If you’re considering starting your own business, you’re not alone. Between 2018 and 2019, more than 774,000 new businesses were founded in the US.
Being an entrepreneur has many perks, such as setting your own hours, the flexibility of where you work, and the satisfaction of building something from the ground up. Yet, there are also some drawbacks—not least of all the fact that half of all startups fail within five years of being incorporated.
Entrepreneurship is the pursuit of opportunity beyond currently controlled resources. When you hear the word “entrepreneur,” you might think of Apple’s Steve Jobs, Microsoft’s Bill Gates, or OWN’s Oprah Winfrey, who each saw a need in the market and filled it with an original product or delivery system. Their respective businesses have not only been successful, but changed the landscape of their respective fields—from personal electronics to digital media. Each took risks and were met with immense rewards, but not all entrepreneurs are so lucky.
So, what does it take to be a successful entrepreneur? In the online course Entrepreneurship Essentials, Harvard Business School Professor William Sahlman warns against falling back on stereotypes, noting that great entrepreneurs can come from a diverse range of demographics.
Although there’s no single characteristic that makes a perfect entrepreneur, some common traits of successful ones include curiosity, adaptability, decisiveness, and innovation.
Is starting a business the right choice for you? Here are six questions to ask yourself before doing so.
Questions to Ask When Starting a Business
1. Is Now the Right Time to Start a Business?
Your idea may never take off if you try to start your business at an inopportune time. Are you currently in a position to pursue entrepreneurship? Consider your relationships, financial wellbeing, and physical health. For instance, if you recently welcomed a baby into your family, you may not have enough time and energy to dedicate to the growth of your business.
On the flip side, perhaps you’ve recently been laid off from your role in corporate finance. This turn of events could spark an ambition that can be poured into starting your new venture, backed by your professional experience.
It’s also important to consider if the timing is right in the broader economy and the specific market you want to enter. You should ensure your offering meets a current need.
For instance, take the coronavirus (COVID-19) pandemic and the preparation to reopen offices. These unique circumstances have generated a need for companies to prevent the spread of germs and enforce social distancing, while allowing employees to work alongside one another. It’s an opportune time for someone who, for example, wants to produce and sell transparent cubicle partitions, because that product fills a market need.
2. Do You Have a Business Idea, and Is That Idea an Opportunity?
When starting your own business, you need to know what you plan to sell. If you haven’t fleshed out those details yet, brainstorm using the following prompts:
- Why does it take so long to ____?
- Why does ____ cost so much?
- Can I deliver ____ with a new business model?
- What can I change about ____ to improve it?
Your idea doesn’t need to be a new invention—it simply needs to fill an unmet need. If you have an idea for an original product, that’s great, but an improvement to an existing product’s cost, production, functionality, or accessibility can go a long way. Take Uber, for instance: Uber didn’t invent the idea of ride-sharing (taxis have been around since 1897), but it delivers the service in a new, innovative way.
You should also determine whether your business idea is an opportunity.
In Entrepreneurship Essentials, opportunity is defined as "a proposed venture to sell a product or service for which customers are willing to pay more than the required investments and operating costs." In other words, people must be willing to pay more for your offering than you’ll spend creating it.
To find out if your idea is an opportunity, first come up with a hypothesis. For instance, “I hypothesize that businesses would be willing to pay $150 per transparent cubicle partition.”
Next, test your hypothesis by conducting market research. Sahlman recommends reaching out to strangers from your target market segment, rather than friends, family, and colleagues, who may sing false praises. The feedback you receive can inform if your hypothesis was correct, or whether you need to test other hypotheses.
3. Are You Prepared to Pivot and Adapt?
Entrepreneurship is an iterative process. If you know that adapting to new information and pivoting when original ideas fall flat aren’t your strengths, develop those abilities before becoming an entrepreneur.
With your earlier hypothesis in mind, say your research tells you 75 percent of people you interviewed aren’t willing to pay $150 per transparent cubicle partition. Given this information, you need to adapt.
You test further hypotheses and discover the majority of your target segment is willing to pay the original $150 if the transparent cubicle partitions are both high-quality and easy to install and remove. This leads to the development of a new prototype, reassessment of the cost to manufacture, and another round of hypothesis testing.
The ability to adapt and frequently pivot, especially in the early stages of your business, is essential.
Related: Tips for Scaling Your Business
4. Do You Have a Strong Team, or the Ability to Form One?
No successful entrepreneur got to where they are by themselves.
“All great companies, even those with iconic entrepreneurs, had many other people who were involved and, without whom, the company might not have made it so big,” Sahlman says.
In Entrepreneurship Essentials, Apple is used as an example to illustrate the power of a team on a growing business.
“Steve Wozniak was the engineering genius behind the company’s early products,” Sahlman says.
Shortly after it was incorporated, Mike Markkula and Mike Scott joined as seasoned executives who proved themselves essential to the company’s growth. Steve Jobs, who had previously been forced out of the company, returned to Apple when it was on the verge of failure and revitalized its products. Without each of them, and countless others on their teams, Apple would not be where it is today.
If you decide to start a business, keep in mind that successful business owners know when to ask for help and delegate tasks. Whether that means starting your business with a partner or two, building a strong team as you grow, or simply accepting any help and advice you can, know that your potential success relies on the strength of the people around you.
Related: 10 Tips to Help You Boost Team Performance
5. Are You Prepared for the Possibility of Failure?
Entrepreneurs must be prepared for the possibility of failure when starting a business. In Entrepreneurship Essentials, Sahlman notes that 70 percent of businesses survive for two years, 50 percent last five years, and only 25 percent make it 15 years.
“Though every entrepreneur imagines success, they must act with the full knowledge that the odds are against them,” Sahlman says.
The very real possibility that your business may not survive is something you need to come to terms with before pursuing entrepreneurship, and you should have a plan for that scenario.
6. Why Do You Want to Start a Business?
As you consider starting a business, continually return to the most basic question: Why?
While only you can answer this question, understanding the relationship between risk and reward can help illuminate your motivations.
It’s the point where the potential of reward—whether that be pursuing your passion, becoming the next big brand, or filling the market’s need—outweighs the fear of risk that your entrepreneurial journey begins.
Ask yourself what you hope to gain from starting a business, and list the risks you anticipate. If the pull of potential rewards outweighs your fear of risks, it’s a good sign you’re ready to be an entrepreneur.
Forging Your Own Path
Asking yourself these questions can shed light on whether starting a business is a path you want to pursue. It can be a lot of work and come with inherent risk, but armed with informed decision-making, an innovative concept, a solid team, and a bit of luck, starting your own business can be an extremely fulfilling experience.
Are you looking to turn an idea into a viable venture? Explore our four-week online course Entrepreneurship Essentials, and learn to speak the language of the startup world.
