I’m in the process of starting another side venture. I won’t get into the details and it’s a fairly short-term project, but the cash from it could be used down the road for something a little bigger. I’ve learned some important lessons just starting out, and taking a page out of The Finance Blogger‘s book, I’ve finally got some business knowledge to share!
1. Test Drive if Possible
Not all businesses can start with a small sample, test, and see if the results are what were expected. It doesn’t have to be the full thing, even a low-risk starter project could be enough to show you whether it’s a worthwhile venture or if you’re in over your head. I’m lucky to have the option of starting small, so instead of investing a lot of money in this, I’m putting just a little in and seeing if what I have is viable and will work the way I expect.
2. State Up-Front How Much You are Willing to Invest
As with any investment, know in advance how much money you are willing to throw at the project. If you do, you won’t go overboard and spend more than you’re comfortable with. I’m not willing to take out a loan for this one or put it all on my credit card, but I am willing to take some of my hard-earned money and invest in what I think is a very safe venture. I have my limits, and will make sure not to cross them.
3. Determine Your Risk vs. Reward.
In college, I was intrigued by far too many opportunities that involved putting a lot of money down, with the reward being just a 10% gain after a ton of work. That sounds great, but I was taking on far too much risk. If you’re going to invest, make sure that the expected outcome is worth it. In this case, the risk is minimal, under $500, while the possible reward is closer to $5,000. With that ratio, it’s hard to say no. Also, consider extra precautions such as small business insurance to reduce the risk involved with starting a side business.”
4. Is It Sustainable?
In high school, I had a job that paid me $30 per hour! The only problem is that I only had the opportunity to work 5-10 hours a month. If it’s not something that will be able to continue in the future (or have a great pay day soon!), take a second look before quitting the day job. I’m well aware that this low-risk high-reward proposition won’t last forever, but that still makes it worth it right now. Knowing that it isn’t a long-term plan yet is good to know up-front so I don’t get too invested.
5. Know The Market
It could be ‘the opportunity of a lifetime,’ but if you’re not the one making the claim, do you trust the information. Do your own research, get involved before making a commitment and you’ll have a much better feel for whether or not you can be successful. I’m confident in my approach mostly for one reason: I can get a fairly good estimate of the value of an opportunity with just a brief look, which means I won’t get tricked into going after something that I’ll regret in the end.
I’m just starting my business venture but I think I have a good feel for the possibilities as well as the realities. I’m able to test drive it, I’ve set my maximum investment, and I know it’s a low-risk, high-reward type deal. It won’t last forever (at least at this level), but it has the opportunity to grow, and I know that I can thrive in this market. By slowly easing my way into the process, I will be able to gauge whether this will be as successful as I envision.
Readers, what rules do you have for jumping on a side opportunity? Do you sometimes get too excited you forget to take a step back?