(Image via jakeandlindsay)
While startups are trendy right now, it’s not something to be taken on lightly. More new businesses fail than succeed. You can lose valuable time, resources, and money chasing after something that isn’t completely thought out. So before you decide to jump head first into a new venture, you need to ask yourself a few important questions:
What does it do that others just like it don’t?
Startups are a dime a dozen. Every day someone has an idea that they think is amazing and that their mom thinks is amazing. But just because it seems clever to you doesn’t necessarily mean it’s a viable idea. It’s important that it’s also a better idea than the others just like it. In marketing, we call that the unique selling proposition. What is it about your startup’s service or product that makes it different from its competitors?
How could you do this without investors?
Often creating a startup comes with a plan to woo investors. That’s a fine plan and one many startups have used successfully. But there are far many more startups who never see a dime of investors money. That’s because investors can be hard to find, hard to woo, and hard to keep interested. If you can’t find an investor who gets your startup, you may have to go it alone. Can you bootstrap it? Can you work on a shoestring budget? You need to know this before you find out that your startup just isn’t sexy enough to attract the right investor.
How much time equity can you put into this?
Maybe you will find an investor, though. Maybe you can partner with someone who wants to be a part of the business and has the cash to to put in. Often when someone else puts in the money, investors expect you to put in the time to make the business work. As they write checks, you need to be on hand to deal with the day to day tasks like overseeing production. Are you ready for this to be your full time job? Are you ready for this to be your full time job while likely working another full time job?
What’s your exit plan?
The beginning is a good time to imagine what the end looks like. The term “startup” encompasses a very finite time in the beginning of your business. If it survives, at some point it will enter any number , which could be divesting, expanding, going public, or being bought out by another, bigger company. Although you can’t predict what will happen, you need to know what your ultimate goal is. Are you looking to be a part of this particular business for as long as possible? Are you hoping to grow a healthy business that you can sell to someone else?
Don’t let this questions intimidate you. It’s more about the journey than the result. Examining yourself and your startup is more important than the answers to these questions. And the more you know about your startup the better off you’ll be.
Princess Jones is the managing editor of She’s Self-Employed, a website for women who write their own checks. For talk about entrepreneurship, startups, and the answers to these questions, catch her on Twitter, Google+, or Facebook.