I write this piece to share my personal and professional experience with all of you aspiring entrepreneurs in out there regarding issues that you will likely have to face when starting your own business. Please note that some of the legal topics in this piece apply to someone starting and operating a business in Ontario, Canada.
DO YOU HAVE WHAT IT TAKES?
Experience and education
You need the technical education and experience in your area of interest to provide a great service or product, whether you’re an accountant, a furniture salesman or a web-designer. But if you have only this, it only qualifies you to be great employee. It doesn’t mean you are able to run a business.
To successfully run a small business, you need to be a “jack of all trades” with a working knowledge in the areas of sales & marketing, accounting & finance, business law, and human resources management.
No one expects you to be an expert in these areas to be a successful entrepreneur, but you should know enough to identify potential problems or issues so you can hire an expert to deal with them quickly before problems get worse. If you cannot even identify a problem, then you’re setting yourself up for some major trouble.
If you’ve considered starting up a business, you ideally should first find a job with a successful employer in the industry that interests you and learn all aspects of how the business is run. You should also enroll in some introductory courses in accounting, finance, business law and marketing at a local college or university.
From our experience, most successful entrepreneurs have the following personality traits:
1. They are highly organized
2. They love their work – they are truly passionate about what they do and that gives them an edge over their competition. This translates into a strong work ethic, and the best entrepreneurs are considered “workaholics”.
3. They have a broad range of interests and talents. In the context of running a business, they are good at selling, financial management and working with people. This goes back to being a “jack-of-all trades” in order to succeed in business.
4. They can tolerate risk but carefully assess risks before making any major decisions.
To be more specific, there are people who are highly intelligent and educated, but require the emotional security blanket of having a job with a steady paycheque. At the other end of the scale are business people who will make decisions recklessly without first getting facts, analyzing them and then weighing the risks. Neither of these types can be successful entrepreneurs in the long run.
PREPARE A BUSINESS PLAN
Why? Because you need to know who you’re selling to – what’s the point of being in business if you can’t sell your product or service?
You also need to know how much it’s going to cost to set up and run your business. After all, if you spend more than what you sell, you’ll be losing money. Why be in business if you’re losing money all the time?
Finally, unless you already have a lot of money in the bank, you need to figure out how you’re going to finance the start up costs of your business.
Who are you selling to (define your market)?
If you took our advice previously and worked for a company specializing in your industry of interest, you should have an idea of who you can sell to and at what price.
If you didn’t, and have no idea whatsoever, then stop right here – you shouldn’t be starting a business at all.
Will I make any money (preparing a cash-flow projection)?
The most common costs you’ll incur can be separated into two categories:
- Legal fees if you’re incorporating your business
- First and last months rent if you’re operating from rented premises
- Costs of setting up an IT network, phone and fax system
- Office furniture
Monthly operating costs
- Inventory purchases if you’re selling goods
- Professional fees (accounting, legal)
- Leasing costs for business equipment
Once you’re able to estimate what you can sell and your cost of doing business, you (or you and your accountant) are in a position to put together a cash-flow projection.
The purpose of putting together a cash-flow projection is to determine if it makes sense to go into business in the first place.
Therefore, get accurate information about what how much you can sell and how much it costs to set up and operate. If you don’t do this before proceeding with actually going ahead with the business, it could lead to disaster.