The individual who decides to establish his or her own small business stands on the cusp of an exciting and potentially rewarding period of life. But he or she also faces a number of decisions that will likely have a considerable impact not only on the ultimate success of the entrepreneurial venture, but also the very character of the individual's life. Of these decisions, perhaps none is more significant than choosing the type of small business that they will establish and maintain.
Factors that should be considered before choosing a small business are myriad, ranging from financial and family issues to those of personal fulfillment and work background. Most consultants, though, recommend that before embarking on an entrepreneurial venture, would-be small business owners start by taking the time to examine their personal strengths and weaknesses, a seemingly fundamental step that, amazingly enough, is sometimes given short shrift in the decision-making process.
Yet a self-examination of positive and negative attributes is of little use to the prospective entrepreneur if he or she rationalizes or discounts negative qualities and overstates positive qualities. Honesty is essential, for after all, these good and bad qualities are going to be the foundation of your business. It is better to find out that the base is insufficiently strong to support your enterprise before you begin building it rather than after. The list should be a comprehensive one, including both personal and professional attributes.
The personal attributes will tend to cover such issues as your ability to get along with others, your level of self-motivation, your talent for written and oral communication, your temperament, your organizational abilities, and your capacity for forcefully dealing with unpleasant people (customers, employees, vendors, etc.). The professional attributes should grade your level of expertise in various business areas that you will need to attend to (or at least have some familiarity with, should you decide to hire someone to take care of it), such as bookkeeping, marketing/advertising, sales, financial planning, project management, research, and computers/technology. Once a would-be entrepreneur has taken the time to list his or her attributes, they will be able to glean not only what qualities they already have, but also what areas need shoring up (via training, assistance from employees, etc.). For as countless entrepreneurs and researchers can attest, the strengths and weaknesses of the establishment's owner are, more often than not, reflected in the business itself.
In addition, such an exercise allows the prospective entrepreneur to match his or her personality "with a business whose personality is compatible," commented James Halloran in The Right Fit: The Entrepreneur's Guide to Finding the Perfect Business. "A business's personality is that center (product, service, or activity) that directs the behavior of the business activity. If there is a mutual attraction between what you enjoy and the business personality, it will greatly enhance your chances for success. In other words, doing what you like to do will allow you to work closer to your potential."
Of course, some people are not well suited, either in terms of skills or temperament, to run any kind of small business. Successful small business owners are often characterized by self-confidence, energy, and creativity; those who lack some or all of these qualities should think long and hard before launching a business enterprise. Indeed, confidence, determination, and creativity are perhaps the most important personal characteristics necessary for success. Of these, Halloran indicated in Why Entrepreneurs Fail: Avoid the 20 Fatal Pitfalls of Running Your Business, self-confidence is perhaps the "the most important characteristic an entrepreneur must have …because there will be days when everything will go wrong. The confident entrepreneur will go to bed on these nights with the attitude that tomorrow will be a better day. You will also need confidence to be an effective decision maker. As a small business owner, there is no buck passing."
WEIGHING THE ALTERNATIVES
Rhonda M. Abrams, author of The Successful Business Plan: Secrets and Strategies, commented that "typically, entrepreneurs get their original business inspiration from one of four sources: 1) previous work experience; 2) education or training; 3) hobbies, talents, or other personal interests; or 4) recognition of an unanswered need. Occasionally, the impetus will come from the business experience of a relative or friend." Whatever the inspiration, potential small business owners need to consider a broad spectrum of factors when choosing whether or not to follow that inspiration and start a new business.
OBJECTIVES People establish businesses for themselves for a wide variety of reasons. Some entrepreneurs simply tire of being a cog in a larger business enterprise and pine for greater independence, while others are determined to carve out a life for themselves in which they can make a living doing something that they already love to do in their spare time. And, of course, many people take the small business ownership plunge in hopes of improving their financial fortunes or creating a more compatible lifestyle for themselves. "Wealth, independence, creativity, self fulfillment, status, contribution to society, choice of life style are commonly listed goals," summarized Halloran in The Right Fit. But he warned that "what you want from a business might well conflict with your career anchor [the set of interests, motives, and skills that have historically defined your career choices] and your values. Someone with a true creative anchor does not necessarily achieve monetary success. Artists must have realistic expectations and must often choose between creativity and wealth. The person who wishes to have evenings free to spend with friends or family will find that expectation does not equate with the goal of opening a restaurant. Therefore, it is important for you to state your needs and then to make sure the expectations from your areas of interest match them."
RISK ASSESSMENT Once a prospective entrepreneur has taken stock of his or her personal and professional talents and areas of interest, consideration of compatible small business options can begin. But even after the entrepreneur has settled on a business idea that seems like an ideal match, a diligent period of risk assessment should be undertaken. After all, starting a new business usually has significant repercussions in various areas of the entrepreneur's life (and the lives of the entrepreneur's family members).
Factors that need to be studied, then, include the following:
* Financial Situation—This is usually the single most important factor to consider. Not only do would-be entrepreneurs need to assess their current financial standing, they also need to undertake a comprehensive examination of business start-up costs (including initial operating expenses) and likely—not hoped for—business financial fortunes in the first few years of operation. Quantitative financial analysis is a must.
* Impact on Friends and Family—Family members and friends can often provide valuable insights into the pros and cons of various new business proposals. "Small business owners need a support group to explore their ideas with," wrote Halloran in Why Entrepreneurs Fail. "If you can't get support, particularly from family, it might be a fatal flaw. Because owning a business is so engrossing, it is not fair to your family to proceed without their support. You will need their understanding and involvement if you expect to realize your goals."
* Market for Business's Products or Services—Would-be entrepreneurs need to research the potential market for their business, and the various steps needed to reach and expand on that audience.
* Industry Health and State of Competition—"Your business does not operate in a vacuum," stated Abrams. "Generally, your company is subject to the same conditions that affect your overall industry. If consumer spending declines and retail industries as a whole suffer, there's a good chance your neighborhood boutique will also experience poor sales. As you develop your plan, you need to respond to the industry-wide factors that will affect your own company's performance. While it is certainly possible to make money in an industry that is experiencing hard times, you can only do so if you make a conscious effort to position your company appropriately." In addition, startup businesses often find that raising capital is a considerably more difficult task if the business is in a struggling business sector.
* Choice of Partners and/or Managers—Selecting partners and/or key personnel for your new business venture is a task that is both fraught with peril and bursting with possibility. The addition of a talented, enthusiastic business partner or experienced, trustworthy management staff can help get your business off to a sound, promising start; conversely, taking on an unreliable partner because you have chosen to enter a business that requires a big up-front investment can put a swift end to entrepreneurial dreams.
* Franchising Option—Many entrepreneurs choose to make their first venture into the world of small business ownership with a franchise. "The ever-growing franchise market offers opportunities in all areas of the small business spectrum," confirmed Halloran. "Although they are more expensive to enter and you will lose a certain degree of your independence, the good ones have a track record to be of great support to the owner."
Prospective small business owners also need to take precautions to make sure that they are basing their decision to open a new business or buy an existing one on sound business criteria rather than emotionalism, which often strikes hardest during periods of personal stress. For example, some consultants and researchers warn would-be entrepreneurs of the hazards of making huge career decisions during a divorce. Others, such as Halloran, writing in Why Entrepreneurs Fail, note that "losing a job can often be the worse scenario for opening a new business. The potential owner has just gone through an exhausting psychological experience and is not prepared to make the necessary and difficult decisions in an objective manner." Finally, there are others who, tantalized by best-case scenarios of wealth and independence, become trapped in businesses that they never should have launched or for which they did not adequately prepare.