For many, turning a hobby or passion into a full-time gig is the epitome of the American dream. You're going at it alone; you're the captain of your ship, the creator of your own destiny. There's a lot to gain by starting your own business! On the other hand, that means there's a lot you can easily lose, too. While it's impossible to answer this question in an article, we can give some insight to help you decide for yourself.
20% of Businesses Don't Make It Past Their First Year
Why is that? Usually, it's because of a lack of funding or profits, but sometimes, it's because the owner realized that owning their own business wasn't what they wanted anymore, or they retired or sold the business. Entrepreneurs also tend to be more willing to take risks and find an adventure into the unknown exciting. This can make for a creative business product but can also mean that owners fail to realize when they're in over their heads. The good news? After several years of business, the probability of survival tends to even out.
It Can Take Years to Turn a Profit
Between salaries, loan payments, and operating costs, it could be a while before you see any extra cash, assuming you make it past year one. In fact, it took Amazon nine years after being founded to turn a profit. How long might it take your business? There are a lot of things that factor into the gap between starting out and turning a profit, such as start-up costs, structure, and the type of business that's opened, but on average, business take two to three years to become profitable.
Location Matters—A Lot
The state you open your business in, and even the city, can make a big difference in your business' success. Factors like the cost of living, tax codes, rebates, hiring rules, minimum wage, and many more of your particular state's rules or laws can have an impact on your ability to succeed. It's important to know what these laws are (state, county, and city), how they might affect your operations, and what you can do to make sure you succeed.
Collecting the necessary cash to get started is the biggest stumbling block for aspiring business owners. The amount of money needed to start a business depends mostly on the type of business, number of partners, and how much of your own money you're able or willing to invest. Regardless of the type of business that you hope to start, you'll need to be sure that you're in a strong, stable place with your personal finances first.
According to Forbes, 90% of startups will fail—a bleak number, but one worth seriously thinking about. Before you quit your reliable day job take a hard look at how much you have in savings and how much equity you have in your house in case the business doesn't get off to a profitable start. If you're still working on building a personal nest egg, then consider starting slow and investing time in your business in the evenings or on weekends until you're ready to make it a full-time commitment
WaFd Bank is Here to Help
At WaFd Bank, we believe in keeping business local. We first got our start in Seattle's Ballard neighborhood by a group of community members who believed banking should be done a little differently. Although we've grown beyond serving just the Puget Sound, there's still nothing we love more than seeing our neighbors succeed at their craft and make their business ownership dreams a reality. Not only does WaFd offer business accounts, we also offer helpful tools and services to give you peace of mind so you can focus on running and growing your business. Give us a call at 800-324-9375, stop by your neighborhood branch, or contact your local business banker to get started today!