You know that feeling. You keep questioning yourself and are troubled by doubts and worries. What does it take to be a business owner? Are you or aren’t you cut out to own your own business? Maybe you should just stay working for someone else. Or, maybe you really have what it takes. How can you tell?
There are 8 essential areas that you need to spend time analysing before you can decide if you have what it takes not just to own a business but to make a valuable company out of it over time. If you take the time to do an honest assessment of all 8 areas then the answer will be obvious to you. And before you tell yourself you are too busy to spend time analysing just think how you will feel if the answers show you that you really do have what it takes. So, don’t chicken out now.
Start with the SWOT
SWOT stands for strengths, weaknesses, opportunities and threats. They sound fairly boring but actually they open the floodgates to determining the success of a business. The strengths and weaknesses reflect the business owner/s and what they bring to the business while the opportunities and threats come from factors outside the business such as changing trends, new laws, environmental changes and many others which, while they are constantly putting pressure on the business, are also supplying it with great new opportunities. And, you know that opportunities are exactly what a small business needs.
To analyse your strengths you just list down your skills, capabilities, experience and personal attributes. Go on, do a bit of bragging to yourself. But, only list down those strengths which you will actually be using in the business. And don’t forget to include the strengths of anyone else that will be an integral part of the business too, whether this is a business partner or staff member.
Now be really honest with yourself and list any weaknesses you have in the same areas. This might include the fact that you haven’t run a small business before or you loathe admin.
Take your list of strengths and consider how you can utilise them in the business in the most effective way. You want to play to your strengths rather than focusing on your weaknesses.
Then take your list of weaknesses and consider how you can overcome them. That’s right – you don’t need to worry about them you just need a plan to overcome them. It may be by learning new skills or you could employ people who already have the skills or ask someone close to you with these skills to help.
To understand the opportunities that are available to your business and threats which your business will need to overcome you need to check out what is going on in your industry, the nation and in the location of your business. You should consider changing trends in your industry as well as your locality so you can anticipate opportunities for the future. This includes possible law or regulation changes which may already be being signaled by central government or local government. It also includes the changing nature of your environment and the climate as well as changing attitudes in the needs and desires of your market.
If you can identify threats which you can overcome or make use of in your business then you can see how they can change to opportunities. You won’t be able to overcome all threats but you can plan how to manage them if and when they arise so you are prepared for almost everything.
By analysing and writing down this SWOT evaluation you will discover one of two things – either you have great skills for being a business owner or you don’t. If you do then you can carry on with the next step but what if you don’t? Well, it is never too late to learn new skills so check out business courses and start your learning journey today. (Te Wananga o Aotearoa offer wonderful courses all over New Zealand and they are free so check out their website now.)
So, the SWOT analysis looks good and you are willing to check out the next step. This is essential but often a bit brutal. Yes, that’s right, it’s time to talk money.
Can I afford to go into business?
The amount of money you will need to start a business will obviously depend on whether you are buying an existing business or starting a new one. Do you plan to start a new business because you think it will cost a lot less than buying one? But, have you taken into account that with an existing business you will have existing customers so you are earning revenue from day one. On the other hand, a new business won’t have any customers and so you will need to pay the bills without an income coming in. Now that’s a bit of a dilemma.
Analysing whether or not you have what it takes financially to be a small business owner is fairly simple. You need to decide what assets you have that you can contribute towards the business and then you need to find out how much more money you will need.
It is reasonable to assume that a new business is unlikely to be able to support you for 6-12 months. That’s because as soon as you start selling you need to plow any profit back into marketing and promoting the business to get more sales and you often also need to buy more materials, ingredients, equipment and supplies to satisfy more customers. So you will need to have access to sufficient funds to support yourself for this time. This is why people often start businesses part time but continue to work until they can establish themselves enough to go into it full time.
The minimum you need to do at this stage is a simple cashflow spreadsheet where you set out your target monthly sales and monthly expenses so you can see if you can afford to get started.
By now you have hopefully evaluated that you have the right strengths and can overcome any weaknesses. You believe that there are opportunities for your business and you can reduce the risk of threats. You have determined that you can afford to do it. So what else do you need to consider? Well the next one is a huge one too.
Your attitude to risk
Starting or buying a small business is not for the faint-hearted. You will be fully responsible for finding customers, satisfying customers, charging customers the most viable prices and doing at least a dozen jobs that you haven’t done before.
Owning a business is risky and all the risk is shouldered by the owner or owners. You can’t blame the boss anymore and you can’t rely on getting paid regularly. Gulp! Now that really sounds serious.
It is important to be really honest with yourself about how much risk you are willing to handle and to also assess your attitude to stress and work pressure. If you are comfortable with dealing with problems, (often several at the one time) and have a realistic but optimistic view of business this will certainly help you as a small business owner. But, if you worry about money and don’t like the pressure of being the person that the buck stops at then you may decide that small business ownership is not for you.
Sometimes we find it hard to recognise our attitudes to risk and stress and you may need to talk this analysis over with family and friends to get an honest view of whether you are actually as laid back as you may think you are.
A small business is a big responsibility even if you don’t yet have any staff to look after every week. The hours may be long and you will certainly be doing tasks that are outside of your usual comfort zone so your outlook and attitude will be essential in ensuring that you get real enjoyment out of it.
If you do an honest appraisal of yourself and see that you have the right attitude to risk, stress and pressure then you know you have one more factor on your side in deciding to be a small business owner. And now there are just 5 more factors to consider. Fortunately these factors are the easier ones to work on so hang in there and let’s get you fully checked out.
Getting to the core of the business
Successful businesses are based around core values which reflect the reason the business was started in the first place. Unsuccessful businesses don’t have this central core and struggle because of it. The list of values is huge and covers everything from recognition and responsibility to creativity and challenge. And we can’t forget independence and innovation and dozens of other values that are important to business owners including having financial security.
What you need to do now is to consider why you want to be a small business owner and what core values you want your business to be based on. This can take a bit of soul searching to identify because our core values are not usually something we spend a lot of time thinking about or talking about day to day.
You want to just focus on a few really important values so you don’t get overwhelmed and then you need to determine if your small business will allow you to deliver on these essential values.
For example, say you had core values of fitness, health, helping others and spontaneity then a small business which had you sitting inside at a desk doing detailed work for hours on end might not be a good fit for your values. But a business which had you coaching others on how to improve their health and fitness could be ideal. So it is a matter of considering the fit between your business idea and your values. The closer the fit the more likely you are to be happy in your business and the happier you are the more likely you are to attract customers and be successful. Of course happiness is not the complete answer but more on that later.
Understanding what you value and ensuring that your small business is able to satisfy your values is an important way of assessing whether or not you have what it takes to be a small business owner.
So what else do you need?
How much determination do you have?
Starting or taking over a small business takes a serious amount of determination because although New Zealand is considered one of the easiest countries in the world to start up a small business it still has a lot of laws, rules and regulations which you are going to need to master.
Understanding which organisations and departments are involved in regulating your industry is complex and the amount of work you may need to do to get consents or permits can be huge.
So if you lack the determination to jump through the hoops as you discover them then being a small business owner may not be the best move for you.
Determination is also required when things go wrong such as when a customer is unhappy or your staff are away on sick leave. It is especially important when you are sick yourself but still have to be there for the sake of your customers.
You will also need to be determined when you struggle with the loss of confidence which seems to hit most small business owners (some times more than once) and find yourself questioning if you will ever be successful or whether you have made a big mistake. This is when you need to review your “why” for being in business and to focus on your long-term goals.
Moving your vision from today or this terrible week to how you will feel when you achieve that next important milestone is what you need determination for because there will be awful days and hideous weeks in your business and it is going to take grit to get through them and keep going.
If you can’t say you have the determination to be successful in business then you are probably going to be downright miserable in your own business and may want to reconsider taking this huge step.
How are your self-management skills?
Now this next piece of analysis is going to be tough because you need to be brutally honest with yourself. Running a small business requires you to have excellent self-management skills such as overcoming procrastination, goal-setting, motivating yourself and doing tasks that are outside of your comfort zone.
