Questions that Entrepreneurs have in their First Steps
The moment you decide to Start a New project, many doubts of all kinds arise.
That is completely normal.
That is why we have collected some of the most common Questions New Entrepreneurs usually have.
- Based on our own professional experience.
Here we will try to give you Quick and Helpful Answers.
- And, if you want to know more, we will suggest some of our publications.
If this is your first time at Consuunt, you may be wondering:
- “Who are you to give advice on Starting a Business?“
We have been working in venture capital for years.
- Buying, restructuring, selling and starting Businesses.
We have experience in Business.
* If you want to know us better, visit our “About Us” Page.
Now that you know who we are, let’s begin:
* Index (Questions we’ll answer):
- How Can I know if my Business Idea is Good or not?
- When should I Start my Project?
- Should I find Partners for my Business?
- How can I get financing for my Project?
- How much money do I need?
- How much is my Project worth?
- How should I promote my Business?
- When should I think about expanding my Business?
- How to know when to Quit.
- What to do if my Business Fails.
1. How Can I know if my Business Idea is Good or not?
Look at the Market and Study what People do.
- How they behave.
- Their interests.
Try to make no Assumptions: Just Describe what you see.
If your Idea:
- Matches a Real Need.
- Is similar to something that already exists.
It could be a Good idea.
Good “New Businesses” are never completely new.
- They are based on previous concepts that people are familiar with.
- Don’t be afraid of not being 100% Original.
- Some of the most successful Businesses were not the most innovative ones.
Check our “Innovate or Imitate” Page.
2. When should I Start my Project?
When you have defined carefully 3 possible scenarios:
- A Pessimistic Scenario.
- A Neutral Scenario.
- An Optimistic Scenario.
For each of those Scenarios, you must have:
- Defined, Measurable and Time-Related Goals.
- A detailed Budget and the necessary Funds.
- Professional guidance.
- Experienced professionals guiding you.
- Optimistic Scenarios never happen (or almost never).
- You will probably need 2 times the time you estimate for almost everything.
Check our “Starting your own Business” Page.
3. Should I find Partners for my Business?
You should considerate finding a Partner if:
- This Partner would contribute to the Project.
- You can’t do what this Partner would do.
It is common to associate with a friend just because you are friends.
This commonly ends badly:
- One of them does most of the work and both the Business and the Relationship fail.
Look for a Partner if you need his (or her) Skills or Money.
- Ask yourself: “Do I need somebody?”.
- “Would this Partner contribute to the Project in the way the Project needs?”.
Check our “From a Startup to a Business” Page.
4. How can I get financing for my Project?
There are 2 ways to Finance a Project:
- Debt: Money that must be returned + Interest.
- Equity: Money in exchange of a Percentage of the Company.
- Doesn’t have to be returned.
Equity is easier to obtain because the Investor will receive future gains… And Risks.
- He will become part of the Company.
To get Equity, you have to convince investors that your Project is attractive.
- Explain why the Project is good, How it can be the “next big thing”, etc.
For obtaining Debt you must prove that your Project will be able to generate Cash.
- Banks (generally) want proof that their money will be back.
Usually, in the initial Stages, Projects are financed with Equity and, as they become “Real” and generate profits, with Debt.
- Be open to offering percentages of your Company in exchange for money.
- It is better to have a smaller percentage of a Real company than 100% of a “dream”.
Check our “Raising Funds for a Business” Page.
5. How much money do I need?
To Start a Business we recommend having enough money to maintain its operations for 6 months.
- Assuming Zero income.
If you have enough to keep the Business for 6 months expecting 0 Income, it will last for a year.
- You’ll surely have some Revenues.
And 1 year is a good amount of time to assess whether or not a Business is worth it.
- Once the Company gives Profits, it must self-finance its Operations.
- If you need money to grow your Operations, prepare a Business Plan and find Investors.
Check our “Entrepreneur with no money” Page.
6. How much is my Project worth?
Compare the Price at which similar Businesses have been sold:
- Divide the Price at which they were sold by their EBITDA.
- Then, multiply this Factor (Price/EBITDA) by your estimated EBITDA.
That is the estimated Price of your Project.
There is other method: the Discounted Cash Flow.
- This method is best suited for Companies with stable and “predictible” Income.
In New Projects, where there is lot of uncertainty, we don’t recommend the Discounted Cash Flow.
- Estimating EBITDA is much easier than estimating Cash Flows.
- If you don’t find a similar Business, look for other equivalent Businesses.
- For example: Bike rental and Bike second-hand Businesses could be equivalent.
Check our “Business Plan Basics” Page if you don’t know what EBITDA is or How to Calculate it.
7. How should I promote my Business?
Targeting the Right Clients.
- Don’t intend to sell your Product to everybody.
- Only Coca-Cola can do it.
Spend your time in finding which Customers might be most interested in your Product.
- Focus exclusively on Them.
The more Specific the Targeted-Group, the Better.
- For example: Young people between 25 and 30 without children Who love Classical Music.
- Pick very small Niches that your Competitors forget.
- Look for “unusual” Customer Profiles: You’ll always find somebody interested in your Product
Check our “Psychographics” Page.
8. When should I think about expanding my Business?
When you have a Profitable Business but your Business Model is easy to Copy.
- In this situation, either grow fast or your competitors will eat you up.
If your Business Model is not easy to copy and your Profits are good enough, you can grow little by little.
Also, If your have Profits but they are small, you should think about growing your Business.
- Your first priority is Getting Profits (it is not easy).
- Don’t jeopardize a small but profitable business by growing too fast.
Check our “Growth Strategies for Startups” Page.
9. How to know when to Quit.
You should consider closing your Business if:
- You have no money left (you can’t imagine the amount of Debt people is willing to accept).
- The Business can’t maintain its operations (also obvious).
- Your Revenue is not increasing and you start having financing problems.
- The Project hasn’t proven to be as attractive as you initially thought.
- Your Profits are small and difficult to improve.
- When your Business adds no Value to other Alternatives in the Market.
- If your Business Model becomes obsolete and you can’t change it.
- For example: Video rental services, Typing machines, etc.
If you’ve been more than 6 months in a difficult financial situation and you see no solutions, don’t wait:
- Close your Business.
We know exactly how difficult it can be (trust us, we do) but as time goes on you will realize what a good idea it was not to spend more money… and time.
- Set Time-Related Goals related to Profitability.
- Set deadlines with “strict” criteria that you must meet to continue your Business.
Check our “KPI” Page.
10. What to do if my Business Fails.
Try to lose the least amount of money and prepare for your next Project.
Successful Businesses are built on the ashes of those who have failed.
When a project fails it is the best time to:
- Analyze what failed.
- Find the wrong assumptions you made.
- Assess How you managed your financial resources.
- Learn, learn and learn.
This is priceless information.
With all this information in hand, you should prepare your next Project.
- Once your project has proven to be a “Failure”, finish it to avoid wasting more time and money.
- All successful Entrepreneurs make mistakes throughout their careers. Don’t worry and move on.
Check our “Entrepreneur Golden Rules” Page.