Question

A good friend seeks your advice about starting a new business. What do you think are the three most important things you would want to advise him/her to do or consider before starting this new business and why?

Answer 1

Before starting a new business, I would recommend my friend to limit their expectations and be ready to commit to a long process which would not only be a test of patience but perseverance as well. The decision-making process would need to be considered on upon the understanding of the following factors:

1. MARKET STUDY

I would recommend my friend to study the market and its trends and then after that, the focus should be shifted towards understanding the values of their offering and the expected traction they can have in the market. This is the most relevant need, especially for a new business or an entrepreneur.

2. COST ESTIMATION

For a business, the cost is always the deciding factor of how well the functionality can be implemented. Simply having a plan with no associated numerical backing can prove to be disastrous, rather, the understanding of the cost implications is one f the main functions the business and in extension our friend needs to perform. Therefore, we can assume that the process of cost estimation should be conducted. The rule of thumb here's to never underestimate the cost requirement and therefore, overestimating the cost with a little buffer value between it can be a much more consistent approach.

3. UNDERSTANDING THE DIFFERENT BUSINESS STRUCTURES

Should the business be a sole proprietorship, should it be a partnership, should it be a limited liability corporation, this can be considered as a necessary process in the understanding of the function the business needs to perform, even before the business processes can be started. This is because the process of raising capital depends upon the mode of business and therefore the structure plays an important role in this.