Based on a few requests, over the course of the next few weeks, I will be addressing various topics related to considerations before pulling the trigger on starting a business. The very first consideration is your current personal situation. I am currently 40 years old and decided that this year was a good time to launch Vistance, as I have had 20 years of work experience and I still have plenty of runway before retirement. I’ve heard parents saying they will encourage their kids to start a business straight out of college. Unless your intent is to teach them a lesson in failure, I don’t agree with this concept.

While education is valuable, school does not prepare you for all the difficult situations that arise in a business. What do you do when you are running out of cash and are in danger of not being able make payroll? Are you prepared for the fact that your employees and partners will not work as hard as you? What do you do when your vendors or customers renege on the terms of your agreement, potentially forcing you to consider taking a loss or start litigation? I believe that the top colleges give individuals a false sense of overconfidence going into the business world, specially to those students with top grades. Work experience in an established business just simply cannot be replaced by business cases. It is easy to sit back and criticize a CEO in hindsight for making what seems like a foolish decision, but when you have conflicting stakeholders including equity investors, debt investors, board members, other executives, regulators all pressuring you to do certain things, some decisions become impossible. I believe an inexperienced entrepreneur is destined to make serious mistakes that are likely to lead to business failure. Being a part of an established business will give an entrepreuner an idea of what success would/could look like and borrow some corporate structure to apply to their business. This does not guarantee success, but having an idea of operational workflows is helpful for any entrepreuner to ensure smooth growth when they transition beyond the startup phase.

The next consideration is your personal family situation. I was blessed with a very fortunate set of circumstances. I have no children, my wife has a full-time job with benefits and I have no major financial commitments in the short-term. I had built up enough capital to take a risk, where I can sustain a 8-10 month period of no income. I will also admit that expanding my consulting business is considerably less risky than launching a B2C product from scratch. Launching Vistance was simply expanding my consulting practice from a one-man shop servicing two clients to a fully staffed company servicing multiple clients. I had to wind down my consulting engagements so I could focus on branding and marketing and had budgeted about $50K for marketing. I also took on a full-time hire when I did not have revenue to support this salary. I was looking at a worst case scenario of burning $80-100K of upfront capital before I would to start to hit the panic button.

If you have large upcoming short-term expenditures – moving into a house to support a family, sending a child to college, large medical bills, etc., the decision to launch a business becomes infinitely more difficult as you give yourself a much shorter window to become cash flow positive. It is like going to the Black Jack table with $50. It is also important that you have the support of your family for your venture. It always helps to have relatives who are willing to step in a help in the event you find yourself in need of cash. My parents have offered their assistance in the event I hit a cash crunch.

Having a supportive spouse / significant other will help to create a positive environment whereas a negative one may cause undue anxiety to achieve results quicker and potentially cause you to make hasty decisions with negative consequences. I was fortunate to have a wife who was fully supportive and confident in my ability to expand my business and willing to take on more expenses if things got difficult. If you are starting a business against the wishes of those around you, you will need to navigate those waters carefully.

I was also fortunate that a colleague I had worked with in a previous business became available, so I hired an employee I trust, has familiarity with the way I work, and is solid performer. She is able to jump directly into client engagements with no learning curve.

If you are looking to build a B2C product from scratch, be prepared for a large upfront investment and no personal income for 18 months. No matter how well you budget, there are always unforeseen expenses that grow beyond your original budget and revenue always takes longer to come in than you ever anticipate. You will hit hurdles whether they are regulatory, term negotiations with suppliers or customers, or customer adoption of your product. Other stakeholders will not share your passion and enthusiasm and will not move at your pace, so you will find yourself impatiently waiting for things to happen. You will have to deal with a lot of administration, bookkeeping, employee contracts… things that don’t necessarily seem fun or within your comfort zone.

It is extremely difficult to raise capital at the start-up stage so making the assumption that you will be able to raise capital at an early stage is a dangerous assumption. Entrepreneurs are typically biased believing their ideas are the best thing since sliced bread. They typically believe that having the best idea and creating the best product is enough to achieve business success and everyone will buy in. However, investors and other stakeholders will tend to focus on your business plan, forecasted budget, go to market strategy, and management abilities and care more about whether your company ticks all the boxes. As much as you think you have a brilliant idea, you have to sit down and work out the numbers. You may find that your business model is not profitable at all. If you don’t have this financial skill set, make sure you work with someone who does, just to provide you a sanity check.

While everyone has a different risk tolerance, I personally feel breaking up my family or losing my home is not a risk worth taking in order to launch a successful business, and if I had no way to mitigate these risks, I would have made the decision not to move forward with expanding. I mapped out a clear budget and an exit strategy if the business did not move according to plan, potentially falling back to a one-man consulting shop. Whatever your risk tolerance or circumstances are, just be honest with yourself about your current situation and be willing to accept the repercussions if your business does not go according to plan. Launching a successful business is one of the most rewarding experiences you can have in life, but the risks that come along with it may be punitive and should not be taken lightly.