Provided by My Own Business, Content Partner for the SME Toolkit
* Characteristics of a Successful Entrepreneur
* Step-by-Step Approach
o Decide if you really want to be in business
o Decide what business and where
o Decide whether to start full-time or moonlight
* Selection Strategy
* Things to Watch Out For
* Required Activities
o Comparative Evaluation
o How to Evaluate a Specific Business you have in Mind
o "For" and "Against" List
o Get Completely Qualified
* Decision Time
* SESSION 1 Quiz
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Characteristics of a Successful Entrepreneur
Testimonial
Collette Paul
STM Media Inc. Publisher of Trade Magazines
"Be able to sustain a financial commitment to whatever business you start."
Transcription - html
Guts: Guts means you must have an entrepreneurial instinct, which is an overwhelming desire to have 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 a business that 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: 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.
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Step-by-Step Approach
Testimonial
Elaine Mitchell
Specialized Veterinarian
"Hiring good staff members who also share the same philosophy has been very important."
Transcription - html
Decide if you really want to be in business:
You will be putting some (not all, hopefully) of your net worth at risk. 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 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.
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Selection Strategy
Testimonial
Millard MacAdam
Pro Active Leadership
"As the saying goes, fail to plan and you are planning to fail."
Transcription - html
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.
* 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.
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Things to Watch Out For:
Testimonial
Sophia Garcia
A-Z Glass Company
"To get ahead in this business you do everything to get the job."
Transcription - html
* Impatience
* Do not let overconfidence short-circuit you from analyzing your selection of businesses carefully. You must not fear of hearing the negative aspects; it is much better to be aware of them and face them early on.
* Be realistic. Do not become lured by high rewards. They will come if you choose the right business and if you understand every aspect of the business before you open its doors.
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Required Activities
It is worth repeating again: The most common mistake and the most costly one is not picking the right business to begin with. This is the time for soul searching.
IF YOU HAVE NOT DECIDED ON A BUSINESS, DO THIS:
On the top of a blank sheet of paper, write an activity you like to do (make this the heading). Do a separate page for each activity or interest you have.
On those same sheets list as many businesses you can think of that are related to that activity.
On the same sheets list all the products or services you can think of that are related to that activity. Use your imagination and think of every possible product or service you could do.
Make a list of businesses that do better in bad times (one may be appropriate for you). Some examples might be pawnshops, auto repairs and fabric stores.
EXAMPLE
Let's assume you end up with three potential businesses: towing service, selling used cars and auto repairs. You can now make a comparative evaluation using the following check-list (or better still your own checklist) with a 1-10 scoring system:
Objective Towing
Service Selling
Used Cars Auto
Repair
Can I do what I love to do? 6 3 10
Will I fill an expanding need? 8 5 10
Can I specialize? 7 8 10
Can I learn it and test it first? 9 8 9
This kind of analysis can help you gain objectivity in selecting your business.
How to Evaluate a Specific Business you have in mind.
Here are some questions to help clarify your thoughts:
* Is it something I will enjoy doing?
My favorite activities are: __________________________
I like to serve people by: ________________________________
* Will it serve an expanding need for which there is no close substitute?
* Can I be so good at a specialized, targeted need that customers will think there is no close substitute?
* Can I handle the capital requirements?
* Can I learn the business by working for someone else first?
* Could I operate as a hollow corporation, without a factory and with a minimum number of employees? ("Hollow corporation" refers to a business where everything is "outsourced," meaning you would subcontract manufacturing and packaging to outside sources. )
* Is this a product or service that I can test first?
* Should I consider a partner who has complementary skills to mine or who could help finance the business?
Once you have decided what business you want to start, do this:
Make a "for" and "against" list regarding characteristics of the business. On a blank piece of paper, draw a vertical line down the middle of the page and list on one side all the "for's" and on the other all the "against's." Sometimes this will help clarify your thinking.
