If it’s your dream to start your own business, there are some cardinal rules that, if followed, will help you dodge becoming a start-up failure statistic. Your road to starting your own business begins here.
Starting a small business: Being your own boss
One of the biggest choices a would-be entrepreneur needs to make is whether to walk away from a relatively secure, salaried job in order to pursue their own-business dreams. But the transition from being an employee to being an entrepreneur is a big one and there are things you should be prepared for:
How comfortable are you with risk?
Not only will you need to decide on leaving your job for starting a business, you may also need to fund it with personal savings, taking a loan, or cashing in a retirement policy.
Entrepreneurship by its nature involves a degree of uncertainty, and as your own boss, you’ll need to make some tough and/or unpopular decisions.
The key is to take calculated risk – make sure you’ve done as much research as possible on the industry, your business model, your target market, and financials.
Do you have the right characteristics?
Great entrepreneurs are independent, stubborn, charismatic, resilient, persuasive, able to negotiate, creative, and natural-born leaders. If you don’t possess these traits, it doesn’t knock you out of the game.
Recommended by Entrepreneur
Be sure that the kind of business you’re entering suits your personality type. For example, a PR agency will require a business person who is tenacious, out-going, sociable, and loves interacting with people. An accountant, on the other hand, may not require such high social skills.
Are you in it for the love of it?
There will be times when money is tight, when hard decisions need to be made, and when family and personal time gets sacrificed for the business. If the dream you’re chasing is just to get rich, it won’t sustain you very long. You need to eat, live and breathe your passion and dream.
Do you have the right skills?
If you’re leaving corporate, ensure that you have all the necessary skills to run a business, or be prepared to reach out for help. Many corporate individuals have expertise in a particular field but don’t have all the other skills needed to run a business.
Be prepared to learn how to fill the gaps, ask for help, or outsource or hire for the necessary skills.
Have you planned properly for starting a small business?
A start-up may start out of the blue, but no successful business has survived and thrived by winging it all the time. A successful small business starts with a careful plan.
Related: Do You Speak Start-up?
First define why you are starting a business
Is it to be your own boss, to make more money, to gain more independence, to have more time, to sell for millions one day, is it for a steady income, because there’s a gap in the market, or you want to turn your hobby/personal interest/passion into a meaningful business?
Second, come up with a sound business plan
No idea can be realised or made to last without some planning. A business plan is your first port of call to mapping out your business.
Next, who will be part of the business?
Are you a sole proprietor who will run all aspects of the business? Will you have partners in the business and what will they bring to the table? A word of caution: Choose your partnerships wisely – if it’s a family business, be sure there are boundaries in place and that roles are well defined.
Make sure your business partners complement your skills and knowledge with their own. While things may start off well, make sure you have an attorney draw up papers of who’s who and contributed what in the event things go south.
Where will the money come from?
While some businesses can be started with very little, many will need a cash injection to bring them to life. Will you use personal savings, take out a loan, seek investors, court venture capitalists, self-fund and bootstrap the business?
Each option comes with its own pros and cons, so investigate them carefully. Also be mindful and realistic about return on investment – it’s very rare that a business will make back 100% of its start-up capital in the timeframe you initially expect. Be conservative in your estimations.
Pay close attention to running costs
Sometimes it can take up to three years before a business reaches break-even and starts to make a profit. So, while you’re working toward this point, keep your books immaculate, document all outgoing and incoming money. It will help you pin point areas where expenditure can be trimmed and income improved on.
The importance of networking when starting a small business
Networking is one of the most important activities you’ll be involved in when starting your business. Entrepreneurship is a hard game and can be a very lonely and isolating experience for some. By networking with other entrepreneurs, you will learn that your fears and challenges aren’t always unique to you, but just par for the course. Sharing with other entrepreneurs can give you confidence and motivation to keep going.
Networking can also help you land clients by giving you the opportunity to rub shoulders with people who may need your product or service – think conferences, trade shows, industry events – or may put you in contact with people who can provide you with skills, resources and advice.
If you’re not in need of help, networking is a great opportunity to market your company and position yourself as an industry expert. If people get to know you as the industry go-to-guy, you’ll develop a positive reputation, gain trust, and business can follow.
Landing clients: A small business imperative
Without clients, a business is a non-start. So once you’ve got your business plan in order, focus your attention on landing your first client as soon as possible. For some entrepreneurs this may involve taking on clients from their previous job, from networking, or through word of mouth.
For others it may involve finding clients from scratch. If you’re providing a new product or service, make your clients fully aware that it’s a work in progress and that things will improve with customer feedback. You may even want to get your first client by offering a free trial period or at discounted rates.
The object of getting your first client is to get feedback as quickly as possible and develop your offering based on their needs and demands, rather than producing a 100% ready for market offering that doesn’t meet the needs of your target market.
Related: Advice for Starting a Business
Starting a small business: The most common mistakes
Key performance indicators
To help you stay focused during the start-up phase and at the same time avoid tunnel vision, it helps to keep track of Key Performance Indicators (KPIs) you’ve set in place.
KPIs are used to measure performance and success in your business, and help you towards your business goals. These can be as simple as 100% customer satisfaction, zero injuries on site, or minimal defects, for example.
Each KPI should be constructed with a particular purpose in mind – the KPIs for finance will be different to KPIs for sales, for example. Some kinds of KPI include: Marketing, production, IT, supply chain management, finance, business government, sales, etc.
Focusing on high-impact tasks
With limited amounts of time and energy given to each day, week, month and year, it’s important to assess your business goals, set realistic milestones and plan accordingly. It is of use for every entrepreneur to do some research into the 80/20 principle: Where 80% of the results come from 20% of the causes.
Focus on your best customers, on selling and improving your best selling product or service. Enable your best staff to do better – fundamentally focus your attention on high impact tasks rather than being bogged down in emails for example.
Types of small businesses
Are you ready to start your business? Here are three kinds to mull on:
- Consultancy – If you have expertise in a particular field, you can start a consultancy providing professional expertise to those who need it.
- Part-time – Believe it or not, you can start a business while being employed at the same time. This kind of venture will be quite demanding, but also worthwhile as you will be able to determine whether your business idea is ready to support your financial needs before cutting off the monthly salary. It is advisable that your employer be aware that you’re running a side-line business, as most employers will support you in your entrepreneurial endeavours provided that it’s not infringing on your work time and the company’s resources.
- Hobby – if you’ve got a personal interest or hobby that can be used to create a profit, then you have a potential business in your hands. Make sure you do your market analysis though and carefully evaluate the amount of time and capital required and versus the income you can gain.
Related: Start A Part Time Business
From here, evaluate whether you can run your business from a home-office, whether you’ll need to rent office or manufacturing space – and can this space be shared with another business, and whether you’ll need staff. Will your staff need to be full-time, part-time, temp, or even a virtual assistant, and will they need training and/or specialised skills to assist you and your business?
When hiring staff, ensure that an employment contract is drawn up with all terms, conditions and expectations in writing, that it is signed by both you and the employee, and that it conforms with the Basic Conditions of Employment Act.