Should I start my own business in a down economy?

I had the opportunity to speak to a group of small business owners today regarding media relations. What follows has nothing to do with that but the topic of whether you should start your own business is one which always interests me and of course it came up today. The post is from February, 2009. Lots has changed but the message remains the same – starting a business is a full time job starting a business is two full time jobs and three when it comes time to clean the toilets, sweep, takeout the trash, etc. (what, you think you will have money for cleaning staff when you start out?).

Anyone thinking about starting their own business has to be crazy and honestly it probably helps quite a bit. The demands are huge, the risks are extreme but the reward is great assuming you are successful. I won’t blow smoke up your… well, I won’t lie to you. Not every business is successful and even some successful business ultimately go out of business. It doesn’t mean they weren’t successful it just means they weren’t successful for the long-term. Keep in mind closing is quit different from going out of business and closing can be a successful and financially rewarding business strategy.

Regardless of what happens I assure you, you will fail if you aren’t motivated. Want to test your ability? I think I have a quick methodology which will help. Go volunteer somewhere for just four hours every day for fourteen days including weekends. Feed the homeless, stuff envelopes for any non-profit, anything. If you can’t make it those fourteen days without calling in sick or taking a day off then… well, I will let you come to your own conclusion.  As for your personal life and cleaning the house I address this below but I’ve never met a new business owner with an entirely clean house… don’t worry, you will get used to it and then you will hire a cleaning crew when you can financially justify it.

Read on…

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I was recently interviewed about starting a business in a down economy. You see, my wife and I started the Dog Dish seven years ago, in the midst of the economic downturn of 2002, and we have been successful (quick, knock on wood please) so far.

The downside to doing a television interview is the time constraints. Cindy Morrison (tvnewsgal) did a great job with the story and addressed several key issues which are important for anyone considering opening their own business. Feel free to watch the interview below then scroll down a bit more for some additional thoughts:

If the video doesn’t play, you can also view it here.

Much of what follows is philosophical in nature but if you are going to start your business consider/do the following:

Do what you love but don’t ever forget your primary goal is to earn a living. Before you quit your day job, get your ducks in a row. Before you talk to anyone outside of your spouse about your proposed business venture create your business plan and pay special attention to your marketing plan – how you plan to get customers. Then make sure you have all your finances in check.

Get yourself a good attorney, insurance agent and accountant. Meet with them at least once per year and discuss all the legal issues and requirements of owning your own business. Natural disasters can’t always be avoided but most man made ones can.

Don’t talk to anyone about starting your own business until after you have made the final decision. It doesn’t matter what they think and most of the time they won’t be honest with you anyway. When we told my mother we were starting a pet boutique she would tell is, “it sounds like a good plan” which we now know was code for the plan sounds good but I think you guys are nuts. Once you make the decision then talk to your friends and family and let them know what you plan on doing and that you will need their help. Don’t factor them into your plan, theyare for emergencies only.

Once you open you are at the mercy of every customer and potential customer out there. If they want to meet 30 minutes before you open then open early. Fear of failure should dictate this. As a side, if you don’t open early but your competition does you just lost your customer.

Plan on working a lot. And when I say a lot, I mean like you have never imagined. Eighteen hour work days are no joke. And if you can’t put in the time then don’t open your business. Time equals money and when you start a business, failure isn’t an option. Every successful small business owner I know says the same. You will never know exhaustion (its a good kind though) until you have started your own business.

Be prepared to give up just about everything. It’s like having a baby but there aren’t any babysitters trustworthy to watch your baby. It is all up to you.

Don’t expect banks to line up and give you money to start a business. In fact, I would argue you might be better off not borrowing any money at all. Nothing like being fully invested to bring out the best in you. Also, from a bottom line point of view, if you decide to borrow money and are lucky enough to qualify for loans don’t forget the repayment and interest will eat into your cash flow. Many businesses which fail are profitable but fail because of a negative cash flow. Bottom line, stay lean and hungry. Starvation is a great motivator.

You will be poor before you are rich. Speaking of cash, don’t expect any for at least the first twelve months and many business owners go without any income for up to two years. Not that the money isn’t there but often it is better invested back into the business for improvements than taking it out altogether.

One final point:

Don’t start a business because you lost your job. Don’t start a business because the economy is good or because it is bad*. In fact, don’t start a business for any other reason than you really, really want to be your own boss. Shelli and I started the Dog Dish not just because we didn’t like corporate life, but because we always wanted to own our own business, wanted to work with each other (and our dogs) and love cooking, which is where the bakery part came in.

If the above hasn’t scared you away from starting a business then let me add this – if you really, really want to start your own business then do it. Start working on it today. Speaking from experience there is no greater feeling creating something from nothing. Best of all, once you have done it, the idea of doing it again is actually pretty exciting. Never in a million years did we think it would be so hard but never did we think it would be so rewarding. We have met people and done things we never would have had the opportunity for had we kept our corporate lives and I can’t imagine our lives had we not taken this path.

Final two pieces of advice, both from my mom who started her own business (Shelli and I both come from families of entrepreneurs). “Think of it as a five year hell to heaven plan. The first two years you will be in hell. Year three will be spent, to a great extent, in purgatory. By year four you should be able to see the light of heaven and if you haven’t reached heaven by year five then you really need to go back and reevaluate your business plan.”

Got a question I didn’t address, post it below and I will give you my best butternut wisdom.

*For those students about to graduate, now is the best time to start your own business – more on that later.