business
Should I Start a Business? Part 2
By Crown Financial Ministries
CBNMoney.com
– Each year in America thousands of new business ventures are started. Some of these succeed and some end in failure. Although no one can guarantee the success of a new business venture, the probability of failure can be greatly diminished if the potential entrepreneur lays the groundwork for success before launching the business. One of the ideal ways to lay this groundwork is to evaluate seven critical business areas by satisfactorily answering questions pertaining to the particular areas. These business areas are God’s will, motivation, knowledge/experience, start-up capital, financial records, personnel, and time/energy/family.
In Part 1 of Should I start a business? we addressed God’s will, motivation, and knowledge/experience. In Part 2 we will address start-up capital, financial records, personnel, and time/energy/family.
Start-up capital
Many businesses fail in the first two years because they are undercapitalized. Before launching into a business, a potential owner needs to count the cost of everything he or she will need to succeed. Rather than be too optimistic, plan conservatively regarding income and be liberal regarding expenses.
Generally, new business owners tend to be too optimistic about how long it will take to develop a business to the point of profitability. Thus, they end up living off the money that should be paying the creditors, and they sink further into debt while trying to hold on until the business becomes profitable. Another common mistake that new business owners make is to use credit cards to cover normal living expenses. This virtually guarantees financial disaster. If it is God’s will for the business to be started, He will supply the funds for it to be successful without going into debt. The following are important questions that need to be answered concerning start-up capital.
- From where will my start-up and operating capital come? Do I have enough cash or liquid assets to operate for 24 months without a profit? (Most new businesses do not turn a profit for at least that long.)
- Should I form a partnership? (Note: Studies show that small business partnerships rarely work out, especially if you are “yoked” to someone who does not share the same values you do. All parties in a partnership must have the mind of Christ in order for it to be successful.)
Financial Records
Not having good financial records will cause major problems, because business owners must make daily decisions based on the financial status of the business. If owners do not know where they stand financially, they run a high risk of acting out of ignorance and making bad and/or costly decisions. Keep in mind that the best set of financial records will be the ones that are simple and the owner thoroughly understands. The following questions should be answered regarding financial records.
- What plans have I made for keeping simple, timely, and accurate financial records?
- Who will be the detail person in this business? How good am I at business and financial details and keeping books? (Be honest.) Is my spouse better suited to handle this task? Should I hire someone who can handle this responsibility?
- How do I plan to become knowledgeable in the use of financial records—income statements, balance sheets, taxes, and so on?
Personnel
The simplest business is a one-person operation in which the owner is the business. However, some businesses may require additional employees. The minute one employee is hired, the situation changes considerably, because many state and federal laws and rules at that time apply that otherwise are irrelevant when the owner is the only employee. If new employees are needed, it is wise for an owner to hire someone who is his or her opposite. If the owner is a big-picture person, the first employee should be someone who is more detail oriented. The following questions need to be answered when considering hiring additional personnel.
- Am I familiar with the federal, state, and local laws and regulations that apply to hiring employees?
- Have I developed a written job description for the position(s) that I need to fill?
- Have I considered developing a pattern of the person(s) that needs to be hired? (Skills, abilities, vocational interests, values, personality, work ethics, and so on.)
Time/energy/family
A realistic evaluation of the time commitment required to start and operate a business is essential. Starting a business can sometimes be a tremendous strain on a marriage and on the family. Therefore, if starting a new business is a consideration, the time constraints and stress on the family must be a primary consideration. Before launching into a new business, the following questions need to be answered.
- Do I fully understand the time commitment required to see this undertaking through successfully?
- Do I have enough energy to complete the task? Is my enthusiasm high enough to bridge times of discouragement?
- How will this business affect my relationship with my spouse?
- How will this business affect my relationship with my children? Will I be able to spend quality time with my family?
- How will this business affect my relationship with the Lord? Will it infringe on my prayer and devotional time?
Conclusion
Once all questions in all seven business areas have been satisfactorily answered, the potential entrepreneur should have a better grasp of the feasibility of starting a new business and should have the tools necessary to begin laying the foundation upon which a successful business can be built. For the business areas of God’s will, motivation, and knowledge/experience see Part 1 of Should I start a business?
(Part 1 and Part 2 of Should I start a business? are an adaptation and paraphrase of Larry Burkett’s pamphlet “Should You Start a Business?” published by Christian Financial Concepts, 1996.)
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