THINKING OF STARTING YOUR OWN BUSINESS?
By Nancy Hughes Coe, As featured in At Home Tennessee, October 2007 Issue
MANY OF US HAVE AT LEAST GIVEN AT LEAST SOME thought to starting our own business.
For the most part, these thoughts go no further than daydreams that help pass the time in traffic or are used to smooth over the rough edges of a difficult day. Over the past 10 years, however, more and more Americans have turned these dreams into reality. Whether they are owned by early retirees, MBAs just out of graduate school or the married couple on the next block, tens of thousands of small businesses are established every year. In fact, it's generally recognized that small businesses account for more than half of the U.S. workforce. Ongoing advances in information technology and telecommunications have helped turn many a former employee into an owner-at least for a time.
Successful entrepreneurship, however, remains an elusive prospect. Starting your own business is an extremely serious undertaking---especially for people who have become accustomed to the security of working for an established company. Without a doubt, the odds of achieving long-term success are small. It is generally accepted that most new small businesses fail within their first year of operation and that around nine out of ten last no longer than five years. Despite these discouraging numbers, success can happen. Patience, hard work and careful planning are some of the necessary ingredients. Although a thorough examination of the ins and outs of starting a small business would fill several volumes, the following discussion can help give prospective entrepreneurs some idea of the challenges ahead.
The prospect of owning your own business may seem attractive, but it isn't for everyone. People who are unable to thrive in a challenging environment, who are averse to taking risks or who find it difficult to make decisions and accept the resulting responsibilities are poor candidates for entrepreneurship. As a small-business owner you have to make a total commitment, since your business will require tremendous amounts of your time and energy.
As is true of life's other major decisions, such as choosing a college, buying a home or raising a family, starting a business requires considerable planning. Without a comprehensive business plan your chances of success will be greatly reduced. Hopes for outside funding and credit from suppliers depend largely on how favorably banks and other lenders view your plan. In addition, inadequate planning will make it difficult to manage overall operations, since a good business plan serves as your blueprint for the future. To be effective, your business plan should answer these basic questions:
What will the business do?, What are its resources?, Where is it going?, How will it get there?, How will you measure success?
A well-prepared business plan will also demonstrate that you've given serious thought to creating your business and that you view the future pragmatically. Professionally prepared plans, should you decide to take that route, will fully describe every major aspect of the proposed venture. These include, but are not limited to, identifying your new business's Principal owners, Products and services, Marketing strategy, Problems and opportunities, Realistic sales, market share and profit objectives, Preliminary budgets.
Inadequate start-up funding leads to many small-business failures. Having too little money in reserve as your business struggles to get off the ground can quickly lead to disaster. Many small-business owners overlook the time gap separating the ribbon-cutting ceremony from the first flow of profits. Having only enough cash on hand for a few months' rent, essential equipment and basic inventory will leave you vulnerable to unforeseen difficulties. Operating a business would be considerably easier if enthusiasm, hard work and dedication were the sole requirements for success. But the fate of every enterprise ultimately depends on the numbers. Therefore, an accurate, easily understood, timely accounting system is an absolute must. Otherwise, accurate records will be impossible to keep - one of the worst mistakes a small-business owner can make.
Another leading cause of small-business failure is poor management. Since small-business owners are unable to rely on subsidiaries or other divisions to help carry the load when profits turn scarce, they must stay in constant touch with the needs of their businesses. This will help prevent small problems from growing larger. Yet managers must also be flexible if they are to cope successfully with personality differences and changes in economic conditions. The small-business owner must also be capable of gathering and maintaining an effective workforce. Unless you are running a one-person operation, your employees will have a considerable amount of contact with your customers. And their actions will serve as a direct reflection on your company. To help assemble the right people for the job, take the time to completely spell out all Job descriptions, Required experience and education levels, Salaries and benefits, Training and promotion procedures.
Most small-business owners take pride in their independence and problem handling skills. But even the most skilled entrepreneur may need the assistance of a professional from time to time----often when it can least be afforded. Fortunately, however, professional business advice need not be expensive. Business and trade associations, chambers of commerce and the local library, just to name a few, are all sources of modestly priced - or free - expertise. Don't let a misplaced sense of pride prevent you from discovering the solutions to your business problems. Determine how much help you need and try to get it as early as possible.