Thinking of starting a business?  This might be the right time.  Finding a traditional job these days is hard.  If you can start a business “on a shoe-string” (with minimal funding), perhaps now is the best time.  As the recovery slowly comes along, companies with sizable cash sitting on balance sheets (reported to exceed $2 trillion) will be looking for good places to invest. Even bank lending is rumored to be loosening up a bit.

Starting a business is not so hard.  Succeeding at it is harder.  The first ingredient is to identify a “need” to fulfill.  Most people start with an idea and then go looking for the need.  That’s backward—and lots harder.  Identify a need, or a pet peeve, or an unfilled niche, all are good market needs; and then develop a solution to sell—a product, a service, something that fulfills that need.

The first question, of course, will be, “what do you want to sell to whom?”  Actually, it is also “what do you want to be—or do—or what business do you plan to be in?”  Answer those questions, but with your identified need and solution (product or service) firmly in mind.  Sounds easy, right?  It isn’t.  It’s hard, but this is the starting place for any new business.

Everything else cascades down from there.  Not only “what” do you want to sell to “whom,” but also where, how, for how much, and when? You get the idea.  The answers to these seemingly simple questions will lead you to a plan.  What needs to be done, by when, to make this all happen?  And who will do it? (That’s you, mostly!)

Your plan needs to consider how big the market is for your “need-filling-solution,” what part of it are you going after, and who has it now.  I hear people talk about entering “new markets.”  Those markets may be “new” to the new entrants, but they are existing markets to the incumbents—who will defend them vigorously.  It’s not as easy an entry point as it sounds.  Consider that point carefully.

You will need money to fund your business, since the time from laying out the first cash and collecting the first cash (from a sale) can easily be 6-12 months.  How do you play to pay for things (including your bills) during that time?  You will inevitably need more money than you think—plan on that.  Bad stuff happens and getting going always takes longer than you planned, and usually costs more than you expected—or both.  I’m not trying to discourage you; just get you prepared.

Finally, but importantly, where are you going to start this business.  If you happen to be in Denmark, Canada or the U. S. you are in luck, since these were recently named as the “Best Spots to Start Out.”¹  The U. S. came in third overall, mostly because it was among top few rankings in most categories, (even though it wasn’t number one in any of them).  

Based on the “Procedures” and “Days” to start the business (ignoring the fact that you must first decide what your business will be, etc.) the U. S. was fourth overall.  Average time to get a business “started” (set-up) was only six days, and the average number of procedures required to do this was also six.  But remember, those are just to get the business “set up.”  The hard work follows soon after that.

You’ll need money, too.  According to the Global Entrepreneurship Monitor’s 2009 Report, it took an average of $175,000 to start a business in the U. S.  Of course averages can be misleading, and this figure depends a lot on that same old questions of what, to whom, etc.  Contrary to popular perception, China is a much tougher place to start a business.  It came up 40^th on the list, (but it’s climbing fast) but it required an average of just $29,000 to start a business over there.  However, it took fourteen “procedures,” and thirty-seven days “time,” —and it helps a lot if you can speak Chinese fluently.

Now let’s to go back to the beginning:

1.  What was that “need” you identified? (Who’s competing in that area now?)

2.  What’s your unique solution? (What you plan to sell.)

3.  What kind of business do you want to be in?  (Products, services, make/buy/sell/distribute, etc.)

4.  What do you want to sell to whom, where, when, how? (Very important.  Be specific.)

5.  Finally, how much money will it take to start your new business and keep it going?  (Even more important. More new businesses fail because of cash flow problems than any other reason.  The second reason for failure is sloppy execution of the business’ plan.  Forewarned is forearmed.)

There you have it. Simple questions, hard to answer, but maybe better than “where will you find a new job.”  If you are in the U.S. it’s a good place to do this, and it’s a good time to start a business—especially if you can’t find a job and want to venture out on your own.

If you do this now you can be your own boss.  And you can prove that innovation is alive and well in America.  If it’s worth doing, it’s worth doing NOW—innovate, America!

John L. Mariotti is President and CEO of The Enterprise Group. He was President of Huffy Bicycles, Group President of Rubbermaid Office Products Group, and now serves as a Director on several corporate boards. He has written eight business books. His electronic newsletter THE ENTERPRISE is published weekly. His Web site is Mariotti.net.