So, if you're thinking about making the leap, what are some things to consider? Let's take a look:
1. Know your industry: I read lots of business plans. And, one common theme is: the entrepreneur has only a sketchy understanding of the industry and competition.
And, I think this can be a dangerous sign.
However, with the internet, you can get a great understanding of an industry. For example, you can look at trade association websites, industry publications and even government sources.
Finally, there's a good book on the subject: Successful Business Research: Straight to the Numbers You Need--Fast!.
2. Write an executive summary: With your industry research, this should be easier to do. Also, specify the business model (how do you make money?); the competition; a forecast and key milestones; and marketing strategies.
Make this simple and concise (hopefully the summary is only one page).
3. Where's the money? That is, how will you get customers to pay you?
For example, according to James Klingler, who is the Assistant Professor of Management and Operations at the Villanova School of Business:
"Too many businesses are started without a clear path to money. Often this stems from not really understanding who the customer is and how the business will reach that customer. Self delusion can often be found in the assumptions made about getting to the customer."
So, it's a good idea to talk to potential customers. And talk to many of them.
4. Leverage: Don't do everything yourself. In fact, with virtual assistants, on-demand applications and outsourcing, there are cost-effective ways to deal with many business functions (such as payroll, customer management systems and so on).
So, I had a chance to interview Tim Berry, who is the founder of Palo Alto Software (which develops business plans and marketing software) and the author of a new book, The Plan-as-You-Go Business Plan. He says: "One of the mistakes I made along the way was trying to do too much alone. Even if you're the lone ranger, don't try to do all the legal and all the bookkeeping and all the administration and all the selling and all the marketing and ... whew, I need to take a breath. Way too many people fail because they don't recognize that nobody's really good at everything. They play too close and too tight. Get help. Make sure you have an attorney you trust and an accountant you trust, at the very least. This is the real world; it takes a village to build a business."
5. Reality check: Take a realistic assessment of yourself. Can you deal with lots of stress? Are you OK with working long hours? Can you sell your products and services?
Yes, it's tough stuff. But, if done right, starting a business can be a tremendous experience.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.