Editor's note: This is a guest post from our friends over at Money Crashers, and written by Tyrone DeMarco. I love side hustles and starting your own business, so this is a great read for anyone looking to take their side hustle idea to the next level.
Small business ownership has its perks: You get to be your own boss, work when you want, and control your own destiny. But business ownership isn't for everybody, nor is it always the best option. It can be a huge financial risk—one that requires a lot of time and mental commitment. In fact, timing and readiness are going to be the determining factors of whether your business succeeds or crashes. After all, the latter is a reality for millions.
Consider this: According to the Small Business Administration (SBA), around two-thirds of businesses that employ workers survive past the two-year mark, while only half make it to at least five years. The reasons for the flameouts vary, but failing to understand the risk is a big part of it. From measuring the financial challenges, hiring the right personnel, finding the right balance between growth and stability, or even just finding the right location, small and young businesses owners often don't realize how huge of an undertaking making their business run smoothly actually is.
Owning a business can be downright scary, but also extremely rewarding. While you'll never know completely when you are ready, there are telltale signs it just may be your time to make the leap.
How to Know You Are Ready to Start Your Own Business
- There's Great Passion Inside You
Anyone can start a business granted they have the capital to get it off the ground. But the ones that are truly successful are those that have a passion for the product or service they are hawking, not just trying to get their business off the ground because they can make money that way.
Take organic food for example. The entrepreneur who has a love of natural foods is going to enjoy learning and sharing that knowledge with customers. The one who is just jumping on a trend won't be as convincing when a potential customer walks through the door. If you don't care about the underlying products or services your business offers, other than their money-generating ability, you are less likely to invest the time to make your business grow and get established.
Truly loving what you do will ensure that business ownership won't turn into the equivalent of taking any old job with a day-to-day toil. Starting your business with passion and no plan can sometimes be more valuable than having capital and a plan, but no passion.
- You Have the Time for the Commitment
Getting a business up and running is tough enough. But then there's the work of growing your baby, which requires blood, sweat, and tears. If the thought of pouring countless hours into your endeavor leaves you wishing you were getting a tooth pulled, then business ownership probably isn't for you. But if knowing you will be breathing, eating, and sleeping your small business gets you pumped up, that's a surefire sign it's time to execute.
Successful entrepreneurs bring all sorts of things to the table, but a shared characteristic is commitment. Without it, you won't be giving your business its best chance of success. As a result, your personal circumstances can be a good predictor of your readiness to go it alone. If things change in your life—such as a new addition to the family or an impending divorce—it's probably not the best time to test your business acumen and idea. A baby requires a lot of attention, not to mention creates sleep deprivation. Although different, a divorce is also a big distraction.
If there is upheaval in your life, you may want to hold off launching your new business. But if everything is smooth sailing and you are ready to give it your all, then it could be the best time to pull the trigger.
- You've Been Thinking About It for a While
Giving up your career to start your own business isn't something that you decide overnight because you're angry with your boss or unfulfilled at your job. Many entrepreneurs worked for someone else, in lots of instances for years, all the while plotting and planning before they made the leap—and sometimes kept working for someone else even after launching their business. It's not like age is a barrier or a stigma anymore.
The Great Recession of 2008-2009 changed the makeup of small business owners and entrepreneurs, with scores of older individuals using downsizing as the impetus to branch out on their own. Consider this: according to the Kauffman Foundation, a non-profit focused on entrepreneurship, the percentage of entrepreneurs aged 55 to 64 jumped to 25.8 percent in 2015 from 14.8 percent since 1997.
Although age doesn't determine success, time considering an endeavor can. The last thing you want to do is launch a business because you feel forced to for whatever reason. Lots of people will take the leap solely because they hate their job, wrongly assuming that leaving will fix everything. If you fall into that category, there's a high likelihood you'll still be unsatisfied and quickly resent it, which is a recipe for disaster for any business owner. Leaving your problems behind doesn't resolve them.
- You Can Do It Better
For some individuals, the light bulb to branch out on their own comes from watching the mistakes of their boss or upper executives in an organization. Maybe it's how they interact with customers that they are doing all wrong, or perhaps it's the lack of openness they have to what could be game-changing ideas that have you frustrated. It could be a culture thing or watching corporate waste in action that's led you to dream about how you would do it better.
Heck, it's not unheard of for an employee to quit a job only to resurface a few months later as a competitor, so why can't you? Questioning the abilities of your boss in and of itself isn't enough of a reason to start your own endeavor, but if you find yourself repeatedly about how you can do it better than your boss or management, then it's a big sign it's time to show them.
Small businesses are the backbone of this economy, employing millions of people—or close to half of the private workforce—according to the SBA. But just because owning your own business puts you in control doesn't mean it's right for you. There has to be a passion, a willingness to commit, a business sense, and confidence in your ability to make what will undoubtedly make a success out of a struggle.
Without it all, pursuing a career within an organization may be the better action.
If anyone has first-hand experience with making the wrong decision when quitting his job and launching his business, Tyrone DeMarco is it. He worked for Corporate America for a decade before finding himself so resentful of his workplace that he ventured out on his own, only to fail miserably when launching his first business. Since then, he’s readjusted his priorities and is a very successful real estate investor, finding the best fixer-uppers around the United States.