The idea of starting a business is generally viewed as a good opportunity, regardless of whether you are currently employed or not. By starting your own business, you become your own boss and begin to walk the path towards financial independence. Studies have shown that at least 70 per cent of new businesses fail within a year. The question, therefore, is how can you ensure that your great business idea materialises into a success story in the narrow and coveted 30 per cent category?
Having a great idea and lots of enthusiasm is certainly not enough. To be a successful entrepreneur, you must have, at minimum, a working knowledge of the business that you plan to engage in before you start it. This crucial knowledge is only bettered by experience, and if you lack both, you should consider getting some of this much-needed insight by either working in the industry or linking with a successful owner/operator for at least six months.
Having experience in managing people and finances is also extremely helpful, as these are often the areas overlooked by new business owners. The majority of businesses fail due to poor and inexperienced management. If you are serious about becoming an entrepreneur, applying the integral factors listed in this two-part feature before you start operations and throughout the life of your enterprise should significantly increase your chances of success. In this issue of Buzzz, we will examine seven of these success factors out of a total of 13, saving the remaining six for Part Two in the next issue.
1.Correctly Assess the Market (Market Research)
The fact that you like a product or service does not mean that the public will be equally enthusiastic about it, and even if they are, an important thing to ascertain is whether they will be willing to pay the true cost for this product or service.
It is, therefore, important to do some level of market research, which could be either formal or informal. On a formal level, you could enlist the services of a market researcher to conduct the necessary groundwork. This, however, can prove to be costly. Conversely, you can opt for an informal and more cost effective method, which involves eliciting the honest, down-to-earth feedback of family, friends and/or people you are in contact with on a day-to-day basis. Their candid and realistic views could save you a lot of time and disappointment in the future.
2.Develop a Good Business Plan
Completing a solid business plan will contribute significantly to your future success. While applicable at various stages of business, it is deemed a necessity at the outset. It will serve as a roadmap to guide you through the fundamentals of the “who”, “what” and “why” of your business. A clear picture of the fundamentals of the business can take you from your starting position to where you want to go.
A good business plan provides a strong foundation to build new ideas, markets and strategies. It includes the goals of the business, financial needs, organisational structure, equipment requirement and marketing details. Having such a plan will provide you with a better understanding of the financial needs and the profit potential of the business.
3.Calculate the Capital Requirements
It is critical to understand the nature of the capital requirements of the business. Firstly, you need to identify how you will finance your business. New businesses often underestimate the amount of money it takes to get off the ground. An entrepreneur needs to identify both the start-up capital cost and the working capital requirements of the business. The sum of the two, plus a reserve, form the total capital recommended for starting a new business.
For the first few years, new businesses often have to plough back all the profits from the operation into the business, in addition to injecting funds from personal resources. It is, therefore, necessary to have an accurate calculation of the capital required.
4. Be Prepared for Long Working Hours
Many persons starting their own businesses are misled by the fallacy that being their own boss means reduced working hours and more time for relaxing. They no longer consider themselves “burdened” by the 9 to 5 grind of being an employee. Generally speaking, this is a very wrong perception. Owning and operating a business is hard work that requires more input than a 24-hour day allows. There is really no time-off, especially in the first few years of operation. Consider whether you have the necessary dedication, drive, discipline and determination to embark on your own business venture. This could be the difference between success and failure.
5.Acquire the Necessary Skills
Running a successful business demands various skills and levels of expertise, and it is important for you, the business owner, to have an appreciation of these requirements. It is important to know the skills that are needed for business, and in the case where these skills are lacking or deficient, you should make every effort to acquire them. You do not have to employ all skills and expertise on a full time basis. Consider outsourcing where necessary. There are many outsourcing and consulting services that can be used on a need basis.
6.Implement a Competitive Pricing Policy
For the most part, the main reason for going into business is to make money. Making big profits does not mean that your pricing has to be above your competitors. Always strive for a competitive pricing policy. You must know your true costs and your required mark up. Compare this with your competitors’, and try to see how best you are able to compete on price. However, remember that having lower prices is not an excuse for delivering substandard products or services to consumers – always strive for quality.
7. Select the Right Partners
In starting your business, it is useful to consider whether or not you need one or more partners. Including good partners can enhance the chances of success of a new business or even an existing one. Potential partners should be the right blend for you and your business. They should be easy to work with and bring to the table one of or a combination of the following: expertise, experience, energy, dedication and capital.
Be sure to catch the second part of this feature later this month.
