The Best Time to Start a Business
Charles R.B. Stowe MBA, JD, Ph.D
- One of the more common questions is "When is the best time to start a business?" While you might expect to read that the time is NOW, you may be surprised by my answer: only when you are really ready. Too often aspiring entrepreneurs are eager to "jump" into business. They see potential for their concept or idea and fear that if they don't spring into action, someone will "steal" the idea. The commonly held belief is that timing is everything in starting a business. Well, here is something to think about.
- During the past 30 years, I have been studying those who successfully start businesses and those who fail in business. Interestingly, those who end up forming a small business for the purpose of generating income spend the least amount of time in the planning/pre-launch phase. They come across a franchise opportunity and sign up in order to be "early" and enjoy the rise of the franchise. Or, they are told of a business for sale and feel compelled to purchase before others learn of the "steal." These individuals go from contemplation to action in less than three months. Successful entrepreneurs, however, often spend several years prior to quitting their day job in order to start their business. Technically, they start their business over their kitchen table. While they may have some sales, the sophisticated entrepreneurs may spend years developing their business model, developing an understanding of and reputation in the marketplace.
- When I was a child, I have a fond memory of a milkman talking with my mother when he came to deliver milk. Did you know that during the 1950's milk was delivered by local diaries to their customer's doors (because the milk was not necessarily pasteurized and needed to be consumed rather quickly after processing)? I remember the milkman telling my mother that his father's diary was going to be cut in half by a federal highway and that they were thinking about forming a new business. They developed a questionnaire which the milkman went through with my mother one morning. This family literally spent a year pondering the issue of what to do next. Almost concurrently, there was a firm that was experimenting with different recipes for bread and muffins. I really don't know whether they were working with the milkman's family or not, but we enjoyed several batches of "English muffins." The milkman's family ended up forming a unique grocery store that is a cross between an animated Disney set with a petting zoo and "stations" where food is baked, milk is turned into ice cream and other fascinating displays. Stewart Leonard's was born after years of deliberations. I remember that Pepperidge farm products became a household staple. OK, you say, that is ancient history. Today, we can't take time because technology is changing the marketplace.
- In the 1970's an aspiring entrepreneur put together a very experienced and respected group consisting of industry experts, accountants, lawyers who dealt with business formation and mergers and acquisitions, financial professionals with experience in taking companies public. Once a month, the entrepreneur who present business plans and ideas to his "board." At one point, he was very close to purchasing a restaurant in order to build it into a national chain when one of his "board" members asked him "Are you sure you want to be in a business which closes at 2 pm every night? That individual later became the founder of what was called Compaq Computer (later acquired by HP).
- the point of the story is that the best time to start a business is after
- (1) you have researched the total competitive landscape of the business,
- (2) you have worked in that same industry so that you have a network of people with savvy and experience,
- (3) you have taken some time to actually work for a competitor or otherwise gained some first-hand understanding of the realities of the lifestyle involved in that in industry,
- (4) you have taken some surveys to discover what problems you are attempting to solve and
- (5) you have a plan (not necessarily an academic business plan) that is strong on the marketing and "production" of the goods or services.
- So many successful businesses were started while the founders were working. Developing a "board" of advisers is an excellent way to make sure that you don't start the business until you have an understanding of the business model, what you must do to remain in business, and exactly what will differentiate your business from others. You need to answer the question of why someone would take their business to your organization. Remember, in business there are few times when a business deal must be made immediately. Don't rush.
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