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Do You Have What it Takes to Start Your Own Business?
A Few Facts
It is estimated that over one million new businesses are started in America each year, from small-scale home-based businesses to large corporate enterprises requiring many millions of dollars of start-up capital. Of all of these new businesses, it is anticipated that only one in five will make it to their fifth anniversary and will be achieving the results they originally forecasted at start-up.
That is an alarming statistic! Why in the world would only one out of five businesses in the "Land of Opportunity" survive, even for a relatively short period of time? There are several reasons why, yet the most common reason just happens to be the most controllable. The bottom line is that there is no magic equation for success; however, one basic rule holds true: "A business owner or business manager who fails to plan, plans to fail."
A business plan helps entrepreneurs think through their strategies, balance their enthusiasm with facts, and recognize their limitations. It will help you avoid potentially disastrous errors like undercapitalizing, creating negative cash flow, hiring the wrong people, selecting the wrong location, underestimating your competition, and pursuing the wrong market.
A winning business plan requires time. Plan to spend fifty to one hundred fifty hours crafting a complete and comprehensive business plan, including research, documentation, analysis, and review. Entrepreneurs should really start planning at least six months before they intend to open or expand their business or begin raising capital. Most entrepreneurs will need to devote time to the start-up while still working another job, or if they are expanding an existing business, they need to continue to run the day-to-day operations. Six months gives you time to sharpen and focus your business ideas and concepts while you are testing your assumptions.
The Journey Begins with You
Many opportunities exist for each of us for going into business for ourselves. The opportunities are immense and can range from the thousands of home-based businesses available to the array of small-, medium-, and large-sized businesses in the manufacturing, distribution, retail, and service arenas. It is estimated that the largest corporations only account for 20 percent of the jobs in the United States. The remaining workforce is mainly employed by local, city, state, and federal governments; nonprofit organizations; and entrepreneurs, like yourself, who are willing to go out into the marketplace and take a huge risk in order to create their own journey and live life on their terms.
Writing a comprehensive and complete business plan will help you get your journey started on the right foot and avoid some of the pitfalls that plague entrepreneurs because they are shooting from the hip and banking on assumptions that are misleading, incomplete, or just flat-out incorrect. Over the years, we have had many individuals come to us with ideas, concepts, and inventions that they felt were surefire winners. Upon thoroughly researching what they wanted to do as part of the business planning process, they discovered for one reason or another-whether it was undercapitalization, wrong market timing, inadequate market size, poor management or people skills, or poor products or services-that their "surefire winner" was nothing more than pie in the sky.
Before you set off on this journey, there are certain issues and questions you should first consider that will be helpful in determining whether what you are planning to do is actually right for you and right for the marketplace.
First, consider what impact a start-up may have on you, your family, and other relationships:
-Your income will suffer.
- Your work hours will multiply.
-Your family relationships will be strained.
- You will expend your personal cash or be in debt.
- You will sometimes feel like you are running behind.
- You may become more irritable or critical with people around you.
- You will see less of your friends and family.
- You may get more headaches, backaches, or stomachaches.
- You will feel guilty at times if you are not working.
- Your life, for a time, may seem like all work and no play.
Second, ask yourself the following questions:
- How much money do I have to invest?
- Can I attract other investors?
- What amount of return do I want?
- What do I do well?
- What do I like to do the most and what do I have the most fun with?
- Will I be committed to working harder and longer hours?
- How do I make up for my shortcomings?
- Will I devote time to continuous personal development?
Whoa! That may seem overwhelming, but do not despair because these feelings and circumstances are a normal part of starting a business or embarking on a new project. We just want to make you aware of some of the challenges you will be facing. During your journey there will be a lot of traffic and a lot of obstacles in your way and when it comes time to cross the street, we want to make sure you look both ways and back again so you have a successful and efficient crossing. The worst thing you can do is go into your business blind. The second worst thing you can do is give up. As Robert Donovan once said, "Giving up is the ultimate tragedy."
Roles You'll Be Expected to Play
If you're currently employed, you have firsthand knowledge of what it's like to be an employee. If you think going into business for yourself will mostly mean doing the same thing but for yourself, you're in for a surprise. If you are writing your business plan to launch a small business, you should know that small-business owners are responsible for the entire business, which involves a lot more than just providing goods or services. It's likely that all the administrative and managerial duties currently performed by your employer will fall on your shoulders after you create your new business.
To evaluate your own aptitude for business ownership, at a minimum you need to understand the responsibilities of ownership. This includes what is involved in owning a business and what roles you will have to play if you own one. This is a good place to start if you're considering starting your own business but haven't owned one before. Ask yourself, what is really involved in running a successful enterprise? Do I possess the right skills to carry it out? We've all heard of the stressed executive who complains that he is overworked because he has to wear two or three hats at his company. Most small business owners would give anything to wear only two or three hats!
Sales taxes and payroll or self-employment taxes have to be collected, forms need to be completed, and payments need to be made. Accounts receivable must be collected, deposits must be made to the bank, and accounts payable will have to be paid in a timely manner. Providing customer service, keeping the appropriate equipment and supplies in stock, and tracking and maintaining inventory and work in progress are activities vital to most businesses. You'll be doing all these things in addition to the activities that directly relate to providing goods or services to your customers.