5 Steps Gen Z Should Take Before Spending Money on a Business Idea
Gen Z has grown up surrounded by creators who make entrepreneurship look fast, glamorous and wildly profitable.
One scroll through social media can make starting a business look simple: Turn a hobby into a side hustle, build an audience and watch the money roll in. However, before spending money, aspiring founders need evidence that customers will pay.
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Here are five steps Gen Z should take before spending money on a business idea.
1. Separate Attention from Demand
A large following can help a business reach potential customers, but it doesn’t prove that those people will buy.
To determine whether an audience represents a viable market, the Small Business Administration recommends researching potential buyers and competitors.
Tash Jefferies, founder and CEO of startup education company MoneyEngine, recommends testing willingness to pay before building. Options include:
A one-page site with a real price and payment link for presales.
A $5 to $10 refundable deposit to reserve a spot.
A small paid pilot.
“A poll that asks, ‘Would you pay for this?’ measures enthusiasm,” she said. “A checkout page measures commitment.”
2. Find Your Customers
Brian Shea, CEO of business growth consulting firm Lucrum Partners, recommends interviewing 15 to 20 potential customers who recently tried to solve the problem the business addresses. Ask what they tried, what it cost and why it fell short.
“‘I already paid for something similar, and it did not work’ is a stronger buying signal than ‘I would probably buy that,’” he said.
Shea said the likely customer is experiencing the problem now, dissatisfied with the current alternative and motivated to make a change.
3. Budget for Real-World Costs
A business launched through a phone or social platform can still carry significant costs.
“Distribution is usually underestimated,” said Ethan Davids, founder of software comparison site Growth Reviewed. “Having an Instagram or TikTok account does not automatically create customers.”
Davids advises budgeting for content production, landing pages, payment processing, analytics, software, advertising, customer support, fulfillment, and returns. He also recommends reserving money to test and improve the offer.
The Small Business Administration also recommends separating one-time startup costs from monthly expenses.
4. Protect Personal Finances
Early financial decisions can determine how much risk a founder takes on.
Dennis Siggins, co-founder of American Gutter Monkeys, a franchise company that trains business owners, said founders should understand their finances or work with someone who does.
“The start-up owner must either have a strong financial background or partner with someone who does,” he said.
Jennifer Openshaw, CEO of youth business education nonprofit Girls With Impact, urges founders to limit personal spending to what the founder can afford to lose, prioritize customer revenue, then exploring grants, competitions and crowdfunding.
“Be extremely cautious about credit-card debt,” Openshaw said. “Interest rates can be very high, and the bill still comes due if your business doesn’t work.”
5. Decide When To Stop
Before spending, founders should establish what would make them abandon the idea, said JT Taylor, an operations consultant who teaches Gen Z founders through his free Small Business MBA program.
“Write the kill number down first,” he said.
Taylor recommends recording what evidence would prove the idea wrong and setting a review date. Together, those limits give founders a point to reconsider before pouring more savings into an unproven business.
“A pre-mortem is free,” Taylor said. “A post-mortem is not.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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