Though most entrepreneurs may understand that enough money is needed to get their new businesses up and running, the truth is that no business can pass the start-up phase to become a successful, operating entity unless there is also adequate know-how and time.
Before you get too far into the business start-up process, you will need to assess what assets you already have access to versus what still needs to be acquired. Though there are many different ways to approach this step, there are basically two goals that you should keep in mind
1. You need to get a realistic picture of all the assets, knowledge, and expertise that will be needed to get your business up and running. Armed with this knowledge you can then go about "filling in the holes."
2. You also need to determine the feasibility of the venture. You may have a good idea, maybe even a potentially lucrative one, but if you do not possess the assets required to actualize it, and have little hope of bringing these assets in from outside sources, then it may be good to put the idea on the back burner (for now at least), or pass it on to someone else.
Why You Should Bring an Adviser into the Business Start-up Process
At this early stage in the start-up process you should definitely consider bringing in an adviser or mentor of some kind (if you have not done so already). Not only can such a person help to point out any pitfalls that you may not see, but they may also be able to give advice on the various steps in the start-up process as well as on the actual operation of the business.
Some potential sources for a mentor:
- A friend or family member who has business or industry-specific experience
- Requesting a free mentor from an organization such as the SBA, Service Corps of Retired Executives (SCORE), and Micro Mentor. (For a more extensive list of organizations that provide various forms of free business mentoring, see my collection of online business resources)
- Taking on paid counsel. In some situations you may need to pay for professional advice. This may happen if you need specialized technical assistance as well as professional legal or financial advice. Where this is the case, then it pays not to cut corners. You could end up losing a lot of time and money down the road with a mistake that could have been easily avoided. You should consider this cost as part of your start-up and operational expenses.
Determining Your Available Resources When Starting a New Business
There are three main areas to consider when it comes to figuring out what additional resources may be needed turn your business idea into an operating entity:
How much money do you have available to put into your business and how much more do you need to get? Once you have calculated your approximate startup costs, if they are significant then you will then need to determine how to cover them.
Depending on your situation in life, you may have access to personal assets. In a previous post, I briefly discussed some of the pros and cons of relying on personal assets to fund your business. One way to increase your pool of self-funded assets, is to take on a business partner. Just make sure that you have a proper business partnership contract in place.
There may also be several outside sources of funding that aspiring frugal entrepreneurs can turn to. Here is a brief list:
- A small business loan, either through an SBA- endorsed lender, a non-affiliated bank or credit union, or a commercial lender. (Note: these days unless you have stellar credit and a very low-risk business idea, this may not prove to be such a fruitful option)
- Getting a microloan from an organization or a peer or turning to crowd funding platforms
- Seeking out an angel investor
- Investigating local grants, sponsorships, and entrepreneurship competitions. (For this information, check with your local small business development centers or your state's economic development department.)
2. Talent, Expertise, and Know-How:
All the money in the world will get you nowhere if you don't know what to do with it. Running a business successfully takes a lot of know-how in various different areas. Just a few common responsibilities include: bookkeeping and record keeping, debt collection, operations management, marketing and advertising, inventory management, human resources management, and sales, and this is not including any additional training or technical expertise you may be required to have to succeed in the specific industry.
By knowing ahead of time where your strengths and weaknesses lie, you will be in the best position to bring the right people or services on board or get additional information and training (here is a list of 30+ free business courses online) so that all the major areas of running a business are covered.
Yes, time is an asset! Just ask all the people out there who wish they had more of it. Basically, you need to figure out how much time and attention you have to give to your fledgling business. This is particularly important if you will be dividing your time between a job, studies, or running a home. The vast majority of entrepreneurs who succeed in business (and this applies to all kinds of industries and business models) did a lot of work to get to where they are. You have to be honest with yourself regarding how much time you can realistically set aside.
If you have access to other assets, such as equipment, furniture, supplies, or a physical space in which you can run your business, you should also make note of this because it will affect your initial start-up expenses.