Pre-Investment: What to Consider Before You Switch to Entrepreneurship

Pre-Investment: What to Consider Before You Switch to Entrepreneurship

For many of us, the pandemic has given us pause to think - am I doing what makes me happy? Would my energy be better spent elsewhere? You might have the passion and motivation to go it alone but, if you’re considering taking the leap to entrepreneurship, there’s some practical advice worth reading first.




When founding a business of any kind, the first considerations should be financial. Forming a business costs money and can pose a risk to your personal circumstances. To help mitigate these risks, it’s worth forming an LLC (Limited Liability Company), as this will reduce your personal liability, paperwork and provide tax advantages. Each state has its own regulations around forming an LLC (for example, the cost to start an LLC in California may differ from Texas) so be sure to consult a formation service before you apply.


Not every business is well suited for investment but, if you’re happy to share some of your company with a VC or angel investor, you may find it beneficial. To pitch for investment and also for your company’s general health, it’s important to write a comprehensive business plan. This will include market analysis, operational plans and, crucially, financial statements and projections. If you’re able to calculate the cost of running and potential profit margins for your company (via spreadsheets), not only will it help to attract investment but it will create clear guidelines on how to budget moving forward.




In the market analysis section of your business plan, you should include all the research you’ve carried out in relation to customers, competitors, and the marketplace itself. Establishing a target market is pivotal for success - you’ll want to identify the kinds of people who you can sell to, their wants, their spending habits, and even seemingly inconsequential variables like fashion taste. Knowing your customers is key to satisfying them and, if your insights are sharper than your competitors, profit is sure to follow.


It’s also important to understand your business. Whatever the product, whatever the industry, trade knowledge is key for avoiding mistakes. If you’re selling physical goods, this might relate to your managing inventory, if you’re selling a digital service, it might relate to your revenue model. Businesses most often fail for reasons that could have been predicted ahead of time - a lack of product-market fit, for example. Sometimes, with enough research, you’ll discover that a certain business venture may not be worth pursuing at all.




When you make the transition into entrepreneurship, you’re not only contending with other businesses, you’re also contending with logistics - the most pressing of which is time. Contrary to popular belief, starting a business is incredibly time expensive, with research showing that most founders work twice as much as employees. If you have kids, relationships, and other important commitments, you’ll have to make a business work around these else they (or your company’s bottom line) are liable to suffer.


There are also questions of physical logistics. The pandemic has thrown an office-sized spanner into the works and finding the space to work, collaborate or meet with clients safely is not always easy. You should also consider basic utilities, such as office equipment and filing space - what do you need to keep a business running and can it do so effectively from home?


Despite economic uncertainty brought on by the pandemic, businesses continue to roll forward and new gaps are opening in the market for savvy entrepreneurs. If you’ve taken the above into account, there’s no reason why you shouldn’t take the leap.


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