustn’t stick to the original idea.
Who are your business competitors?
Many new entrepreneurs mess up here. If the answer is that there are no competitors, they think it’s good. But nothing can be as far from the truth as this. Having no competitors means your idea has no market.
Creating a market is a challenging and costly task. Having competitors means your idea is already market-tested. Research competitors and do better than them to stand out.
What networks can you leverage?
Networking might seem less important to you, but it’s the most valuable asset for every entrepreneur. Your network will give you advisors, attorneys, accountants, and marketing knowledge you never knew you’d need. Your network will provide you with customers, vendors, and access to future employees.
If you have no network, it’s the same as starting with no capital. So, if you have not invested in building a network yet, start. Here are some tips.
- First, find industry events and look for smaller gatherings around the event. They might be private dinners, parties, and what I call LobbyCon, that spontaneous little network in the hotel bar.
- Find masterminds relevant to your industry, whether a small local meetup or a larger professional organization.
- Find groups on meetup.com that match your industry and business ambitions.
I also have a course on this subject, so you can grab my networking course[link to Professional Guide to Networking]. You’ll be miles ahead by the time you get your business started.
What industry events are relevant to you?
Asking this question will help you a lot, and you’ll be amazed at how much you can learn at a trade show in your industry. I’ll give you an example. I own patents in an industry related to cremation. There’s a huge industry event each year that’s what’s called Death Care. If I want to use those patents to start a business, I’d be crazy not to go to the big trade show.
At that trade show, I’ll learn more than I ever wanted to know about the industry. I’ll meet people who have spent their lives in the various aspects of that industry. I’ll meet the lawyers in that industry. Different CEOs will present and participate in panels. I was an independent trademark attorney for a few years before I realized there was a big trade show for trademark attorneys.
It was a question I should’ve asked earlier and one that you should ask now. Do your research, find the significant events, and get out there and participate.
Where do you find mentors?
Most entrepreneurs are ambitious and don’t like the idea of a mentor. But it might be a mistake because your mentor is someone who has already been through what you are about to experience. Here’s how to find them.
- Find local business accelerators, companies, and programs specifically designed to mentor new entrepreneurs.
- Search out industry events where seasoned veterans can lend advice and make connections.
- Hire attorneys and accountants working with other local entrepreneurs and ask them to introduce you to mentors.
The more mentors you have, the better off you’ll be.
What does success look like?
Entrepreneurs must ask themselves this question because it helps them map their future business goals. Ambitious people may want to make 1 million in a year, but the reality is that may not be possible. Some businesses take a decade before crossing the million mark.
So, map your 36-month plan and decide what your business will look like.
Why are you going into business?
People have different reasons to start a business. Some might want to quit a tedious job, while others have sold lemonade since they were kids. That’s what they do.
But there are more compelling reasons to do business. You must have a solid reason to do business. Because if you don’t, you might find yourself in a more stressful situation than your previous job.
If you want to do business to be free and in control of your life, that’s what you must remember throughout your journey. Build systems that support your ambition and give you less stress. One of my mentors is Michael E. Gerber, who authored the book “E Myth.” It’s a book that every entrepreneur should read.
Is there a unified management solution for your business?
When you start your business, you must refrain from doing what you can do using software. Ask yourself: is there any software or tool that can manage things? If there’s one, invest in it and focus more on the critical affairs.
If you manage real estate, you might do that with texts, emails, QuickBooks, vendor tracking software, leasing software, credit check software, and marketing software. You might also have a dozen different communication channels with dozens of people. Some unification is in order here. It’s easy to imagine how much time would be saved by doing so. But what about the cost?
If you had to create a business system from scratch, you could spend millions of dollars building an infrastructure to manage everything. But you don’t need to. There are several providers of solutions that do everything in one place. Finding an answer like that will empower you to focus on getting customers rather than juggling inefficient communication processes.
That’s All
If you liked this article, have requests for more, or have any questions, please comment or contact me at hello@danarobinson.com. Subscribe to my weekly newsletter at www.danarobinson.com for updates on my content and special promotions.