So you want to be an entrepreneur! That’s great.
Starting an enterprise, whether it’s a small-business, tech startup or a new initiative within a large company creates questions along the way. Or, as soon as one question is answered, other new questions will surface at the same time and that can get confusing or complex.
The “Top 10” questions below identifies and answers the most important questions, answered by the experts for those interested in starting a business in Illinois or in exploring the viability of a new idea:
- Do I have experience in the area of my business?
- How much capital will I need to start a business?
- Do I have what it takes to be an entrepreneur?
- How should I structure my business?
- What customer problem do I solve?
- What solution does my business provide?
- What is my business model and how will I make money?
- Do I really need a business plan?
- What key metrics will tell me if I have a viable business?
- How do I get help?
1. Do I have experience in the area of my business?
Statistics report that the number 1 reason why businesses fail is lack of experience. Put the odds in your favor by launching a business in an area where you have the skill set, industry experience, passion and a good network of technical expertise to help you succeed.
2. How much capital will I need to start a business?
Answering this depends on the type of business you open and your chosen industry. www.startupnation.com/articles/estimating-startup-costs-for-a-new-business/. Another useful estimate based on a study by the Ewing Marion Kauffman Foundation put the average cost of starting a new business at just over $30,000.
Many small businesses, particularly freelance, online and home-based businesses startup costs are lower than this, often needing only a few thousand dollars to get started.
Startup costs can typically be divided into 6 categories:
- Cost of sales
- Professional Fees
- Technology Costs
- Administrative Costs
- Sales & Marketing
- Wages & Benefits
It is important to identify all startup costs (expenses) and capital equipment (assets) you will need to launch.
3. Do I have what it takes to be a small business owner or entrepreneur?
Most people generally have an innate ability to start a successful business. It all starts with understanding your personality and tolerance for risk to know what traits you possess versus what expertise you might need to bring in from the outside to help (i.e. a business partner, outside technical expertise, a strategists, a communicator).
4. How should I structure my business?
The majority of businesses start as sole proprietorships. The reason is in its simplicity with business income reported the same as personal income for tax purposes. The major disadvantage, however, is that you as the owner, are also the business. That means you assume all liabilities for the actions of the business and put your personal assets at risk.
Other types of business structures are general and limited partnerships, C corporations, S-Corporations (S-Corp) and Limited Liability Companies (LLC). Each has its advantages and disadvantages, depending on the type of business you are starting and you might consider obtaining legal guidance in this important decision. Sources for comparisons on legal and tax considerations for different business structures can be found at www.entrepreneur.com/article/38822 or through the SBA.
5. What customer problem do I solve?
As simplistic as it may sound, an entrepreneur identifies customer pain points and creates solutions to resolve the problem. Whether you are opening a restaurant, launching a beauty salon, creating a web-based business or developing market transforming technology, the foundation of a successful business starts with understanding your customer problems or pain points.
6. What solution does my business provide?
Once you understand customer problems, you are in a better position to provide the right product or service at a cost that will return a profit to you (hopefully). Ideally, your business should provide a solution that is better than what your competition is offering (better, faster, cheaper). That is the foundation of your business model.
7. Do I understand my business model, how will I make money?
The answer to this question starts with understanding if the price of your products and services covers all your expenses so that you make a profit. In business, cash flow is king. Knowing how fast that will occur (in weeks, months, years) is critical and whether a profit is realized and repeated.
For example, a restaurant's business model is to make money by cooking and serving food to hungry customers. A website's business model may not be so clear because there are many ways in which these types of companies can generate revenue. Some websites make money by providing something “free” and then sell advertising to other companies, while others might sell a product or service directly to online customers.
8. Do I really need a business plan?
Statistics show that those who develop and implement a business plan tend to survive and those who don’t, fail.
Whether you are a “reluctant” entrepreneur exploring a business while keeping a day job, or a full-time entrepreneur preparing to open, your business plan is a necessary guide to making your vision a reality. A business plan demonstrates your level of commitment to family, friends, employees and financial contributors. www.sba.gov/tools/business-plan/1.
A business plan doesn’t need to be an intricate 20-40 page document. For successful early stage ventures, a “lean” business plan can articulate in 8-10 pages, your company mission and description, where you want to go, how you will get there and what outcomes to be expected.
More detailed plans are required for SBA loans or presentations to outside investors. The Business Plan Handbook, Volume 7 is housed at the COD Library. This resource is an excellent compilation of diverse business plans from manufacturing and tech companies, to healthcare- software companies, web-design businesses, and includes many traditional businesses such as restaurants, night clubs, beauty salons, insurance, auto mechanics and hundreds more.
9. What key metrics are important for my business?
Use customer feedback over intuition. Early on, you can obtain critical key metrics in your launch that can give you confidence to move ahead with your investment in time and money.
Early feedback such as customer reaction to your concept (described to potential customers asking “how likely are you to buy?”), or features, to knowing the number of competitors in your market so you can differentiate yourself to capturing customer satisfaction rates, return rates, repeat visits, number of hits on your website, or even understanding how much it costs to obtain a customer. These types of metrics should be the key drivers to your business growth or necessary tweaks that may be needed in your first year.
10. Where can I go for help?
Your success is vital to the continued health of our new entrepreneurial-based economy. A first point of contact may be COD’s Business Development Center Illinois Small Business Development Center (SBDC) at (630) 942-2600.
In collaboration with our community partners, many business services take root in one location to provide you with:
- One-on-one counseling, business coaching
- Feedback on small business or help in growing your ideas
- Market validation through “proof of concept”
- Assistance in early-stage startup strategies and launch
- Competitive intelligence insights
- Assistance in writing a business plan to secure funding
- Help in certification (woman, minority, veteran) for government contracting
- Guidance in selling or sourcing goods in international markets
- Training in quick books, social media and business planning
Other excellent links to resources for register your business in Illinois includes:
- Free mentoring https://foxvalley.score.org
- Business name searches, patent or trademark protection www.uspto.gov.
For obtaining a Federal employer identification number (EIN) www.irs.gov or the IRS operates a general information hotline at (800) 829-1040.
Business Development Center
Illinois Small Business Development Center
535 Duane Street, Office 233
Glen Ellyn IL 60137
Ute Westphal, Program Manager
Phone: (630) 942-2630
Fax: (630) 942-2606
Summer Hours of Operation
Monday to Thursday, 8:30 a.m. to 5 p.m.