I have made a lot of mistakes in my business career. Thankfully, I have made some good choices that have paid big dividends and today I’m blessed to work with some amazing people as a part of a growing, dynamic company. But some mistakes still haunt me and I often like to share them with friends who are embarking in new, entrepreneurial waters. Recently I was talking with a friend who is assessing the possibility of buying an existing business or folding it into something he wants to do. I asked him to answer these 3 questions:

1. Is this something I enjoy and have the aptitude to do? If it’s just about the money, you’ll eventually tire of the long hours and hard work it takes to make something successful. Also sometimes after a couple of very strong margaritas you might be tempted to start a business with your drinking buddy. Don’t do it. That seldom works. Not that I would know from personal experience, of course. Remember, every day you are doing something you don’t like is a day you give up in pursuing your dreams.

2. Is this a business that can be managed better and produce more profit, or is this a fading business model that no matter how well it runs, it will never be profitable again? I would not want to run a newspaper even if you gave me one. It’s a difficult business. 75% of all newspapers in the country lost money last year. Those who didn’t have smaller margins than ever before and are staying afloat by shrinking their workforce and overhead. So don’t be lured by the idea of “getting in” cheap.  Because the “getting out” might just do you in.

3. Do I really understand the risk?. No one starts or takes over a business with the intention of failing in it. Statistically most will not make it. Understand your “walk away” point and its total costs is an important exercise before jumping into any new venture.  You must realize that your total cost is more than just your initial cash and/or work equity. Walking away from a failed business can be crippling, including personal bankruptcy if you are a personal guarantor for the business debts. If failure means losing everything you have built, make sure you are willing to start over from scratch.

What else would you add to this list?