Chapter 2 – Getting Started
So you want to be an entrepreneur…
You have made a very important decision, but have you really considered
all the implications?
Many Northerners have thought about the benefits of starting a business, but are you really ready for the changes it will bring in your life? How much risk are you willing to take?
The decision to get into business is one that only you can make. The level of risk that you may feel comfortable with may be too great for someone else. This handbook will not help you assess your personal tolerance for taking risks, but it will take you step-by-step through the major decisions you must make in bringing your business idea from vision to reality.
Why do you want to get into business?
To be an entrepreneur is to be a risk taker. At the heart of every new business is an entrepreneur: someone not content to leave things the same. As an entrepreneur, you bring two important ingredients to your new business:
- Your confidence in your idea.
- Your willingness to accept the hard work and long hours necessary for success.
Before setting the wheels in motion, it is important for you to evaluate your reasons for getting into business and your capabilities.
Assessing your personal strengths and weaknesses
Running a business requires skills in management, organization, accounting, marketing and economics. Few managers possess all of these skills. You must carefully review your own strengths and weaknesses and develop strategies for getting help where you need it.
Assessing your personal risk tolerance
There is no such thing as a risk-free investment. Your challenge is to:
- Decide on the level of risk you are willing to assume.
- Understand the consequences of that choice.
Being your own boss can offer great personal satisfaction, but with it comes the responsibility for making decisions and living with the consequences. The right decision offers profit and success. The wrong decision can cost you – and others who have helped you to get into business. Wrong decisions can put you out of business.
Your decision to enter into business will have implications on your lifestyle. When considering your decision ask yourself:
- Do I have enough experience in my choice of business and, if not, how do I obtain it?
- Am I a risk taker? Do I understand the implications of my decision?
- Should I maintain my current employment or will my business provide enough income to meet my needs?
- Is my family supportive and understanding?
Assessing your financial resources
Starting a business requires money. You will also need money to support yourself and your family while you are working on your business. You must estimate:
- The amount of money you are willing to put at risk.
- The minimum income needed to meet your current obligations and
continue to live comfortably.
STEP 1: Estimate your capital assets
You will need to invest capital (money, property and effort) in your business. You may need to sell some of your personal assets to obtain the cash needed to start your business. In undertaking this assessment, you must determine your net assets: what you own less what you owe.
What you own:
- Real estate
- Automobiles and equipment
Less what you owe:
- Charge accounts
STEP 2: Estimate the income you need to live
Your business must pay you enough to cover your living expenses. Include expense items such as:
- Monthly payments on loans and credit cards
- Rent or mortgage payments
- Food and clothing
- Automobile expenses
If you plan to continue working somewhere else while starting your business, do not forget to include the money you will earn in your income calculations.
Recognizing the risks
Businesses fail for a variety of reasons. Some common reasons for failure include:
- Lack of experience.
- The wrong product.
- Poor timing.
- Lack of capital.
- Too high or too low pricing.
- Too much or too little inventory.
- Overspending on buildings and equipment.
- Giving credit to the wrong customers.
- Excessive withdrawals by owners.
- Unplanned expansion.
- The wrong attitude.
- The wrong location.
- Family pressure.
- Lack of market research.
- Poor customer service.
- Lack of supportive and capable staff.
- Expecting too much, too fast.
Strategies for reducing risk
There are some steps you can take to lower your chance of failure, including:
- Talking to people. Meet with potential clients to discuss your idea and what they want as customers.
- Looking at the industry leader. If there are others in your business within your community or in other communities that are particularly successful, see what they are doing right.
- Considering playing it safer by doing your idea on a small scale.
- Educating yourself in bookkeeping, marketing, people management, business management, accounting and computers.
- Making sure you have up-to-date knowledge about regulations that may affect you.
- Working for another business like the one you want to start.
- Reducing start-up costs by starting a home-based business on a part-time or full-time basis.
- Getting professional financial, employment, marketing and legal advice before you start.