5 Questions Every Business Owner Should Answer Before Starting a Business

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

After working with business owners for many years as a financial planner, I’ve seen firsthand that while many new businesses struggle, the ones that succeed usually have something in common: they answered a handful of very important questions before they ever opened their doors.

There’s a well-known statistic that a large percentage of new businesses don’t survive long-term. But the businesses that do succeed usually didn’t just have a good idea — they had a plan, a target market, and a clear understanding of the financial side of running a business.

In this article, we’ll cover five important questions every business owner should be able to answer before starting a business:

• What is your business plan?

• How will you obtain clients?

• What are the costs of starting the business?

• What is your timeline to break even?

• When do you close the business?

These questions may not be the most exciting part of starting a business, but they can dramatically increase your chances of success.

1. What Is Your Business Plan?

There are a million great ideas for businesses. But a business idea is not a business plan.

A solid business plan should outline:

• What product or service are you offering?

• How does the business make money?

• What is your pricing structure?

• Who are your ideal clients?

• How will you onboard new clients?

• What does it cost to produce your product or deliver your service?

• How much do you need to sell to be profitable?

• Who is responsible for what within the company?

• How much money do you need to start the business?

• What is the realistic timeline to profitability?

Without a plan, you’re not running a business — you’re making an educated guess.

That doesn’t mean your plan won’t change. In fact, it almost certainly will. But having a plan gives you something incredibly important: a starting point and something to adjust when things don’t go as expected.

It’s also incredibly valuable to:

• Talk to other business owners in your industry

• Study competitors in your area

• Study competitors outside your area

• Do market research before launching

One thing almost every business owner learns quickly: starting and running a business is harder than it looks from the outside. Expect challenges and be ready to adjust.

2. How Am I Going to Obtain Clients?

This is one of the most important questions a business owner can answer.

Many new business owners make the mistake of trying to sell to everyone. In reality, businesses tend to be more successful when they clearly define their ideal client.

You need to be able to answer two key questions about your potential clients:

1. Do they want what I’m selling?

2. Can they afford what I’m selling?

If the answer to either question is no, the business may struggle.

For example:

• If people want your product but can’t afford it → You have a pricing problem.

• If people can afford it but don’t want it → You have a marketing or product problem.

• If people both want it and can afford it → Now you have a business opportunity.

One of the best things you can do before starting a business is talk to potential customers. Survey them. Ask questions. Have real conversations.

Many business owners are surprised to learn that what they thought people wanted is not actually what people needed or were willing to pay for.

3. What Are the Costs of Starting the Business?

Business owners almost always underestimate how much it costs to start a business.

Costs may include:

• Inventory or materials

• Software and technology

• Website development

• Marketing and advertising

• Rent or office space

• Build-out and equipment

• Insurance

• Accountant and tax preparation fees

• Legal fees

• Payroll or contractor costs

• Licenses and permits

It’s usually wise to overestimate costs and underestimate revenue early on. That creates a financial cushion and helps prevent cash flow problems.

It’s also very helpful to talk with a tax professional or accountant early, because there are many financial and tax-related items new business owners may not be aware of.

4. What Is the Timeline to Break Even?

This question ties directly into the cost of starting the business.

Most businesses do not become profitable immediately. It takes time to:

• Find clients

• Deliver the product or service

• Get paid

• Build consistent revenue

Meanwhile, the business has ongoing expenses.

You should be able to estimate:

• How many clients do I need to break even?

• How long will it realistically take to get that many clients?

• Can I financially survive until that point?

Simple Example:

If your business expenses are $5,000 per month and you make $100 per client, you need 50 clients per month just to break even.

But how long will it take to get those 50 clients?

• 3 months?

• 12 months?

• 24 months?

This is a critical planning question because many businesses fail not because the idea was bad, but because they ran out of money before they reached profitability.

5. When Do You Close the Business?

This is the hardest question on the list, but it may be one of the most important.

Starting a business is exciting. Business owners are proud of what they’re building. They tell friends and family. They invest time, money, and energy into making it work.

But sometimes, despite best efforts, a business simply isn’t going to work long-term.

The danger is when business owners:

• Rack up credit card debt

• Take out personal loans

• Refinance their home

• Drain retirement accounts

• Continue pouring money into a business that isn’t sustainable

I’ve seen situations where business owners didn’t just end up closing the business — they ended up in a much worse financial position than before they started.

That’s why it’s important to define ahead of time:

• How much money are you willing to invest?

• How long are you willing to try?

• What financial metrics need to be met to continue?

• At what point do you walk away?

Closing a business is not a personal failure. Sometimes it’s a financial decision, and making that decision at the right time can prevent long-term financial damage.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.