Entrepreneurial planning and the big four: questions to ask before starting a business.

• Author: Branham, Michael A.
• Position: SMALL BUSINESS

Entrepreneurs are the lifeblood of the American economy and the generating force behind small business start-ups from Anchorage to Miami and Boston to Honolulu. Small businesses, defined as a business with less than 500 employees, account for 99.9 percent of all US businesses and employ 48 percent of all private sector employees within the United States, according to US Small Business Administration, June 2016; Statistics of US Businesses, US Census Bureau, US Department of Commerce; Nonemployer Statistics, US Census Bureau, US Department of Commerce; and International Trade Administration, US Department of Commerce.

On average, over the last ten years, almost 80 percent of small businesses last at least one year, with about 50 percent of new businesses lasting five years and roughly 33 percent able to survive for a decade, according to US Small Business Administration. Of course, every entrepreneur believes they can beat the odds or they likely wouldn't take the risk in the first place. What steps can a potential small business owner take to ensure the best chance at entrepreneurial survival? There are four questions every small business owner should ask prior to taking that leap.

Owner Skillset

Is the role of "business owner" in my set of core competencies? This self-reflective question is often answered "yes" without much thought, but the skillset needed to run a business differs greatly from being a baker or a financial planner or a computer programmer. We've sat with many a client who confesses (after the fact) that the hardest part of what they do is to "run the business," even if they're an expert in the vocation in which their business resides. Of course, you can hire someone who IS an expert in running a business, or take on a partner with that skillset, but those two decisions usually require the revenue to support two employees from the beginning.

Financial Readiness

Am I financially prepared to take the risk? While few start-up entrepreneurs are entirely financially independent, having a solid financial foundation from which to build is critical, especially when families are involved. Given that 57 percent of small businesses are started with personal savings, and another 25 percent with "no startup capital," according to the Survey of Business Owners 2012 conducted by the SBA Office of Advocacy, a vast majority of entrepreneurs take personal financial risk to start their business. Knowing that you can pay your personal bills...