Characteristics of a Successful Entrepreneur
Guts: Guts means you must have an entrepreneurial instinct, which is an overwhelming desire to start your own business. You must have the guts and dedication to be completely devoted to your goal. Incidentally, devotion to your goal is much more likely if you have a love for your intended business. Life is too short to start your own business only to discover that it doesn't give you satisfaction and joy. And, through good times and bad times, you will stick with something you love.
Brains: While appropriate educational credentials are important, entrepreneurial "brains" means more than scholastic achievements. To become a successful entrepreneur, you must have a working knowledge about the business you plan to start before you start it. Common sense combined with appropriate experience is the necessary brainpower. Prudence, follow through and attention to detail are very important.
Capital: To start your own business you will need seed money of your own plus sufficient cash to maintain a positive cash flow for at least the first year. In a future session you will learn how to forecast future cash requirements through cash flow control. Many businesses can be started on a very small scale with a small investment. Then, as the business grows and you gain experience, cash flow from your business can be used for growth. In some cases you don't need starting capital to hire other people because you might start by doing everything yourself. The "do it yourself" start is a good way to learn everything about your business and also makes you better qualified to delegate work to others later on. You can control your risk by placing a limit on how much you invest in your business.
How To Start Your Own Business: A Step-by-Step Approach
Decide if you really want to be in business:
You will be putting some (not all, hopefully) of your net worth at risk when you take the plunge and start your own business. You will run the risk of becoming eccentric, meaning creating a life that is out of balance, with working hours taking away from other family or pleasurable activities. There may be levels of stress you have not experienced as an employee.
Decide what business and where:
Once you have decided you have the characteristics of a successful entrepreneur and that you definitely want to be in business, then you must decide which business is best for you and where to locate that business. Selection strategy is covered later on in this Session.
Decide whether to start full-time or moonlight:
There are some interesting advantages and some pitfalls in starting as a moonlight business. (That is, a business you start in your off hours while still working at your current job.) More often than not, the advantages of starting your business as a moonlighter outweigh the risks:
- You avoid burning your bridges of earnings, including retirement, health and fringe benefits and vacations.
- Your full-time job won't suffer if you maintain certain conflict of interest disciplines, including compartmentalizing your job and business into completely separate worlds.
- You can avoid conflict of interest with your job by choosing a business that is appropriate for moonlighting, such as: single products, real estate, specialized food, e-commerce, direct marketing or family-run operations.
- There are great advantages for operating a family business. The family can run the business while you are at work. You have a built-in organizational structure. You can teach your kids the benefits of being in business.
But there are also some pitfalls to consider in starting a moonlight business:
- There is a temptation to spend time at your job working on your moonlight business. That is unfair to your employer and should not be done under any circumstances. (You may need a family member or some trusted person to cover emergencies when you are at your job.)
- Another problem may be competing with your employer, which, again, is not right. Think of how you would feel or handle this employee if you were the boss.
- Any kind of conflict with your regular work can jeopardize your job and your moonlight business.
- Overwork and mental and physical exhaustion can also become a very real problem for moonlight entrepreneurs.
Selecting the wrong business is the most frequent mistake that start-up entrepreneurs make. Here is a checklist to help you select a successful one:
- Take your time and wait for the business that is just right for you. You will not be penalized for missing opportunities. The selection process takes a lot of planning and your experience and complete knowledge is vital for your success when learning how to start your own business.
- Don't tackle businesses that may be too challenging. It is better to identify a one-foot hurdle than try to jump a seven-footer.
- Try to identify a business that has long-term economic potential. Follow Wayne Gretzky's advice, "Go to where the puck is going, not to where it is."
- A big mistake can be an error of omission. This means you may fail to see an opportunity that is right in front of you.
- Look for a business that will grow in today's and tomorrow's markets. Many small retail stores are no longer in business because huge stores such as Wal-Mart and Home Depot provide more choices to the customer and often at a cheaper price.
- Follow the advice of Warren Buffett, Chairman of Berkshire-Hathaway Inc. and the most successful business picker in American history: Mr. Buffett looks for businesses that focus on a "consumer monopoly" with pricing power and long-term predictable growth prospects. Examples include: See's Candy's, Coca-Cola and Gillette Razors. Can you copycat this philosophy in a small way?
- Businesses to avoid are "commodity" businesses where you must compete entirely on price and in which you must have the lowest cost to survive. As Mr. Buffett has said, "In a commodity type business you're only as smart as your dumbest competitor."
- Most service businesses have pricing power.
- Should you bet on a business you don't know when you can bet on a business you do know?
- If you intend to manufacture a product, consider the pros and cons of contracting out production to a low-cost supplier. In other words, operate a "hollow corporation." A "hollow corporation" is a company that subcontracts manufacturing and packaging.
Things to Watch Out For: