Five Questions to Answer Before Starting a Business
“Know the difference between a lifestyle business and a scalable business, and decide in advance what you want.”
Interview with Gillian Muessig
CEO of Outlines Venture Group and co-founder of MOZ
Are you a wizard or a business guru?
The most successful companies, in the tech sector especially, have a wizard and a business partner. The wizard, or the idea-partner, is the one who creates the concept and perhaps drives it to market. It might be someone who codes; it could be a designer; it could be neither. But it's somebody who has the vision. That's your visionary — or wizard.
The other person is the one who worries about whether the coffee was made or whether more coffee needs to be purchased, whether the rent was paid or whether the rent can be paid. That's your business partner. And the purpose of the business partner is to protect the wizard. If the wizard is thinking about anything except what's next, you're losing money.
Knowing whether you are a wizard or a business guru is critical.
How frugally can you live?
If you're going to build a business, test frugal living before you leave a cushy job to build a business.
• You’ll gain expertise so you can run your business in a frugal manner.
• You’ll know what you’re in for when it’s time to invest your cash in that startup company.
• You’ll have one less thing to become adjusted to.
Life as an entrepreneur is significantly different than that of an employee, especially one with a salary that provides you with a very comfortable lifestyle. Once you get the hang of lean living, lean startup is a really good way to go. Startup always costs more than you think, even in your ‘worst-case-scenario projections’ and takes longer than you think when you’re standing at the starting line.
What’s your risk tolerance?
Think not only about your personal risk tolerance but the risk tolerance of anyone with whom you share your life — a significant other, spouse, a business partner. Think about your willingness, as well as your partner's, to downsize should it become necessary. Often, one person has the risk tolerance and the willingness to do whatever it takes, and the other does not. Best to find out early, before you leave a cushy job. Make agreements with both your professional and personal/life partners in advance.
What assets will you — and will you not — invest in the company?
When you’re thinking about risk tolerance and boundaries for actions involving a business, decide early what’s available for you to invest in the company and what’s off limits. This is about protecting your personal assets. People get worried about questions such as, “Can somebody come after my home?” Decide if you will, for example, sell a vehicle in order to fund the company. Does your spouse or partner agree this is an option? Those kinds of upfront decisions are important.
What kind of business do you want to build?
Know the difference between a lifestyle business and a scalable business, and decide in advance what you want. Different times of your life require different parameters around the business. Know where you are in the world and in your life. Then decide whether you want to build a scalable or lifestyle business.
Scalable businesses require more capital and more personal claims on your time, as well as business funds as you move forward. They require different support systems – from business mentorship and financial capabilities to financial risk tolerance and a willingness to subordinate the personal to the professional, especially in the early years. Know what you're going to build: It will help you set clear expectations for yourself as well as your team/staff and any significant others.