Write down the names of at least five successful businesses in your chosen field. Analyze what these five businesses have in common and make a list of reasons that make them successful.
Talk to several people in your intended business. Don't be afraid of the negative aspects of your intended business. Instead, seek out the pitfalls: better now than after you open your doors. Take notes if possible. Write down the information as soon as you can.
Analyze the competition that are not doing well and write down the reasons.
Get Completely Qualified
Before you start, get completely qualified:
* The best way to become qualified is to go to work for someone in the same business.
* Attend all classes you can on the subjects you need, for example: accounting, computer and selling.
* Read all the appropriate "how-to" books you can.
* Don't be afraid to ask questions or seek help from the most successful people in your intended business.
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Decision Time:
What could you sell or what services could you perform that would make money and you would enjoy?
To complete this session you should have decided on a business or at least selected a business you think would be best for you. To get the most benefit out of the next eleven sessions you should have a definite plan in mind. Session Two will show you how to prepare your business plan.
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SESSION 1 Quiz: DECIDE ON A BUSINESS
1. Which of the following actions must always be taken to become a successful entrepreneur?
1. You should be prepared to risk all of your family assets.
2. Plan to quit your job before starting.
3. Choose a business that is in a field you enjoy.
4. Be prepared to put down a lot of money.
2. The most common and biggest mistake made by entrepreneurs is in not having sufficient money.
1. True
2. False
3. Which one of the following is NOT a good reason to consider starting a moonlight business?
1. You won't burn your bridges of income and benefits while you're getting your business started.
2. Family members can become involved in your business.
3. You have the time and equipment available on your regular job to conduct your own business.
4. New tools including the Internet, pagers and fax machines are available to conduct home-based businesses including e-commerce, direct marketing and single products.
5. If a part-time business proves out and becomes successful, you can decide at that time whether to quit your job and become a full-time entrepreneur.
4. Let's say that you are looking for some overall guidelines for picking a business. Which one of the following answers would be a good decision?
1. You have the choice between taking on a business that would be a huge challenge to make successful and one that would be a no-brainer for you to accomplish. You would go for the challenging one.
2. Realizing that you're not getting any younger and this is going to be a big step, it would be better to jump right in and get something started and see what happens.
3. If you had the choice between getting into a business in which you already have experience and one that would be a fresh start in an entirely new field, you would go for the fresh start.
4. You'd take your sweet time to seek out that one great opportunity.
5. If your heart is really set on opening a toy store in a strip shopping center, you would go for it no matter what.
5. Realizing that there are no hard and fast rules, generally speaking, which of the following businesses would be easier to start and command better pricing power?
1. Operate your own gasoline service station.
2. Sell your grandma's special candies.
6. In most cases, the very best way to become qualified in a business you intend to open is to:
1. Talk to everyone you can who is in that business.
2. Do a "for" and "against" analysis.
3. Do a twelve-month pro forma balance sheet, income statement and cash flow projection.
4. Work for someone in the same business.
5. Objectively weigh the collective opinions of your accountant, banker, lawyer and insurance agent.
7. Starting a "hollow corporation" means:
1. Starting a company with no assets.
2. Starting a company with negative net worth.
3. Acquiring a shell corporation.
4. Creating a company where all activities are outsourced (manufacturing and packaging).
8. You have always dreamed of opening a hardware store but now that you're ready to start you realize that the Home Depots of the world would be too hard to challenge. You should:
1. Find a niche segment in the hardware business that you can specialize in.
2. Find another business.
3. Go to work for one of the "big box" hardware chains and see if any needs exist that you could uniquely fill.
4. All of the above
9. What is the single most frequently made mistake that leads to failure?
1. Lack of experience in the business chosen.
2. Undercapitalization.
3. Not picking the right business to begin with.
4. Lack of knowledge of accounting.
5. Lack of familiarity with the competition.
10. You don't need to worry about the dumbest competitor in a business that is service oriented.
1. True
2. False