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The idea of starting a business is generally viewed as a good opportunity, regardless of whether you are currently employed or not. By starting your own business, you become your own boss and begin to walk the path towards financial independence. Studies have shown that at least 70 per cent of new businesses fail within a year. The question, therefore, is how can you ensure that your great business idea materialises into a success story in the narrow and coveted 30 per cent category?
Having a great idea and lots of enthusiasm is certainly not enough. To be a successful entrepreneur, you must have, at minimum, a working knowledge of the business that you plan to engage in before you start it. This crucial knowledge is only bettered by experience, and if you lack both, you should consider getting some of this much-needed insight by either working in the industry or linking with a successful owner/operator for at least six months.
Having experience in managing people and finances is also extremely helpful, as these are often the areas overlooked by new business owners. The majority of businesses fail due to poor and inexperienced management. If you are serious about becoming an entrepreneur, applying the integral factors listed in this two-part feature before you start operations and throughout the life of your enterprise should significantly increase your chances of success. In this issue of Buzzz, we will examine seven of these success factors out of a total of 13, saving the remaining six for Part Two in the next issue.
1.Correctly Assess the Market (Market Research)
The fact that you like a product or service does not mean that the public will be equally enthusiastic about it, and even if they are, an important thing to ascertain is whether they will be willing to pay the true cost for this product or service.
It is, therefore, important to do some level of market research, which could be either formal or informal. On a formal level, you could enlist the services of a market researcher to conduct the necessary groundwork. This, however, can prove to be costly. Conversely, you can opt for an informal and more cost effective method, which involves eliciting the honest, down-to-earth feedback of family, friends and/or people you are in contact with on a day-to-day basis. Their candid and realistic views could save you a lot of time and disappointment in the future.
2.Develop a Good Business Plan
Completing a solid business plan will contribute significantly to your future success. While applicable at various stages of business, it is deemed a necessity at the outset. It will serve as a roadmap to guide you through the fundamentals of the “who”, “what” and “why” of your business. A clear picture of the fundamentals of the business can take you from your starting position to where you want to go.
A good business plan provides a strong foundation to build new ideas, markets and strategies. It includes the goals of the business, financial needs, organisational structure, equipment requirement and marketing details. Having such a plan will provide you with a better understanding of the financial needs and the profit potential of the business.
3.Calculate the Capital Requirements
It is critical to understand the nature of the capital requirements of the business. Firstly, you need to identify how you will finance your business. New businesses often underestimate the amount of money it takes to get off the ground. An entrepreneur needs to identify both the start-up capital cost and the working capital requirements of the business. The sum of the two, plus a reserve, form the total capital recommended for starting a new business.
For the first few years, new businesses often have to plough back all the profits from the operation into the business, in addition to injecting funds from personal resources. It is, therefore, necessary to have an accurate calculation of the capital required.
4. Be Prepared for Long Working Hours
Many persons starting their own businesses are misled by the fallacy that being their own boss means reduced working hours and more time for relaxing. They no longer consider themselves “burdened” by the 9 to 5 grind of being an employee. Generally speaking, this is a very wrong perception. Owning and operating a business is hard work that requires more input than a 24-hour day allows. There is really no time-off, especially in the first few years of operation. Consider whether you have the necessary dedication, drive, discipline and determination to embark on your own business venture. This could be the difference between success and failure.
5.Acquire the Necessary Skills
Running a successful business demands various skills and levels of expertise, and it is important for you, the business owner, to have an appreciation of these requirements. It is important to know the skills that are needed for business, and in the case where these skills are lacking or deficient, you should make every effort to acquire them. You do not have to employ all skills and expertise on a full time basis. Consider outsourcing where necessary. There are many outsourcing and consulting services that can be used on a need basis.
6.Implement a Competitive Pricing Policy
For the most part, the main reason for going into business is to make money. Making big profits does not mean that your pricing has to be above your competitors. Always strive for a competitive pricing policy. You must know your true costs and your required mark up. Compare this with your competitors’, and try to see how best you are able to compete on price. However, remember that having lower prices is not an excuse for delivering substandard products or services to consumers – always strive for quality.
7. Select the Right Partners
In starting your business, it is useful to consider whether or not you need one or more partners. Including good partners can enhance the chances of success of a new business or even an existing one. Potential partners should be the right blend for you and your business. They should be easy to work with and bring to the table one of or a combination of the following: expertise, experience, energy, dedication and capital.
Be sure to catch the second part of this feature later this month.
Share this post: