Are you thinking about starting your own business? Not sure if you have what it take to become an entrepreneur? We would all like to be our own boss, but being an entrepreneur is about more than just having a great idea.
Before taking on the gargantuan endeavor of owning your own business, there are certain considerations that you must address first. Below are questions broken into their level of difficulty that prospective entrepreneurs should ask themselves.
Entrepreneur 101: Beginner:
1) What’s the number one reason that I want to start a business?
Your personal goals for becoming an entrepreneur play a key role in the success of your business. People start their own businesses for various reasons, but motives much greater than money and flexible work hours inspire the most successful entrepreneurs. For a startup to succeed, the goals of its owner must be realistic. Here are some good and bad reasons for starting a business:
Bad reasons for becoming an entrepreneur:
- Working under 40 hours a week
- To get off weekends
- To be famous/glamor
Reasons such as those above are poor motivations to start a business because they are largely false assumptions of entrepreneurship.
Good reasons for becoming an entrepreneur:
- To create something new
- To make an impact on your community
- To do something you love
- Creative freedom
The above reasons are much stronger incentives for starting your own business because they are realistic expectations of entrepreneurship.
2) How well do I organize and plan?
Most new businesses fail within the first few years of operation due to poor planning. Inexperienced business owners often make the mistake of overlooking the importance of forecasting their cash flow.
The lack of proper planning can lead to cash shortages during the first few months or even years of operation. You may run into situations where your suppliers require payment, but your cash reserves are inadequate because you are still waiting on payments from credit sales. Even with a profitable product/service, businesses can still run into periods of negative cash balances that in most cases result in the collapse of the company. A simple way to avoid periods of cash shortages is to go through the process of writing a business plan.
Creating a business plan is a crucial step in the business development process as it allows entrepreneurs to anticipate potential risks and formulate a contingency plan to avoid them.
3) Do I like to challenge myself?
Starting a business is no easy task. It takes a lot of hard work, long hours, and patience to see your business plan through. You are bound to encounter obstacles from the get-go.
Before you go head first into starting your own business, ask yourself, “When faced with a challenge, how do I react?” If you have a “grab the bull by the horns” mentality, the challenges of starting a business will serve as motivational tools to push you through the stages of your business’ development.
Entrepreneur 202: Advanced:
4) Do I have the stamina and energy to run a business long term?
Rome wasn’t built in a day and neither were the most successful small businesses. Creating a business with staying power that lasts until you are able to retire or sell is no easy feat and is a process that takes years.
When most entrepreneurs start their own business, they are full of excitement and possess an unearthly amount of energy. Many new business owners are eager to finally have a product/service and storefront they can call their own. They will do anything to see their business succeed. Yet, after a couple of months when the honeymoon period of entrepreneurship ends, the energy that once filled the business owner begins to wane.
Long hours of juggling countless responsibilities begin to take their toll and the true test of a business owner’s grit commences. If the entrepreneur can maintain their vigor and weather the rocky storm that is business ownership, after several years they will likely be rewarded by a stable business that produces dividends.
5) Am I risk-averse?
Starting a business takes guts. No matter how well thought out a business plan is, entrepreneurs always take on a certain level of risk. The risks associated with starting a business is the number one reason people decide not to become an entrepreneur.
Instead of completely avoiding taking gambles, it’s better to handle risks strategically. When encountering potential risks, business owners should perform a cost-benefit analysis to make well-informed decisions on whether or not to pursue an action. When asked for advice on becoming an entrepreneur, the Richard Bransons and Jeff Bezos of the world all emphasize that failures are a part of building a business.
6) Am I willing to put in long hours and work weekends?
Too many people go into starting their own business with the mindset that they will have the luxury of working under 40 hours a week and be able to take off weekends. Truthfully, this privilege is only granted to the most fortunate business owners who have already made it through the trials and tribulations of building a business.
You can count on the first few years of your business being grueling and work intensive. When issues arise, there will be no one else to defer to. The responsibility will fall upon you alone. These problems won’t politely pop up between 9-5 either. Complications tend to arise unexpectedly and at the worst possible times.
When starting your business, you can expect:
- To work over 40 hours a week
- To work on the weekend
- Wake up early and go to bed late
- To be thinking about the business even when you are not working
On the bright side, the more work you put in, the higher the chances of getting a return on your investment.
Entrepreneur 303: Expert
7) How well do I handle criticism?
Thinking everyone is going to like your product or service from the start will set you up for a rude awakening. Entrepreneurs take a take a lot of heat from customers, prospective investors, and business partners. Be prepared for questions on every decision you make.
Business owners need to have thick skin and not get discouraged when they encounter rejection. Never assume that your business is perfect and has no need for an upgrade. Improvements should always be considered, as innovation is necessary for a company to survive long term.
Evaluate each harsh criticism as a chance to improve your business and offer a better product/service. Although it’s not always easy, a good entrepreneur will recognize the value of criticism.
8) How far can I stretch a dollar?
The best entrepreneurs are thrifty and know how to get the most bang for their buck. Within the adolescent stages of a business, the initial costs will almost always outweigh your initial revenue. That is why it is crucial to make your startup capital last for as long as possible. When faced with tough monetary decisions, it’s important to find the best deals.
9) Do I have what it takes to be a leader?
Few entrepreneurs can start and run a business on their own. It takes a team of professional-minded individuals with specialized skills to operate a healthy business. As the owner, it is up to you to select members of your team who you can trust to work according to the company’s goals. That is why an entrepreneur must have adaptive interpersonal skills. Managing employees entails:
- Giving clear directions
- Setting realistic expectations
- Evaluating employees’ work
- Providing incentives
- Encouraging honest and constructive feedback
- Mitigating conflicts
This can be a lot to handle when having to manage all other aspects of the business.
10) What is my back up plan?
It hurts to admit, but there is a chance that your business might not succeed. If the day ever comes for your business to accept defeat, it will undoubtedly be a day full of despair and anguish. It feels almost impossible to pick yourself back up after suffering the loss of a project you poured your heart and soul into.
Before you step into the world of entrepreneurship, establish a fallback plan and set aside some funds incase your business venture sours. It will be much easier to recover from the disappointment of a failed business if you have a safety net.
Thinking about owning your own business is always fun to imagine. However, if you are serious about becoming an entrepreneur then you will need to consider the questions above to examine whether entrepreneurship is really for you.
Author: Taylor Johnson is a business plan expert at businessplantoday.com, the leading provider of business plan software and professional entrepreneurial resources.