The 10 Most Common Business Startup Questions
Posted on 19th September 2017 in Business
Written by Freya Hughes
The internet is used as a FAQ for life by most, and it’s our endless googling that often influences our decision making. Some research is ultimately not worth the page it’s written on, while much of it is based on fact. In this post-truth era, almost everybody is getting sick of wondering what’s right and what’s wrong. To save you some time and effort working out what you’re meant to be doing in your startup, we’ve provided you with the ten most common startup questions – and some answers, because you deserve some truth.
1. Do people need what I’m selling?
While it may be tempting to make your dream a reality as soon as possible, it’s not always the best idea. You must research market need for your offerings, or risk being stuck with hundreds of products you can’t shift. Say, for example, you need (or simply want) a product to help you with a daily activity. Now let’s say you’ve built a prototype for your idea and need to test it. If you’ve not looked into what is out there already, or if people even need your product, you may find your investments of time and money are well and truly pointless. The vast majority of new business ideas are just that: ideas. Entrepreneurs dream up solutions to problems that do not really exist, or rather only exist because of a personal need or experience. They then simply – and wrongly – assume everyone has the same problem.
Once you’ve identified a need for your offerings, you must make sure you’ve priced it out fairly and competitively – or you might be ignored. This must be in your business plan: the need and desire for your product or services, and how much you should sell it for. Don’t fall at the first hurdle.
2. How much money will I need?
This may be the most-asked question of all. There’s no exact answer though, as each business is unique, and they’re unique to their own market too. Some companies will need thousands to get off the ground, while others can make their profits with little investment. The best way to overcome this worry is to set up a forecast. Even if you’re unsure of exact figures, you can predict them to an extent. Put these estimates into this tool and it’ll show you how much you need to earn to progress to the next step, show you where you may need to scrimp and save and iron out anything you feel in the dark about. To take this one step further, create a base scenario in the scenario builder and input your best, worst and middle-of-the-road outcomes to see how likely you are to be able to expand, or invest in a premises, or hire staff.
QuickBooks did some digging and report 64% of entrepreneurs (in a recent Intuit survey) started with less than $10,000. So that’s £7,395 at the time of writing. They continue: “Obviously, the more cash you have to fund your startup, the easier your life will be during the often hectic first months. Your first task is to research what it will cost to start your business in your geographic region, in your industry, or in your marketing niche.”
3. What do I need to know about the financial side of things?
First of all, you need to have a good understanding of the three financial statements you’ll be using throughout your career. These are:
- Balance sheet, showing you the financial state of your business at a given time
- Profit & loss, which depicts whether or not you’ve turned a profit at a given time
- Cash flow statement, giving you a break down of your cash position at a given time
Keeping these three crucial documents up to date will allow you to forge your path with far less risk. Forecasting combines all three to show the most accurate financial projection you can get. If you’re unsure as to how to set these up then head over to your accountant who will be able to help or do it for you. You’ll be able to log all transactions, sales and purchases, giving you a really good insight into how much money you have to play with.
4. Should I write my own business plan?
Definitely! That’s our answer for sure, because only you know the exact direction you want your business to take. A great business plan can turn an idea into a successful business. It can be daunting to get started, but it’ll give you a path to follow, which is crucial when you’re having those days where nothing is going right. You will, at times, need to alter your plan because life just gets in the way at times. Adapting to what your consumers want and need means you can set up your business to be agile from the off. The world is ever-changing, and so you need to ensure your business is able to change with it.
5. Where can I get investment?
A large number of entrepreneurs look to their own bank accounts, their friends or families to secure their first round of investment. This is because your first investment will probably be a fairly low figure, so the people around you are likely to have the amount of cash you need. Many first time entrepreneurs are tempted to trade investment for a percentage of their company, but this is a risky move. Your first few years may be a struggle but if your business really takes off, do you want full control or would you mind an investor having a say in what you do? Ask yourself this before you make any rushed decisions.
There are many options to consider for funding, and while most will require an amount of hard work from you, they will almost always pay off. From seed funding to Angel investors, crowdfunding to cash advances, make sure you’ve done your research and come up with a plan to suit your own needs.