Start by assessing your life today. Do you have many unfinished projects which you are meaning to get around to or do you always finish everything you start? Do you have clearly defined goals for the important areas of your life and have you set dates to achieve them by or are you someone who gets up every day and wings it? Does time ever slip by without you knowing what you were doing or are you focused on what you want to achieve most of the time?
No-one is perfect and we all have times when we aren’t as focused as we would like to be but if you don’t manage yourself well now imagine what it will be like when you are running your own business. Time wasted during your business hours is now going to cost you in sales and that is your income. You don’t earn money when you don’t use your time and expertise in an effective way.
Thankfully, self-management skills can be learnt and easily practised if you choose to do so and for many people the adventure of their own business is enough to motivate them into improving their skills. Also, most people already have many of these skills they just don’t necessarily put them into practise as often as they could.
However, if you can’t see the point in changing your outlook and believe that “you are what you are” then owning your own small business is going to be hell.
You are the only person who can manage your time effectively without procrastination, who can motivate yourself to do the tasks you don’t really want to do and to set the goals both short and long term which when achieved will ensure business success.
You need to look at your ability to self-manage before you consider becoming a small business owner because this ability will be essential to the business.
Just how persistent are you?
Actually if you have read down to this point you are already showing persistence because some of the earlier points may have been quite challenging to you. Many people will have started to read the article hoping to tick off the various attributes and feel good in justifying why going into business would be perfect for them. Many of them will have skipped to other articles long before now because they didn’t like the tone of this one as well as it’s emphasis on self-analysis. But you are still here and still reading so you are probably going to score well in this section.
Persistence is such an important attribute to running your own business because success always takes longer than you think. To consider going into business you need to be an optimist but a realistic optimist who is mentally prepared for the challenges which are certainly going to be part of this journey. Every part of your goals will be more difficult than you first imagined and everything you want to achieve will take more time than you planned.
It isn’t you – that’s just the reality of achieving “overnight success” – it takes ages.
Most successful businesses appear to have achieved success quickly because we often only hear about them when they are achieving success but look into their history and you can see that it has taken a long time and a lot of persistence to become successful.
You need persistence because it takes time to become established in your industry and in your markets. To establish a reputation and to earn trust takes much longer than most of us plan for.
Fortunately you can use your persistence to create consistency and this will make the process of establishing your reputation much easier. Being consistent in your type and frequency of your communication with your markets is one way of ensuring that they can trust you. Being consistent in your offering and your delivery is also going to help your reputation.
Without persistence communication can become erratic or cease altogether simply because the business owner isn’t getting the results as quickly as they imagined so they focus on trying other tools to win over potential customers.
Most success stories show that persisting and being consistent were the most important components in their success. That and learning from their mistakes (because we all make mistakes) rather than giving up at the first sign of a set-back.
Being a very persistent person is a great attribute to bring to small business ownership.
The last essential – market knowledge
This final area is not about you personally (phew, I’m sure that’s a relief) but about your understanding of your potential target market.
Many small business owners believe that having a good idea for a product or service is what they need first and then they will find the market. But learning about the market first and tailoring your product or service to what customers want to buy is a much more successful way of getting into business.
Your customers have problems and your business will be helping to solve one or more of these problems. The customers will pay you because they really want to have the problem solved. That’s the formula for making sales.
So what you need to know when it comes to market knowledge is what problems the customers have that they are willing to pay money to have solved. You also need to know how many customers have the problem and who else is also helping to solve the problem aka your competitors.
You are looking for a large market with many customers who have the problem and are willing to pay to have it solved and a market that you can offer a unique solution to.
If this market exists then you will be in a great potential position to utilise all the other skills, attributes and resources that you have previously identified to claim your share of it.
To find out if the market exists you need to do quite a bit of research but it is invaluable to start a small business knowing that there are customers wanting your business solution and that they are willing to pay for it.
You’ve made it!
Wow, well done on staying focused and finishing the whole article. Here’s a summary of the 8 essential areas which will show you whether or not you have what it takes to be a small business owner.
- Your strengths and weaknesses and the opportunities and threats
- Your financial position
- Your risk attitude
- Your core values
- Your determination
- Your self-management skills
- Your persistence
- Your market knowledge
I hope you have found this useful and that you are now really determined to get started as soon as you are able. Good luck.