Timing Your Entrepreneurial Journey: When to Start a New Business
Hint: There's no quantitative "right" answer. You start when you're the most ready to start because the world almost never perfectly aligns for a perfect business start date.
Embarking on the entrepreneurial path is an exciting and challenging endeavor. Many people will say that determining the right time to start a business is a complex decision that involves a careful evaluation of multiple factors. Now, if you want to start a business for the sake of starting a business, there is a lot of information already out there about market research, economic factors, and other business-jargon filled things to investigate before opening your doors. However, I’m here to say that having a clear understanding of why you’re in business can be good enough.
A lot of the information out there on “when to open a business” will make assumptions about your current financial state – either you have zero money and need to hustle so hard you’ll end up in the hospital if you’re not careful or you have a partner bankrolling your day-to-day expenses before you’re able to turn a profit. Both extremes are not helpful.
From my experience, many of today’s business-minded entrepreneurs understand that businesses can be multi-purpose and the people starting them come from a wide variety of experience, skill, and socioeconomic backgrounds. Are you launching to test a unique business idea (think agro-tourism, tough obstacle-course racing competitions)? Are you testing the waters with your hobby to ensure you won’t come to hate your favorite hobbies and that you can handle the administrative portion of starting a new business? Aside from the standard analysis on the current economic market and competitive landscape research - what do you need to be ready?
While there is no one-size-fits-all answer to the question of when to start a new business, there are certain key factors to consider before taking the leap. In this blog post, we will explore some important personal considerations for determining the optimal timing to start a new business.
Financial Stability
Starting a new business involves initial financial investments and the possibility of a period with limited or no income from said business. It is crucial to evaluate your financial stability before taking the leap. Consider your personal savings, access to capital, and any financial obligations you have. Having a solid financial foundation can provide the cushion needed to weather the initial stages of business establishment and help sustain your venture until it becomes profitable. Depending on your personal motivation, having more or less of a financial buffer can encourage you to move more quickly to achieve your business financial goals.
Examples:
1. You are looking to open a service-based business to work on landscaping during the evenings and weekends while you maintain your day job. You already have the tools to do the work and a truck to reach your customers. Your cash requirements must cover registering your business, obtaining permits and licenses, and other lower cost administrative needs. You could easily start this business with a couple thousand dollars in the bank.
2. You’re looking to purchase commercial real estate and become a landlord. You’ll need enough cash for a down payment on a property, cash to cover any immediate repairs and insurance in addition to the general administrative costs associated with running a business. You may also need a lawyer, a broker, and a property manager. Depending on where you’re planning to purchase, you may need hundreds of thousands of dollars just for a down payment.
Personal Readiness and Timing Opportunities
Starting a new business demands commitment, perseverance, and the willingness to embrace uncertainty. Reflect on your personal circumstances and readiness to assess if you have the appropriate goals and necessary resources, traits, and support systems in place to navigate the challenges that lie ahead. Starting a business can be emotionally and physically demanding, so it's crucial to identify potential timing opportunities that align with your needs and circumstance in addition to aligning with your business concept to maximize the benefits of starting a business venture.
Examples:
1. Congratulations! You won the lottery by working at a startup that has exploded in value and now have vesting restricted stock units (RSUs) making your tax bill exceedingly high for a couple short years. You’ve always been interested in starting your own business so now might be a good time financially to invest in a business where you know you’ll be taking a loss at the beginning to offset some of those RSU gains. You’ll have to plan carefully and work hard to keep up with both your employment and business commitments, but the financial gain of lowering your tax burden may make it worth your while.
2. You want to buy a home and stop paying rent. Instead of purchasing a single-family home or condo, you decide to get a small duplex or 4-plex unit where you live in one unit and rent out the other unit(s). You need to spend some money on fixing the roof, getting a new coat of paint, and updating a few appliances. Since you decided to go with a short-term rental (STR) business model, you also need to spend money to furnish the units. You also need to maintain the landscape and set up internet services for your customers. Many of these costs can be expensed or depreciated to help you offset the overall cost you would have accrued on your own.
Starting a new business requires careful consideration of various factors. By assessing your financial stability, personal readiness, and timing opportunities, you can make an informed decision about when to embark on your entrepreneurial journey. Remember that every business is unique, and the timing that works for one may not be suitable for another. Ultimately, keep in mind that your business should support you, not the other way around. If you trust your instincts and are prepared to adapt to the dynamic nature of entrepreneurship, you can succeed. Welcome to the wonderful world of being your own boss!
“Keep on going, and the chances are that you will stumble on something, perhaps when you are least expecting it. I never heard of anyone ever stumbling on something sitting down.”