Should I Start My Own Business in 2022?

Corporate America has changed. Job security is nonexistent, benefits (if offered) are not nearly what they used to be, and starting your own business looks a lot less risky. As a result, employees are quitting their jobs in record numbers in what has been called the Great Resignation. It is no wonder this trend continues to grow.

The people I spoke to say apathy towards their jobs is why they resigned. Some described years of emotional numbing brought about by a bad boss, wrong culture, overwork, undervaluation, disrespect, lack of advancement, or low pay/benefits. People are looking for what they consider a better alternative and feel that starting their own business will offer them just that.

The pandemic lockdowns gave many Americans some financial cushion and a lot more time to think about what is important to them and what they want to do with their lives. Some realized they wanted more control over their destiny or less overbearingness from a bad boss. However, starting a small business is no small decision. It may have a significant financial and quality of life impact on you and your family. Take, for example, the inflationary pressures and supply chain crisis impacting Americans today. As a small business, these could potentially be strong headwinds to overcome depending on the industry you choose to enter. These could also be a tailwind for others. But, whether headwinds or tailwinds, they will factor into your financial success and must be considered before starting your business.

There are often two misconceptions about small business ownership: you’ll get rich and be your own boss. There is some truth to both, but mostly these are misjudgments for new small business owners. If these are your motivating factors, starting and running a successful business will be hard.

For example, according to the U.S. Treasury’s Office of Tax Analysis, 75% of small business owners make less than $200,000 annually. PayScale says small business owners make between $34,000 and $106,000 per year. If getting rich is your primary motivation, you may be in for a shock.

That said, despite the countless sacrifices and challenges small business owners face, an overwhelming 84 percent of small business owners would do it all over again. So, if you’re thinking about taking the plunge and starting a business of your own, there are some key things to consider:

Evaluate your motivation

If you are thinking of starting a business because you lost your job and are having trouble finding a new one, then think about improving your job search. For example, hire a career coach or get some training. Starting a business is much more complicated than getting a job, so it’s worth the extra effort to look for employment more effectively if that’s your true preference.

Also, consider whether you have what it takes to start a business in these terms: No one will tell you what to do (except your customers). You have to be self-motivated, willing to make many sacrifices, and be able to last for the long term while your business goes from startup to maturity.

If you want extra money, maybe you should start a side hustle. If you want more freedom, perhaps it’s time to leave your 9-to-5 job and start something new.

What skills do you have? Where is your area of expertise? How much can you afford to spend, knowing that most businesses fail? How much capital do you need? What sort of lifestyle do you want to live? Are you even ready to be an entrepreneur? Be brutally honest with your answers.

What type of business

Once you decide you have the right motivation for entrepreneurship, you need to figure out the type of business you should start.

Franchise or independent? Service or manufacturing? Brick-and-mortar retail or online? Consumer or business-to-business? There are dozens of different types of businesses, each with its own benefits and drawbacks.

Think of a business idea

Do you already have a killer business idea? If so, congratulations, you can proceed to the next step. If not, there are many ways to start brainstorming for a good idea. The web is full of resources and articles on the top 10, 15, or 50 business ideas, successful businesses to start, fastest companies to start, etc.

Once you look through these resources, decide on an idea for your business. Then, methodically, diligently research your idea. Is anyone else doing it the way you want to approach it? How intense is the competition? Do consumers and businesses have viable product/service substitutes if they don’t choose yours? Does your product solve a unique problem? Will the demand be significant enough in the future, not just for a year or two? Once you’re convinced you have the virtual better mousetrap, you can proceed.

Develop a powerful message

What customer problem are you solving that potential customers are willing to purchase? This position is often called the value proposition.

Understand your strengths, skills, and time availability

Know when you need to engage an accountant, lawyer, insurance agent, marketing specialist, web page designer, or other professional. Identifying which professionals you need will start your management process as a business owner.

Write a business plan

A business plan describes how your business will evolve from when it starts to the finished product. There are dozens of business-plan-in-a-box resources available online. Many are free. Writing a business plan forces you to answer critical questions that you may otherwise ignore if you want a strong chance of success. The business plan does not have to be long. You can make it a single page if you don’t have the patience to do more. But it should answer these questions:

• What is the purpose of the business?
• Who are my customers?
• What problem does my product/service solve?
• Who is my competition, and why is my product/service’s advantage?
• How will I price, position, market, and support my product?
• What are my financial projections for the business for the next 3-5 years?
• Look for how you are going to finance your business.

There are many ways you can go about financing your business. First, I would suggest funding your startup yourself if you can. Bootstrapping your business might take longer, but the good part is that you control your destiny (and equity). You may consider reaching out to your friends and family if you require more capital. I like to keep business and personal relationships separate, but some circumstances may make this a favorable option for you.

There are traditional funding options as well. These include bank loans, lines of credit, grants, angel investors, venture capital, joining a startup incubator/accelerator, crowdfunding, or even something like Kickstarter.

Manage the Legal and Financial Paperwork

Along with starting a business come a variety of paperwork requirements that can’t be overlooked, including:

• Filing for applicable licenses and registrations from the federal and state governments. Get guidance from your state’s Office of Taxation website on which forms you need to complete.
• Open a bank account. You will find that any business arrangements, including government, vendors, etc. require a bank account. This step should be your first order of business after filing your legal name and securing your EIN (Employer Identification Number).
• Secure intellectual property. Even though filing for trademarks and patents is expensive, it’s far more costly to battle someone over rights down the line. Also, ensure you acquire Internet domain names that may be important to your business.
• Purchase appropriate business insurance before you begin operations.

Final Thoughts on Starting Your Own Business

No matter what type of business you start—selling physical products, offering up your services on a contract basis, building a digital product, or launching a startup—there will be ups and downs. When going into business for yourself, it’s imperative to set realistic expectations so that you’re not disappointed with your progress after the first few months of growing your customer base.

If you decide to take the plunge, good luck with your new business venture! May you have much success this year!