The individual who decides to establish his or her own small business stands on the cusp of an exciting and potentially rewarding period of life. But he or she also faces a number of decisions that will likely have a considerable impact not only on the ultimate success of the entrepreneurial venture, but also the very character of the individual’s life. Of these decisions, perhaps none is more significant than choosing the type of small business that they will establish and maintain.
Factors that should be considered before choosing a small business are numerous, ranging from financial and family issues to those of personal fulfillment and work background. Most consultants recommend that before embarking on an entrepreneurial venture, would-be small business owners start by taking the time to examine their personal strengths and weaknesses, a seemingly fundamental step that, amazingly enough, is sometimes given short shrift in the decision-making process.
Yet a self-examination of positive and negative attributes is of little use to the prospective entrepreneur if he or she rationalizes or discounts negative qualities and overstates positive qualities. Honesty is essential, after all, because these good and bad qualities are going to be the foundation of your business. It is better to find out that the base is insufficiently strong to support your enterprise before you begin building it rather than after. The list should be a comprehensive one, including both personal and professional attributes.
The personal attributes will tend to cover characteristics like your ability to get along with others, your level of self-motivation, your talent for written and oral communication, your temperament, your organizational abilities, and your capacity for forcefully dealing with unpleasant people (customers, employees, vendors, etc.).
An assessment of your professional attributes should include your expertise in various business tasks that you will need to attend to yourself or through oversight of another’s work. These business tasks include bookkeeping, marketing/advertising, sales, financial planning, project management, research, and computers/technology. Once a would-be entrepreneur has taken the time to list his or her attributes, she will be able to glean not only what qualities she already has, but also what areas need shoring up (via training, assistance from employees, etc.). As countless entrepreneurs and researchers can attest, the strengths and weaknesses of the establishment’s owner are, more often than not, reflected in the business itself.
In addition, such an exercise allows the prospective entrepreneur to match his or her personality with a business whose inherent characteristics are compatible. If there is a mutual attraction between what a person enjoys and the type of business he or she intends to operate, it will greatly enhance the likelihood of success. In other words, doing what one likes to do will allow one to work to full potential.
Of course, some people are not well-suited, either in terms of skills or temperament, to run any kind of small business. Successful small business owners are often characterized by self-confidence, energy, and creativity; those who lack some or all of these qualities should think long and hard before launching a business enterprise. Indeed, confidence, determination, and creativity are perhaps the most important personal characteristics necessary for success. During the early years of any new business there will be day when everything will go wrong. An ability to keep striving through times like these, to start every days with confidence that obstacles will be overcome, is important to success.
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Weighing The Alternatives
Most people who start a successful business have an idea for the business before they even think of it as a business.
Typically, new business ideas are inspired by one of four sources: 1) previous work experience; 2) education or training; 3) hobbies, talents, or other personal interests; or 4) recognition of an unanswered need. Whatever the inspiration, potential small business owners need to consider a broad spectrum of factors when choosing whether or not to follow that inspiration and start a new business.
People establish businesses for themselves for a wide variety of reasons. Some entrepreneurs simply tire of being a cog in a larger business enterprise and pine for greater independence, while others are determined to carve out a life for themselves in which they can make a living doing something that they already love to do in their spare time. And, of course, many people take the small business ownership plunge in hopes of improving their financial fortunes or creating a more compatible lifestyle for themselves.
Identifying clearly what you want from a business is essential since what is desired may conflict directly with the realities of the requirements of the business one intends to start. For example, someone who hopes to spend more time with his or her family in the evenings should not decide to open a restaurant or bar. An article in the San Diego Business Journal describes the potential pitfalls to be avoided when starting a new business. “If you have a hobby you enjoy, don’t assume you can turn it into a business, and ‘work and play’ at the same time.
The hobby may stop being fun if it becomes an obligation, or, if you continue pursuing your hobby, you may ignore the business issues, and your company may never reach its full potential.” Matching up one’s goals with the likely requirements of running a particular business is essential to success.
Once a prospective entrepreneur has taken stock of his or her personal and professional talents and areas of interest, consideration of compatible small business options can begin. But even after the entrepreneur has settled on a business idea that seems like an ideal match, a diligent period of risk assessment should be undertaken. After all, starting a new business usually has significant repercussions in various areas of the entrepreneur’s life (and the lives of the entrepreneur’s family members).
Factors that need to be studied include the following:
- Financial Situation—This is usually the single most important factor to consider. Not only do would-be entrepreneurs need to assess their current financial standing, they also need to undertake a comprehensive examination of business start-up costs (including initial operating expenses) and likely—not hoped for—business financial fortunes in the first few years of operation. Quantitative financial analysis is a must.
- Impact on Friends and Family—Family members and friends can often provide valuable insights into the pros and cons of various new business proposals.
Starting a business is an endeavor that will involve family and friends, indirectly if not directly. Having their support from the beginning is very helpful.
- Market for Business’s Products or Services—Wouldbe entrepreneurs need to research the potential market for their business, and the various steps needed to reach and expand on that audience.
- Industry Health and State of Competition—A business does not operate in a vacuum. Generally, a company is subject to the same conditions that affect the overall industry. If consumer spending declines and retail industries as a whole suffer, there’s a good chance that a neighborhood boutique will not be immune and will suffer poor sales. While it is certainly possible to make money in an industry that is experiencing hard times, one can only do so if a conscious effort is made to position the company appropriately. In addition, start-up businesses often find that raising capital is a considerably more difficult task if the business is in a struggling business sector.
- Choice of Partners and/or Managers—Selecting partners and/or key personnel for your new business venture is a task that is both fraught with peril and bursting with possibility. The addition of a talented, enthusiastic business partner or experienced, trustworthy management staff can help get your business off to a sound, promising start. However, taking on an unreliable partner because this person can bring along a big up-front investment can put a swift end to entrepreneurial dreams.
- Franchising Option—Many entrepreneurs choose to make their first venture into the world of small business ownership with a franchise. The franchise market offers opportunities in market segments. The initial entry may be higher with a franchising arrangement. These arrangements also provide a proven business plan and usually offer training for a new entrepreneur as well. This support is comforting to many new business owners and well worth the cost.
Prospective small business owners also need to take precautions to make sure that they are basing their decision to open a new business or buy an existing one on sound business criteria rather than emotionalism, which often strikes hardest during periods of personal stress. For example, some consultants and researchers warn wouldbe entrepreneurs of the hazards of making huge career decisions during a divorce. Others note that the period right after losing a job is usually not the best time to open a new business. Having thought through things and planned thoroughly before launching a new business enterprise can help to avoid the sort of problems that can arise if the decision to start a business is made too quickly or impulsively.