Questions to Ask Yourself Before Starting a Business

By Nathaniel Stevens, Founder of Punchey, Managing Director at Stevens Ventures, and Founder and Former CEO of Yodle

Despite high property costs and borrowing rates, 2024 is still a promising year to start your own business. A recent survey showed millennials and “side hustlers” saw business ownership as the best way to build personal wealth in 2024. Younger generations, such as Gen Z, are reportedly the most likely to become small business owners in 2024, proving there will be a big wave in the coming years of promising new entrepreneurs. Yet, while younger, ambitious go-getters may have passion and drive, it’s essential to ask yourself a few crucial questions to ensure you’re financially, emotionally, and mentally prepared to take the leap — some I asked myself before starting my own business years ago.

What is my demand and Competition?

Aside from identifying your target audience, it is of utmost importance to understand and evaluate market demand and the competitive landscape so you can answer the question, “Where do I fit in?” This involves conducting market research to assess sufficient demand and understanding how your business can be differentiated. Research methods may include conducting surveys to potential clients, hiring a consulting firm to do A/B testing, or simply going out and asking people via a “door to door” approach. Simultaneously, identify who else is in your space. Who will you compete with, and what part of the market do they touch that you don’t? Do you tangentially overlap with them, or are there aspects of your business that they don’t touch upon? What is your “Unique Selling Point?”

Am I mentally prepared?

Before leaping into a new venture, consider if you’re ready to take on the stress and mental stamina launching a business requires. As a business owner, you are responsible for anything that could go wrong. It’s imperative to gauge if you’re prepared to make the potentially appropriate lifestyle changes and face the uncertainty of entrepreneurship. Common sacrifices may include long hours, financial insecurity, emotional stress, and time away from home or loved ones. Once you understand the hard work that goes into executing the long-term plans of your business and have a sound support system behind you, you are a step closer to being ready to embark on your business idea.

What is my business/revenue model?

While money isn’t always the only outcome, you must ensure the business has financial viability, especially if you’re employing other people. If you intend to receive funding, you must strongly respond to how you will generate revenue.

Do I have enough initial capital and funding?

You must ensure you have enough initial capital when kicking off your business. To understand what you’ll need, research the costs of the necessary infrastructure, technology or personnel, including the fees for registration/licensing, raw materials, and inventory acquisition, packaging, real estate/rent, and advertising and marketing.

Do I have the correct registration and taxes in place?

Upon building a business, you need to register it and obtain the correct licenses both at the federal and local levels. Federally, you must obtain your taxpayer identification number (TIN) and employer identification number (EIN). Your EIN is an important step to start and grow your business and is needed for tasks such as opening a bank account and paying taxes.

Potential Plan B

90% of new businesses fail. If that happens to you, what is your next step? Do you plan to scale into a more significant business or franchise, sell it, or pass it on to someone else? If things go wrong, do you have a personal financial buffer? Lastly, will the closing of your business emotionally crush you, or do you have things outside of work that keep you centered, motivated, and hopeful? In volatile markets and competitive businesses, you must approach each new venture with a “plan B” if it doesn’t work out.

By thinking through your answers to these questions, you can better assess the feasibility of your business idea and develop a comprehensive plan for what’s next. Aside from these practical questions, the cornerstone trait of a new business owner will be enthusiasm and passion for whatever it is they plan to build. Find inspiration in the big picture but excitement for the more minor details.