Have you ever thought about starting your own business? Nowadays, there are numerous blog posts and articles on how to quit your day job and become an entrepreneur, but they won’t tell you that there are many factors to consider before starting a business.

Here are 10 questions to ask yourself that can help you determine whether you’re ready.

1. What problem am I solving?

This is the first of many questions to ask yourself before starting a business: What makes your business unique? It would be helpful if you offered something cheaper, better, faster, or has better technology than what’s already on the market. If your offering isn’t challenging what’s already out there, you’ll have difficulty overcoming the competition.

2. What are my business startup costs?

Understanding your financial requirements is crucial before launching your business. You can start by creating a comprehensive breakdown of your initial needs, including equipment, inventory, business licenses and permits, and marketing expenses. Don’t forget to account for ongoing expenses such as rent, utilities, insurance, payroll, and software.

Then, consider multiple funding sources such as personal savings, small business loans, outside investors, or crowdfunding platforms. Many entrepreneurs underestimate their startup costs by 20-30%, so it’s best to build in a buffer for unexpected expenses. Research your industry to ensure your estimates are realistic.

3. Do I have the necessary resources?

Starting a business requires an initial investment of time and money. Among other factors to consider before starting a business, you should ensure you have access to enough cash to sustain you for at least the first six months, if not the first year. This is especially true if you plan to quit your day job right away, as you won’t have a guaranteed source of income.

Think about the resources you have at your disposal. Maybe it’s a relevant degree, a substantial savings account, or a rock-solid support system. Successful entrepreneurs possess a range of skills and knowledge that enable them to navigate the challenging early months of starting a business.

4. Who is my target customer?

It might seem like one of the more obvious questions to ask when starting a business, but it’s also one of the most important. Knowing your prospective customers is essential for success in your industry. You need to know who your target audience is, what their needs are, where they are in life, how they think, and how your product or offering can solve their problems.

Here’s a pro tip: Clearly define who your target customer is not. This exercise will help you with clarity.

5. What is my business model?

Your business model serves as the blueprint for generating revenue and creating value. Will you use a subscription model with recurring monthly payments, a one-time purchase model, or a freemium approach where basic services are free but premium features require payment?

Consider whether you’ll pursue B2B, B2C, or both sales. Your pricing strategy should reflect your costs, competitive edge, and the perceived value of your offerings. Consider your cost structure and whether you can scale effectively as you grow.

6. What is my marketing and sales strategy?

Marketing and sales are both essential factors to consider before starting a business. Reaching your target audience requires a detailed marketing and sales plan that incorporates multiple channels. Identify where your customers spend their time, both online and off. Will you start with a focus on social media marketing, content marketing, paid advertising, or email campaigns?

Map out your sales funnel from initial awareness through conversion and retention. Calculate your customer acquisition cost and ensure that it’s sustainable. Consider both organic growth strategies and paid channels, and be prepared to tweak your approach based on your results.

7. What is my competitive landscape?

Analyze both the direct and indirect competitors in your space. Direct competitors offer similar products or services, whereas indirect competitors may address the same customer problem differently. What are their strengths and weaknesses? What is your advantage over them?

Your competitive advantages may include superior technology, exceptional customer service, a more convenient location, specialized expertise, or innovative approaches. Understanding what makes you stand out will help you market your business more effectively and communicate your unique value proposition to potential customers.

8. What is my legal structure?

Selecting the appropriate legal structure has significant implications for taxes, liability, and operational efficiency. A sole proprietorship is simple but offers no personal liability protection. An LLC provides liability protection with more flexible tax options than a corporation. Partnerships work well when multiple owners want to share both responsibilities and profits.

Corporations offer the strongest liability protection and are best for businesses seeking outside investments, but they come with more complex regulations. Consult with a lawyer and an accountant to decide which legal structure best aligns with your risk tolerance and future business goals.

9. What are my financial projections?

Creating realistic financial forecasts is essential for planning and attracting investors. Develop revenue projections based on market research and strategies for pricing products. Build detailed budgets that account for all operational costs. Create best-case, expected-case, and worst-case scenarios to understand your range of outcomes fully.

You should review and update these projections quarterly as your business grows and you gather real data. Remember that overly optimistic predictions can lead to poor decisions, while conservative estimates can help you better prepare for challenges.

10. What does the future look like?

One of the most critical questions to ask yourself before starting a business is whether your idea has a sustainable future. How mature or developed is the market? Is there potential for consolidation, tech revolution, or market evolution? Is there an opportunity for your business to grow and evolve, or will your idea become outdated in a few years?

Bonus: Do I have what it takes?

It takes a specific type of person to become an entrepreneur. You need to be okay with uncertainty and be willing to persevere through the highs and the lows. Ask yourself: Am I committed enough to do what it takes to start and develop a business?

Additional questions to ask before starting a business
include this: Do I have the active support of my family? Starting a business can put a strain on your relationships. Be sure you either have the support of your loved ones or are determined enough to succeed without it.

Starting a business can be rewarding, but it’s not an easy task. Considering these questions to ask before starting a business is a great start. Download my free ebook, The 10 Critical Responsibilities of a Business Owner, to learn more about the needed skills to own a business successfully.

Want to learn more about running a business? Click here to sign up for my weekly articles on the keys to entrepreneurial success. If you need a business coach to discuss the key factors to consider before starting a business, click here to schedule a meeting.

Coach Dave