Friday, February 21, 2014

Starting a Business

Starting a Business

A blog for businesses with 20 or fewer employees or for people planning on starting one. There are two threads. One for Starting a Business and a second for Growing a Business.  Author: Henry McCabe.


If you are reading this, you are probably thinking about hanging up a sign- Coming Soon- My New Business. Starting one is a multi-step process. The first step is to make a realistic assessment of your readiness to do so. An earlier blog suggested assessing your knowledge. Do you know what you need to know? The last blog suggested assessing your finances. Do you have the cash to start a business and keep it going going through the early lean times?

Assessing your readiness.

The third question a nascent business person must answer is:  Am I willing to take the risk inherent in starting a business? As can be seen from the graph below, half of businesses started are no longer operating after five years. That does not mean that 50% of the businesses had a dramatic end through liquidation in bankruptcy. Many quietly close the doors because the business did not meet the founder's personal cash flow requirements. Often at the end of an initial  lease term or other commitment when the owner concluded that it was not worth soldiering on. Some are acquired or merge with other business or are sold and continue to operate under another name. Still, the odds are against a start up being a long term successful business. In these cases the founder risked, and lost, his investment of cash and something even more valuable- years spent during which he could have earned income working in somebody else's business.



That is the bad news.  The good news is that 16 years after starting 25% of the businesses started  were still going. There is a high probability that the owners of those  businesses had years of high earnings and are getting ready to sell off, or pass on, a valuable asset.  They looked at the risk of failure (one hopes), decided to take the chance and won the prize.


Think about this question- Am I willing to risk my money and months or years of my life in the face of these odds? And another very important question- If I do decide to go ahead, is there a way I can minimize the risk?

 

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