Every business, even huge multi-national corporations, start as an idea of an individual. Whether it remains an idea or grows into a business depends on what happens after the idea is conceived. Bert Whitehead, a thought leader in the financial planning profession, has spelled out the evolution of an entrepreneurial venture, as explained here.
If you have an idea and take action on it, you’ll probably do some research to see if your service already exists. If so, you’ll research if you could also provide the service, perhaps with an enhancement or to a different market. Next, you start setting yourself up as a business. You get business cards, a web site, set up your bookkeeping system (more on this next week), get any regulatory approval you might need, buy equipment, and other tasks necessary to establish a business that you’ve envisioned. Then you start looking for clients.
For a while after your business is set up, it will look financially more like a hobby than a business. Your expenses will probably exceed your income. Depending on the type of business, you might have more expenses than you have income for anywhere from a year to three or four years. But at some point, if you’re not making money, you need to examine why. The point of a business – especially from the perspective of the IRS – isn’t just to do something you enjoy. It’s to do something you enjoy that people will pay you money to do. If you’re not heading toward profitability after a year or two, take a closer look at your expenses and how you price your services. It may even pay to hire some consultants to help you examine how your business is structured.
Once you’re making enough money to live on, it makes sense to hire some staff. The first person many hire is some type of assistant. In this business environment, that doesn’t necessarily need to be someone who is physically in the same space as your business. It might be a virtual assistant. Technical expertise is also helpful and can also be someone who is not always in the same place as your business.
Ultimately a business grows into a team of people who are all doing something they enjoy and in which they have skills. The variety of skill sets is often what makes a business truly successful – people who each have strengths that complement those of their co-workers, with everyone doing something they love. A business like this can ultimately become more than the original idea of the founder. That is a business that someone else may want to buy someday.
There is nothing wrong with having an idea that is confined to something you love and can make good money doing, but that doesn’t grow into a business that’s bigger than you. This endeavor can also serve the needs of its clients and be a positive force.