10 Million Americans Applied to Start a Small Business in the Past 2 Years. Should You?

Starting a business is a big risk, but one that could very much pay off.

For some people, starting a small business is something they've dreamed about for years. And if you're in that category, it may be time to take that leap.

In his recent State of the Union Address, President Biden said that 10 million Americans applied to start a small business over the past two years. And he also called small businesses an "act of hope."

He's not wrong. Small businesses have long been hailed as the backbone of the economy. Not only do they tend to create local jobs, but they also have the potential to benefit communities in many ways.

Of course, starting a small business is a major change. And it's one that can be risky. If you're a salaried employee now, you're talking about giving up a steady paycheck and taking the chance that it could take months, if not years, for your small business to become profitable.

But starting a small business could also improve your quality of life in many ways, not to mention benefit you financially in the long run. So if you're thinking of going this route, ask yourself these questions to see if it's right for you.

1. Do I have a concrete plan?

Maybe you love baking and want to turn it into a business. That's all fine and good. But what will your business actually look like?

Will you sell baked goods directly to customers? Or will you target supermarkets, restaurants, and speciality stores? And if you'll be doing the baking because you're the one with the recipes and skills, who will be in charge of the many other aspects of that business, from paying the rent to reviewing bank account statements and handling invoices?

If you're serious about starting a small business, it's not enough to simply have a cool idea. Rather, you need a detailed business plan. If you don't have one yet, write one up -- and then think about quitting your job to venture out on your own.

2. Am I about to experience any major life changes?

Starting a small business can be jarring enough. So if you're on the cusp of another big life change, like having a baby, then you may want to hold off until things settle down.

It's natural to want to throw yourself into your new business, and you might need to do that for it to have a chance of being successful. But you'll need to make sure the timing is right to be dedicating yourself to that sort of thing.

3. Do I have plenty of savings?

It's hard to say when a new business will become profitable. And the last thing you want is to rack up scores of credit card debt in the absence of earning an income.

Before you start your business, assess your personal savings. Do you have enough money to pay for at least a year's worth of bills? If so, you're in pretty good shape to give up earning a paycheck for a while. If not, you may want to hold off on starting a business and boost your cash reserves.

Starting a small business could end up being the best career-related and financial move you ever make. But answer these questions first so you don't wind up regretting your decision.