How suited are you to running a small business?
This article is one of a series about the wide and varied things that need to be thought through when starting up a new business. There are a huge number of things to think about but we’re going to focus in on one of the most important here today.
For someone starting up a new small business it can be a real roller-coaster of excitement and worry and the aim of this article is to try and help the individual prepare themselves for all that is to come so that they don’t make some of the same mistakes that others (including me!) made when starting out. Ok, so what do we need to think about?
There are a number of ‘standard’ reasons why people start a small business:
- Made redundant
- Didn’t get the promotion they expected
- A feeling of ‘not being heard’ and frustration working for someone else
- Fed up with the rat race
- A sense of lack of achievement in your present job
- Thinking that you can do it better than everyone else
- A change in domestic circumstances that requires a re-think of working life
…and so on
It’s important that you think carefully about why you’re contemplating starting a small business because this will be an important motivator in the years to come. One simple thing to ask yourself is “Am I running away from something, or am I running towards something?”. What I mean by that is are you simply thinking business of your own will be better than working for someone else, or are you genuinely excited about starting the new venture to achieve new goals?
Think very carefully about this. With my first business I thought I was running towards something; when I look back I realize that actually I was just running away from a boring job and starting a business seemed like a good idea at the time. As a result that business didn’t do too well – it didn’t fail but it could have done a lot better if I had been positively motivated, rather than negatively motivated.
What sort of business?
This also needs some careful souls searching. Is the business you plan to start something that you either have a lot of experience in (eg from your corporate life), is it something that already plays a major part in your life (eg from a long term hobby or interest) or is it something completely new?
I would argue that if it’s the third choice in that list then you need to be very careful for two key reasons. First, your inexperience in that area will make it much more difficult to get the business up and running; second, the chances are that you are in the ‘running away from’ camp and so your motivation will be negative. Tie these two things together and the chances are you will fail, no matter how hard you try.
There’s a really good book called ‘What color is my parachute?’ which is aimed at people looking at a change of career path and I remember one really useful thing sticking in my mind about how to bring about a career change – do it in two (or more) steps. Let me give you an example.
Say you’re working in project management in an IT company but want to get involved in sales for an aircraft company. The chances are if you try to move from project management to sales at the same time as switching industry then you will fail – or at least have a very bumpy road. So, do it in two stages; either move from project management in IT to sales in IT (build up your sales knowledge) or move from project management in IT to project management in the aircraft industry (build up your industry knowledge). Then, once established, make the second move.
It’s the same principle when starting up a small business – you will already have enough on your plate with the new business without trying to learn new skills or break into markets you don’t understand.
Another question in the ‘what sort of business’ arena is do you want to consider a franchise? There are many pros and cons of starting a franchise business and it may be that, for you, the pros outstrip the cons.
Is the change being forced on you or are you making the decision to start a new small business? The best of these two options is the latter. This allows you to make a controlled move from one environment to the other and ‘test the water’ before jumping.
Once again, we’re back to positive/negative motivation here. If you’re forced into starting a business then the motivation is negative; if you make the choice yourself – in your own time – it’s positive.
As a rough rule of thumb I would recommend that you should have been thinking about how to start a small business for about a year before taking any major action (such as resigning from your job or actually spending any big money on the new business). During this time you will be thinking about what you want to do and how; you will also be attuning to the market and getting an understanding of how both the market and a small business work.
If, at the end of that year of investigation and discovery, you’re still enthused by the whole idea and have not found any major issues that would stop you succeeding then you’re ready to go.
That doesn’t mean quit your job tomorrow (if you’re still working for ‘the man’). It means you’re now in the ideal situation to actually set up the business and then test the water to see how things go. Many small businesses are started this way and you should aim to do the same as it will help with the transition from one to the other.
I even know people who have started their own business while still working for someone else and then told their boss what they were doing and asked for support. This is something for you to think about in relation to the company you work for and your boss’s attitude.
Some people would prefer you told them of your longer term plans so that they can make plans for a gradual change from you to your successor; others could sack you on the spot thinking that you will either take business away from your present employer or you won’t do any work while still in the old job because you’re focused on the new one.
Only you will have an idea about how your boss will react. Before speaking to them work out a solution that will benefit both of you and help your boss to see that this isn’t a black or white situation. For example, if they sack you then there’s no-one to do your job and they will have to take a gap until they recruit and train someone else. Instead, how about you agree to stay for 6 months to allow them time to recruit someone properly and then for you to train them – and as part of the deal you will agree to a percentage pay drop once the new person is in post.
What will you sell?
It sounds sort of counter-intuitive but if you’re new in business you probably want to be selling something that has a healthy amount of competition. Why? Because people will then know what it is you’re offering, rather than you having to educate them in a whole new product/service. Also, if the product is already being sold then you know that a market exists.
You may have an idea for a product/service that will revolutionize the industry but unless it is a very simple concept for people to understand the chances are that you’re making things very difficult for yourself. Think back a few years ago when Microsoft brought in tablet computers; even with their marketing power and brand they never took off.
What is your attitude to risk?
For most people setting up a new small business they are going from a stable 9-5 job where holiday pay, company car, insurance, health and dental might all be included in the package. And you know that provided you turn up each day, work reasonably hard and keep your nose clean then that will continue on for many years to come.
When you start your own business all that certainty stops. You could now be working double the hours and still not getting in the money you would have got previously. Also, you are now the one paying for all the extras that you used to take from granted.
Here’s another thing to think about. When you start a small business it is usually just you (some start-up businesses have one or two people to help but the majority start out as one man bands). In many senses you don’t actually have a business yet; what you have is a job, because if you stop working for whatever reason (eg sickness) then the work very quickly stops coming in.
There’s no doubt about it, starting a new business is risky; statistics show that after three years over 40% of businesses will have failed. Those that haven’t are probably still struggling to make ends meet. Could you cope with that sort of pressure?
How’s your home life?
This ties in with attitude and risk; starting a new business is going to put a lot of strain on home life. You will be working very hard for long periods, work will not stop at 5pm, nor on weekends. You may be trying to run a business from home with the added complication of kids not understanding why you can’t give them time and attention like you used to.
Do you have the self-discipline to keep working when there are many other distractions around? Just because you no longer have to catch the commuter train doesn’t mean that you don’t have to be at your home office desk until 11am, before knocking off at 3pm to go and pick up the kids. I know one guy who still dresses up to go to ‘the office’ (his spare bedroom) because that’s his way of mentally getting into work mode and staying there. Someone once told me that breakfast network groups like BNI are as important to small business owners for the discipline of getting them out of their pajamas and into a suit as they are for finding new business and I can well believe that for some business owners I know!
This article has, by its nature, been focusing on some of the negative aspects of starting up a new business. I have done that for two reasons; first, because it’s very easy to get carried away in the excitement of starting up to forget one of the most important parts of the business – you; second, because I have experienced going through the process without the benefit of some of the things written above and, believe me, it’s a lot easier when you do go into this sot of thing with your eyes open and a clear understanding of what lies ahead.
If you recognize all your own shortcomings and limitations and understand the bumps in the road ahead then you’re much more likely to succeed.