What sort of person are you?
Do you like to act on impulse or do you normally consider all the angles before making a decision? If you belong to the first category, no doubt you have enjoyed the fun and the excitement of doing something on the spur of the moment. However, if you want to go into business, you really need to belong to the second category. Why is that?
Why is so important to look at all the angles?
Running your own business is a life-changing experience. I have heard people giving all sorts of reasons as to why they want to run a business. Here are some:
- You are in control: Maybe, but no one is in total control. Get things wrong and you may find that others may actually control you. Even when things go well, a successful business owner knows that his freedom is limited. For example some clients may be demanding and although you do not report to a boss, you may find that you are actually reporting to your clients.
- You can decide when to work: Maybe, but often you need to work so hard to establish your own business that 10 hours a day may not be enough. As clients increase and resources are limited you may have to work longer than expected.
- You can choose the people you work with: Maybe, but how easy is it to find good people? It can literally take years to find good staff and it takes real experience to identify good qualities in others.
- You like taking risks and enjoy the rewards: Maybe that is also true, but have you considered taking a risk which results in a loss? It is a lot more stressful than you think. Do you have the personality and resources to cope with it?
- You love new challenges: That is great and yet I have some clients who tell me that “the work they love doing has turned into a job they hate”. Running a business is a different thing than having a job. A business is an organisation of departments. You need to have the skills to get them to work well together.
- You want to feel you own something: Great, but make sure that you do not end up having so many debts that someone else owns you!
Now, if you still want to run a business, here are some important factors you need to look for.
“What factors should you look for before starting a new business?”
1. Products & Services
First of all you need to look at your products and services you wish to offer. You need to have deep knowledge of what you want to sell. Have you compared your product/services with those offered by the competition? I find that comparing is a very important function to gauge the quality of any item. No wonder internet based comparison sites are so popular.
Once you are satisfied that you have a good product, you need to think about the marketing. I believe that good marketing is one of the main success factors in any business. So I say, “Market, Market, Market your products and services”. But what is marketing? Marketing is a mix of communication channels. Each product or service requires a different mix. So if you want to open a shop you need to use different marketing channels from those of a consultancy firm operating from an office in London. Marketing and advertising are fundamental in getting awareness about your business, getting it wrong can be very expensive both in real terms and in terms of lost revenue.
The third element is perhaps the most important and that is funding. You must make sure you have the right level of funding in place. For example opening a shop is much more expensive than starting a consultancy firm. Even before a shop starts trading the leasing agreement imposed by the Landlord may be very onerous. Add to this Council Tax, security and all other costs and you may have heavy losses to deal with even before the business actually starts trading. Therefore, understating the funding needed to run a successful business is a major issue. In my experience it is vital to prepare a good plan covering at least the first 3 years of trading. If necessary budget for initial losses and make sure you have the right funding in place.
The forth element for a successful business is to look for support. There is plenty of advice out there and not all of the advice is beneficial. So you need to sift to make sure that you surround yourself with experienced and knowledgeable advisors who can help you make good decisions.
Finally I would like to mention a comment that was made to me by a successful industrialist many years ago. He likened starting a business to that special moment in time when a plane takes off (he had a private plane and I think I was sitting next to him in his plane when he said this).
You cannot abort a flight once the plane gains momentum and then leaves the ground.
It is similar in business. Knowing and admitting to one’s limitations is the most difficult thing for many people. We all like to think that we can fly high, but the reality is that the majority should keep their feet firmly on the ground.
Running a business is a difficult business. You need to be able to deal with pressure. It seems that we all need some pressure to perform well. However, there is a tipping point beyond which pressure starts becoming a burden, as the weight increases, the business owner becomes trapped. In most cases this will result in business failure.
My personal view on this is that knowing how to market oneself and the business is key to building a successful business. Everyone going into business should understand the basic factors outlined above. If you do your home work well, you will be increasing your chances of success considerably. I was astonished to learn that at least 50% of businesses fail in the first year of trading. I believe that this figure can be reduced by a high percentage if you consider all the angles.
By the way there is one final element, please get a good accountant . . .