"Owning my own business." It sounds like a wonderful idea: making your own choices, setting your own goals, keeping your own money. However, not every business makes it out of the starting blocks, and not everyone is cut out to be an entrepreneur.
Before you look outward to the benefits of owning your own business, look inward and make sure that you are 'entrepreneur material.' At the heart of every new business is the entrepreneur, the base upon which all other aspects of the business will rest. The qualities of this entrepreneur will be reflected in the ultimate success or failure of the new venture.
When larger firms looking for personnel advertise for a 'self starter', they are looking for someone with a key entrepreneurial ingredient. As your own boss, you will be responsible for 'getting out of your bed on your own' every morning. You may think that you already do this, but with no timeclock to punch, and no boss watching the door, it's very easy to come in a little later, leave a little earlier, or take a longer lunch break. Fledgling small business owners learn the hard way that their new-found freedom is more a state of mind than a state of body. In fact, studies show that people who own their own businesses often spend longer hours at their new business that they did when working for someone else.
As an entrepreneur, you must have a healthy dose of self-confidence. You must be totally committed to your business idea, and then have the confidence to sell others (notably banks), on that idea. It takes single-minded determination to forge ahead, even when family or friends oppose the idea, or worse, ridicule it. An entrepreneur must maintain her confidence, even in the face of non-confidence votes from those closest to her.
This same confidence carries over to the ability to take calculated risks. By their very nature, entrepreneurs are risk-takers. They move beyond their own status quo, constantly thinking ahead to new goals for their lives and businesses. To reach these goals, they confidently take risks, trusting in their own instincts and reactions.
An entrepreneur is also a leader. Running your own business means that you are now 'the boss' and all the responsibilities of that position now fall upon you. You need to have an inner urge to direct, lead and be a manager of people. You'll need to be a good communicator, too. It's no good being the boss if you can't communicate with your employees.
Most entrepreneurs are high in analytical ability. This is the ability to analyse - to extract the significant meaning or trend - from a situation, a problem, a report or a statistic. The successful entrepreneur is the one who saw the new market trend before her competitors did, or used her financial statements to emphasise the profitable side of the business, or recognised her buyer profile from her sales statistics.
All would-be entrepreneurs must have the 3Rs. Ask yourself these three key questions:
1. Am I Resilient? Can I bounce back after a bad decision, a rough sales week, or a slow market? Can I continue to operate with the same degree of enthusiasm with which I started? Or, am I easily discouraged when I encounter roadblocks on the way to attaining my goals?
2. Am I Resourceful? Can I live without my regular pay cheque and rely upon my own skills and abilities to create my income? Or do I get panicky and worried at the thought of an uncertain income?
3. Am I Resolute? Can I 'hang in there', stick it out, and give my business a chance to make it? Or do I tend to give up easily either through boredom or hardship?
Before you embark on your business venture, consider carefully the person who will be running that business. An entrepreneur can be anyone, but not everyone can be an entrepreneur.
If you decide that you are definitely the person to run her own small business, be aware of the five external reasons that most small businesses fail.
"Only five?", you may say. There are a myriad of reasons why small businesses have a high failure rate, but these five danger areas are early warning signs of trouble ahead for the new entrepreneur.
Lack of experience: It's surprising how many entrepreneurs leap into a business enterprise with little or no experience in that particular field. For every story of the woman who made a million in a brand new business, there are a million stories of the woman who found herself over her head in an unknown environment. Statistics show that you are more likely to be successful in a business in which you have personal experience. It makes sense: after all, few would-be programmers set up shop before they've learned how to turn on the computer.
Lack of money: Starting a business on a 'shoestring' sounds good, but more often than not, the shoestring proves to be too short! One of the soundest pieces of advice that an entrepreneur can heed is to make sure she has all her finances in place before she begins. Your financial resources must be sufficient to withstand the strain of start-up for the first year or so. A general rule-of-thumb is that you should have a cash flow position (money available), to enable you to survive at least three, and optimally, six bad months. When you estimate how much money you need to start your business, always estimate from a 'worst case' scenario. That way, there won't be any surprises six months down the road when the business is finally beginning to show promise, but your cash has dried up.
The wrong location: The real estate adage that 'location, location, location' are the three most important factors in selling a house also applies to your small business off line or online. You can have the greatest product in the country, but if your location if difficult to find, in an unsavoury neighbourhood, off the beaten track with no easy parking nearby, your product will remain the country's best-kept secret. A new business has enough difficulties in the first year without adding the burden of a poor location. Look for the best possible location for your new business, and give it the advantage it deserves.
Overhead too high: On the other hand, the best location in the world may be the worst choice for your business. Why? Because it may be too expensive for your business to carry. Some small business owners make the mistake of choosing locations that immediately burden their businesses with high overhead expenses - expenses like rents, leasing costs, utilities, maintenance fees, shared advertising and marketing costs. Being in a prime location such as a large shopping centre may guarantee a steady supply of customers, but most new businesses do not have the operating capital to cover these expenses until they win customer interest and loyalty. Rather than starting off with high overhead expenses, build the move to a more expensive location into your business plan. Consider it part of a natural expansion once the business is up and running, and generating revenues.
Taking too much out of the business: Everyone knows that you are not in business just for something to do. You expect your business to pay the mortgage and put bread on the table. However, simply dipping into the till everytime you need a few dollars is deceiving. You may think that you're only spending a minimal amount, but over the months, it quickly adds up to a substantial sum and a major drain on your working capital. It's vital that you control how much you take from the business for your own personal use. The best way to do this is pay yourself a regular 'salary', either a fixed amount each month or a percentage of the profits. In your initial cash-flow forecasting, count your personal drawings as a fixed expense, not as a flexible amount which depends entirely upon your own generosity.
If a new owner is experience is her chosen business field, if she is financially ready for any situation, if her business location if right for her enterprise, if she keeps overhead costs within reasonable limits, and if she has control over her own spends, then her business is on the right track for success.
No one says that starting and running a small business is easy, but the dangers are clearly marked by the experiences of those who have gone ahead. The forewarned entrepreneur is forearmed to avoid the costly mistakes that will put her business in jeopardy.
Originially published in Her Business magazine
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