So you want to start a business. That’s great, but before you do, you need to make sure that you can.
My purpose here isn’t to discourage entrepreneurship. It would be fair to say that entrepreneurship has always been a major element of the “American Dream.” After all, who but entrepreneurs employ the vast working masses of W-2 employees in this great nation? Indeed, even in today’s economy, entrepreneurship forms a major element of the American business environment.
The individual entrepreneur cares not for the big picture, however. Individual entrepreneurs may succeed or fail, and every failed business venture leaves behind a trail of financial woe that wreaks havoc on personal finances — and relationships. Before starting a business, it’s important for an aspiring entrepreneur to take care that he or she is able to handle the risks involved.
From franchised storefronts to multilevel marketing (MLM) gigs, the same rough set of characteristics must apply to every individual who chooses to go into business for him or herself. More importantly, if the would-be entrepreneur has a spouse or committed partner of any kind, that partner must share each of these qualities as it relates to the business; i.e. the partner must either have the same characteristic or accept that the entrepreneurial partner has it and trust them implicitly.
What are those characteristics? Here’s the list. Don’t start a business without them.
1. Ability to Deal With Uncertainty
There’s one certainty about going into business for oneself: uncertainty. It takes a certain type of personality to be able to deal with the tremendous psychological pressure that comes from not knowing whether or not you’ll get paid next week. An alternate definition for “entrepreneur” might be “a person crazy enough to be OK with working twice as hard as anyone else and maybe not getting paid.”
Pressure wears on everyone over time. It’s easy to be happy and stay the course when things are going well; it’s much harder to do so when the money isn’t coming in regularly. This is why so many people want to work 9 to 5: They know when they need to come in to work, they know when they are going to leave, and they know how much they’re going to get paid for it. They waste no mental energy worrying about where and when the money is coming. They avoid uncertainty altogether.
Entrepreneurs swim in uncertainty every day, especially at a start-up. There are no guarantees in this life — even the 9-to-5ers will concede that — but entrepreneurs must be intimately acquainted with that notion. Entrepreneurs wake up to an uncertain sunrise, pass uncertain days, and sleep with uncertainty under their pillows. The very air they breathe is tainted with its bitter taste. Their families and friends can taste it, too, and are often not as patient or understanding about what it means.
Being a successful business owner means mastering it.
Bottom Line: Be realistic about your business, particularly the early stages when income may not be likely, and be comfortable with not knowing your income. If you need certainty, get a job instead.
2. Marketing and Sales Skills
We are all in the fashion business. I’m paraphrasing marketing guru Seth Godin here because he’s absolutely correct — any business start-up has to be attractive to its target market in the right way in order to be successful. It has to be able to sell itself to the right people and do so consistently. This leads to another truth about business: We are all in the sales business.
In autumn of 2007, I was a third-year law student and was beginning to worry about finding post-graduation employment. Every time the big Chicago firms came to campus but passed on interviewing me, I grew more nervous. I shared my concerns with my small group of friends and was rewarded with an obvious solution: “If you don’t get a job, just hang out your own shingle. You have a law degree and lots of people need legal advice, so you’ll be fine.”
Great advice! I tried it, and long story short, I still owe debts from my failed experiment in private legal practice.
Ultimately I failed because I thought opening a law office with no business plan, putting an ad or two in the yellow pages, and just generally announcing to the world that I was open for business would result in people walking through my door every day. I didn’t know how to market myself to the people I wanted to serve, had no concept of the importance of networking, and felt entitled to business by the “J.D.” on my business card. I learned some hard lessons as a result, but I didn’t learn them in time to save my legal practice.
Every business must be marketed effectively in order to be successful. If you can’t make people want to buy from you — whether it’s because they can’t find you, don’t trust you, or don’t have an idea of what you can do for them — your business will not succeed. Be good at fashion and sales or you’ll be closing your doors all too soon.
Bottom Line: If you’re not a natural marketer, seek some guidance. Be prepared to hire someone if you have to, and put together a business plan.
3. Financial Support
Unless you’ve got an absolutely fool-proof moneymaking idea that is going to make you rich overnight (in which case please feel free to get in touch with me), you are going to need some financial backing in order to start a business. Here’s a short list that includes just a few of the expenses you may need to cover as a business owner:
- Professional licensing
- Advertising and marketing, including web design
- Equipment purchases and/or rentals
- Office space
- Memberships in professional and trade organizations
This is just a start. Each business is different with its own unique costs involved. You can start a financial advisory service without buying equipment or office space, but you may need to get licensing and buy a lot of lunches, dinners, and drinks in order to woo potential clients. If you’re starting a print shop, on the other hand, you need space and equipment like it’s going out of style, but probably won’t have to bother with the wining and dining.
We also have to consider costs at home. If you don’t have a partner providing health insurance, add that to the list. Will the business require travel? Be prepared for some auto expenses you may not be able to write off. And if the business needs more capital, where is it coming from? Usually entrepreneurs have no choice but to raid personal or family emergency reserves if they haven’t planned well, and that’s a recipe for disaster.
Bottom Line: Go into business with enough capital to cover early losses and unexpected expenses, and be prepared to acknowledge failure before raiding personal savings.
4. Time Commitment
Most employees work 40 to 45 hours per week (at least, that’s what they’re scheduled to work). Guess how many hours a successful entrepreneur clocks in the average week?
Starting a business takes as many hours as you can put into it without dropping from exhaustion. You generally get out of a business what you put into it, and if you’re not prepared to commit to doing everything possible to make it work, you are doing the business, yourself, and anyone depending on you a disservice.
Here’s a good rule of thumb: Any start-up business will require more time than anyone thinks it will.
Make no mistake, the demand on your time that comes from starting a business will make much of your personal time disappear. It can have a significant negative effect on health and happiness in the short term (if you’re lucky). The only thing that has a greater negative effect is failing at the business, so be prepared to make sacrifices and commit the time necessary to maximize your chance of success.
Bottom Line: Estimate how much time you think you’ll need to put into starting your business. Then add in all of the free time you expect to have. The number you come up with will be the number of hours you should be willing to put in. When you’re profitable, you can buy that free time back.
5. Belief (Even If It’s Irrational)
Small businesses fail at an astonishing rate. Are you going to be a statistic?
The answer you give had better be “no.” If you hesitated even for a moment, you shouldn’t be starting the business.
Everything I’ve covered in this article outlines how incredibly difficult it is to start a business and make it into a long-term success. There are so many factors working against business owners under the best of circumstances, and even the savviest entrepreneurs can’t always get out of their own way. But one universal trait applies to every successful business owner I know: An absolute belief in their future triumph. They don’t think they can build successful businesses. They know it.
We all question ourselves from time to time, especially during lean periods. The key is to keep any nagging doubts from having any effect on your mindset as you operate your business. When you’re sitting in front of a client trying to make a sale, you have to know that you’re going about your business the right way. When you come to the store in the morning, you have to know that you’ve got all your bases covered. Don’t let outside forces damage your optimism.
Bottom Line: Entrepreneurship is a state of being that requires perfect confidence in your ability to conduct your business. Have that confidence, even if it seems a little irrational, or your rational pessimism will destroy you.