6. What skills do I need?
While this is a broad question, it’s one you must consider. It’s all well and good to be charismatic, but you need to be able to follow through with any commitments and promises you make. We’d say that flexibility is a key trait to have, because in a tumultuous climate you must be able to adapt. You can’t always predict a market change, so ensuring you’ve got the nerve to take risks will see you through. That’s not to say you can chase every whim you have, of course. Be tactical and thoughtful and you’re likely to survive.
Being resilient and agile are valuable traits too, as sometimes it can all go heart-breakingly wrong. If you can pick yourself up and dust yourself off then you’re in a much better position than most!
7. Am I measuring the appropriate metrics?
When we spoke to The Peloton, a firm combining marketing and accounting, marketing manager Anna told us their mantra: ‘what is measured is managed’, and this is spot on (read more about how they approach KPIs here). If you can identify the core KPIs in your company – and measure them regularly – then you’re going to feel a strong sense of control in your business. The metrics you choose must be personal and specific to your business. The ‘one size fits all’ approach simply isn’t appropriate for any business, because each is individual.
As a concept, key performance indicators can be a little tricky to get your head around. So, to help you get going, read our beginner’s guide, browse our fully-stocked KPI Library, and flick through our industry-specific KPI lists.
8. Do I have the right people?
This is going to be a pretty constant worry throughout your time as an entrepreneur. As your business develops and grows, you’re going to start attracting the right people, but as a startup a lot of your staffing may be circumstantial. It’s a big step to make your first hire, so make sure you’re completely ready to be relied upon, and have all of the legal paperwork completed. If you happen to be starting out with a load of cash in the bank, it may be worth investing in a recruiter to help you out.
Perhaps you can’t offer much in the way of payment, but asking friends and family isn’t without its risks. Sometimes, hiring friends can end in a lack of focus and can ultimately test your relationship. This said, its usually best practice to hire somebody you know will be good at the job but hasn’t got that personal connection with you. You might end up dissolving one part of your friendship, so don’t risk losing your best mate just for the sake of them working with you. If you think your friendship can cope with the pressures of work, set out clear boundaries and guidelines – read more tips on how to overcome more of these struggles courtesy of Inc.com.
Remember that the candidate has to be a good fit. If your business has you and another person at the helm, things will run a lot smoother if you all get on well. Entrepreneur.com wrote back in 2012 something that is still true today: “If a new employee doesn’t fit in with the company rhythm or perform well during the first few months on the job, don’t delay in discussing your dissatisfaction.” They’re spot on. You’ve gambled a lot to get where you are, so don’t mess it up just because you feel bad for someone.
9. Do I have the right customers?
This is going to be impacted mostly by your marketing efforts. If you open up a physical shop or have a site in a town or city, naturally the people who notice you first are the locals. While you will probably get some friendly faces through the doors, they might not actually help your business. When you made/make your business plan, you’ll have researched the market and industry, which shows you which kind of people are going to want or need your product or services. Target them with digital advertising, using Google and social media. This is one of the cheaper options and you can track your results. Soon enough you’ll work out exactly what kind of marketing best fits your business. It’s all about experience.
Have a look through this list by business growth champions, Thrive Hive. They’ve broken down the best ways to reach the right customers by industry, and by method. Again, you’ll learn how to attract customers over time, but this will get you going.
10. What if I fail?
We really hope you don’t but if things do go wrong, try not to get too disheartened. It’s good to be aware that there’s a high chance things won’t go to plan, but it’s important to not be too negative. A predicted 90% of startups fail, and this is usually down to not market need, being happy with lack of growth, poor leadership and, the most common reason – running out of cash.
To give you a real-life example, Julia Elliott Brown wrote for The Telegraph about her business failure. Starting a footwear company, they eventually arrived at a point when investors were expecting them to have really taken off. She writes, “the business simply wasn’t growing fast enough. Our cash was running out. I felt like the captain of the Titanic, with the iceberg looming rapidly. We were unable to secure further investment, nor find a buyer for the business in its entirety. We sold our key assets to a competitor, and our dream came to an end.” Read the full article here, and see how sometimes your luck – and cash – simply runs out. Putting some safety buffers in place, like having liquid assets will cushion any cash dips, but it’s ok if this doesn’t work out.
Failing is nothing to be ashamed of, rather you should be proud you’ve set about your venture at all. And if you think about the likes of James Dyson, Walt Disney, Thomas Edison and Vera Wang, they all fell before they rose. They all made huge successes and legacies to be proud of eventually.