Nearly six months into 2021, the U.S. Census Bureau has good news for aspiring entrepreneurs. Small business formations are growing — and growing — each month.
According to a June 2021 report, business application filings — specifically applications for tax IDs — increased 1.2% in May 2021 compared to April 2021. Similarly, business formations also experienced a higher increase in filings. Formations were at 35,578 in the month of May, increasing at 1.9% when compared to April 2021 business formation filings.
Think you’re ready to throw in the towel on your 9-5 job and start a small business? The good news is that there is room for you and your ideas. However, entrepreneurship is challenging and full of surprises.
Before you start a small business, prepare to ask yourself these three questions. Your answers will determine if you’re ready to start a small business or need to focus on getting ready before you launch.
1. What’s your why?
Simply put, why do you want to start a small business? The answer should not be to make a lot of money or become famous overnight. Unless your idea is a rare unicorn, neither tends to happen for the majority of startups.
Understand your why inside and out. These prompts may help you better make this discovery.
- You want to make a difference in your community or bring them something unique.
- You have an idea that is proven to make life easier and solves common problems facing customers.
- You are passionate about a specific product, service, or offering. In pursuing that passion, you are ultimately working towards discovering your purpose.
2. How does your business solve problems and meet needs?
Most industries are saturated with people and companies trying to sell something and grow their customer base. How is your business able to stand out from the crowd?
The answer should be found in being able to meet the needs of your customer base. Before you decide to launch a business, consider the existing market. Is there a demand for your offerings? Who makes up your target audience and ideal customer persona? What can your business do that no other company can — and what sets it apart in creating a customer experience unlike any other? Dive into these details by drafting a business plan. This document will help evaluate your company from an objective standpoint and feasibly understand what you can accomplish in the short- and long-term.
Further, what is it about you specifically that makes you qualified to run this business? For example, you may have years of experience in this industry. This has given you great insight into how the business works. Your expertise allows you to better understand that your business can meet needs that may be currently going unmet.
3. Are you ready to make this startup your full-time line of work?
There is a certain amount of stability that comes with a 9-5 job, including steady paychecks and healthcare benefits, that is not readily available for most entrepreneurs starting a business. Before you determine if you’re ready to make this startup your full-time job, you’ll need to make sure the startup is profitable.
Review the financial projections portion of your business plan to ensure that your startup has a positive cash flow and a solid business model that allows the company to consistently earn revenue.
Take a moment to review your personal finances as well. Do you have enough savings in place that would allow you to comfortably live on that amount? Do you have existing debt you need to pay off? Are you good about sticking to a budget? If you struggle to answer these questions, your startup might benefit from starting off as a side hustle before it becomes your full-time line of work.
Don’t get discouraged if that’s the case. This gives you more time to work on the business, grow its customer base and revenue, get it in compliance by incorporating the business, and build up a nest egg for savings that can support you and the company. Starting up as a side hustle also gives you the opportunity to continue testing your products and offerings to ensure they are working at full capacity and can meet the exact needs of your customers.