4 questions you should ask yourself before starting your business4 October 2015 Category:
Dubai’s economy – with its competitive combination of location, legislative, market and environmental advantages – has seen it take its place not only as the business hub of the UAE and wider region, but also among the cities at the forefront of the global economy.
It’s unsurprising then that thousands went it alone last year in an attempt to take advantage of this booming marketplace. Due in no small part to Dubai’s world-renowned low barriers to entry for entrepreneurs, a staggering 21,358 new businesses applied for licences with the Department of Economic Development (DED) in 2014 alone – up 13% from the previous year.
However, starting a business is one thing, making a success of it quite another. Even in a marketplace so full of potential as the UAE, launching a startup is still a leap into the unknown, and it’s not necessarily right for everyone.
The following four questions are those we at Virtuzone like prospective clients to ask themselves before they take the leap. It’s all about arming yourself with the right information so you can cover as many bases as possible. Preparation is one of the key factors in determining your success, after all.
Question 1: Can I survive financially?
The first thing to be sure of before launching a startup is that you are financially positioned to do so. While this may seem obvious, plenty of new businesses fall by the wayside simply because they run out of cash. Aside from the initial costs directly associated with setting up the business, all new entrepreneurs need to ensure they are personally taken care of as well.
So how much will you need? This will vary hugely depending on the type of business you are starting, so do your research. Speak to those already in the industry and get a handle on how much money you are going to require. Consider everything from staffing costs and premises to insurances and licences – and again how much you yourself will need. Once you’ve got your figure, add in a fall-back of 25-50%.
To minimise risk, many entrepreneurs develop what is called a minimum viable product – essentially, a very minimal service or product that offers just enough to test the market. By starting out small, you may be able to get your new business off the ground while still in employment, and then hop aboard fully once revenue from first customers allows you to do so.
Question 2: Am I ready for a potentially long-term change in lifestyle?
Starting your own business may severely test your work-life balance for the first year (or two or three). The distinction between work and home can be blurred, because if your business has a problem it is your problem – whether that’s during normal working hours or at 3am.
And it’s not just the hours that are sporadic, but so too the paychecks. Once your new business has an established client base with a regular income, you can afford the luxury of paying yourself a regular wage, but until then you’ll have to prepare yourself for fluctuating earnings. That can severely affect your standard of living for a while.
For many entrepreneurs, not knowing exactly how much they’ll earn month-to-month simply comes with the territory, and the well prepared will have gone into things with some savings that they expect to carry them through until they get into cash flow positive territory. But whether the savings are there or not, do not underestimate the stress that comes with financial insecurity. The financial side of things is in fact a deal breaker for most aspiring entrepreneurs.
Question 3: Am I truly passionate about my business?
Building a business requires focus, determination, dedication, and the mental strength to overcome the many challenges and setbacks that are part and parcel of the journey. Which is why maintaining the level of drive required is extremely difficult when you are not truly passionate about what it is you are doing.
When first launching, you are your business. How enthusiastic you are for your product or service is what often makes the difference between closing a deal and going home empty-handed – and being able to time and again bounce back from all the “no’s” you are likely to get in the beginning.
It’s easy to be passionate when the going is good, but in the initial stages when the hours are long and the paychecks lean (or non-existent), it is your passion and commitment which gives you the strength you need. No business has ever succeeded without a healthy dose of it.
Another thing to consider when it comes to the passion debate is the following: If you don’t believe fully in what you do, you likely do not have a clear enough vision for your business, and without a clear vision you are not yet ready to start a business.
Question 4: Can I get a big enough piece of the market?
It is not unusual for new businesses to spend so much time pre-launch on their product or service that they simply take for granted that the demand is there. In truth, this attitude of ‘build it and they will come’ very rarely leads to success.
Be sure to thoroughly research your industry – spot key trends, areas of growth and anything else that can help you gain a competitive edge. It is also important to get to know both the consumers and the competitors in your chosen market – firstly to gauge the demand for your business, but also to establish if you are different enough to what is already on offer.
Most likely you will be entering the market alongside established players. Don’t ever underestimate just how hard it is to take business away from them or win new business in a market that is already fairly well defined.
But don’t get caught in the negativity trap. It is easy to get discouraged by what may appear to be a crowded market. In such a case, remember that you are here to bring something ‘fresh’ or ‘better’ to the market in order to meet needs that are not yet being met. Innovation is key, and as I always say, your business ideas – your products and services – should never stop evolving. Differentiation is not something you achieve once. It is something you must maintain.
It’s for the brave and the prepared
Again I will stress that starting a business is not for everyone – and certainly not for the faint of heart. The psychological demands in particular will test your bravery. But if you have what it takes, it can end up being the most satisfying of journeys. Building something to success satisfies us humans like little else can.
If after answering the above you feel you are ready, then don’t hesitate. While just about every entrepreneur is going to have failures to go with their successes, it is rarely those failures that are the regrets, but rather the initiatives never undertaken due to fear or self-doubt.
About the author
Neil Petch; Chairman at Virtugroup
With a history of business successes, Neil Petch is well known in the UAE and beyond as a visionary entrepreneur with a passion for helping others establish and grow their own businesses. Neil founded Virtuzone in 2009 and quickly brought the company to profitability before launching Virtugroup, a holding company that has a wider mandate of supporting startups from formation through to successful market entry and beyond.