The Accidental Entrepreneur

50 Things I Wish Someone Had Told Me About Starting a BusinessBy SUSAN URQUHART-BROWN

AMACOM

Copyright © 2008 Susan Urquhart-Brown
All right reserved.
ISBN: 978-0-8144-0167-5

Contents

Foreword by Jim Horan…………………………………………ixAcknowledgments………………………………………………xiIntroduction…………………………………………………1Index……………………………………………………….173About the Author……………………………………………..179

Chapter One

WHAT IS AN ENTREPRENEUR, ANYWAY?

Eight Questions to Ask Before You Start a Business

HAVE YOU BEEN THINKING about making your endeavor into a business? Are you confused about where to start and what to do? If you answered yes, your next move is to answer the following questions for yourself. This will help you to gain the clarity needed to find direction. Also, the thinking and research you do as you answer these questions will become your steps for starting your business. Don’t be like 95 percent of wannabe entrepreneurs who think they have a great idea and jump into business without careful planning. Some people who follow this strategy are very successful; but if you look before you leap, your percentage for success will be much higher.

Questions to Ask Yourself

1. “Who am I?” Starting and running a business is a lot like running a marathon. There will be highs and lows, and the prospect is both exciting and scary. To maximize your chances, analyze your strengths and weaknesses as well as your personal characteristics. For example, to be in business, you need determination, persistence, creativity, flexibility, and a steep learning curve. Will you be able to develop and strengthen these characteristics better by working alone, being in a partnership, or being at the helm of a fast-growing organization? How does your business idea fit in with your personal goals for the next three to five years? Your business idea, your expertise, and your personality all need to fit well with the type of company you’re growing.

2. “What business am I in?” Carefully define and detail what your product and/or services are. What problems do you solve? What benefits do you provide? Who are you targeting to buy your services? Consumers? Organizations? Where are they located? How will you reach them? For example, if you want to build a coaching practice, what type of coaching do you offer—executive coaching in which your clients are corporations, or personal coaching in which your clients are individuals? Learn everything you can about the business you want to start and the marketplace in which you plan to operate.

3. “Is my business idea viable?” In order to find out, market research is essential so that you can answer such questions as, “Who will buy my product?” and “Are there enough potential customers out there for me to make a profit?” Identify and analyze what your competitors are doing, and how what you offer is sufficiently different to attract customers. But you don’t need to do expensive focus groups. You can test market your idea with a group of friends and colleagues; interview competitors who are willing to talk to you; and research your industry and the market trends via the Internet or the local library. Other resources are the Small Business Administration Resource Centers, your local Chamber of Commerce, and successful entrepreneurs in a business related to yours.

4. “What is my market niche?” What is unique about you and your business? What do you want to be known for? If you fit your niche well, even in a recession, people will ask first about your product or service, and second about price. Hint: Having a niche does not mean offering the lowest price. Any competitor can charge less. A market niche is what makes your business stand out from the pack. However, any old niche won’t work. It has to be one that is focused, or narrow, but deep—that is, having enough potential customers in your targeted niche to bring you the business volume you want that will make your business profitable. For example, publishing companies are creating more specialty magazines. There is even one called Prison Life, which has a specialized but huge captive audience—literally.

5. “How will I market my business?” The marketing strategies you choose must do two things: One, reach your target customers, and two, fit your business because you must continually market your business. Out of sight (or sound) is out of mind. For example, speaking and writing is a good marketing mix for business consultants. Back-of-the-room sales are also brisk if you have authored a book. However, if you love to give talks but you own a retail store, your store location and a well-placed radio or TV/cable commercial might reach a wider audience of potential customers.

6. “How will I finance my business?” The flip side of the question, “Will I make enough money?” is “Do I have enough money to get started?” Work with an accountant or business consultant to carefully determine how much start-up funding you need and help you do a profit-and-loss projection. I recommend that you have enough personal funds to finance your living expenses for your first year of business. If you get a business loan, remember that you must put up collateral, which is often your house; if you get financing from angel investors, you must give up equity in your business, which may mean you won’t have control over what your business really is and how you run it.

7. “Why do I need a business plan?” Now that you’ve decided to go into business and you have done your research, you are ready to write a business plan. Planning ahead can mean the difference between success and failure. This is the stage when you get your ideas out of your head and onto paper. You set your goals for the year, as well as strategies and specific plans for how you’ll reach your goals. The written plan is a document that you can use to quickly explain your business to potential investors and—more importantly—to keep yourself on track.

8. “Will I go into my own business?” Are you going to run the marathon? Answering the above questions carefully will help you make a well-informed decision. If you’re ready, start running now. Remember: Even though there are obstacles along the way, a marathon always has a well-planned course to follow.

Myths About Going into Business for Yourself

SOMETIMES A PERSON decides to go solo on a whim, based on some common myths about the joys of working for oneself. If you’re considering starting a business, review the following common myths before you decide to proceed, so that you can avoid the pitfalls that go along with them:

Myth 1: “I’ll try it out and see how it goes.” Many people who are between jobs decide it’s as good a time as any to start a business. However, choosing to go solo by default is not a wise idea. Starting a business is very demanding and includes long working hours, financial investment, and, of course, no regular paycheck. It is not something to go into lightly. If all you are doing is “Trying It Out,” it’s bound to fail. Don’t waste your time and money.

Myth 2: “When I’m my own boss, I’ll avoid corporate politics.” Just because you’re the boss doesn’t mean you don’t have anyone to answer to. You will have many more bosses than you ever did as an employee—bosses called “customers,” “corporations,” or “investors.” So instead of dealing with the politics of a single company, you may have to handle the politics of twenty companies. It’s up to you to stay tuned into the needs and subtleties of each company and figure out how to meet those needs if you want to continue to be retained.

Myth 3: “I’ll have more free time and flexible work hours.” If you think you will have time to spend on your hobbies, play tennis a couple days a week, and schedule time off whenever you want, think again. The first few years you will most likely spend sixty to eighty hours per week getting your business up and running. Moreover, the number of hours you spend working for yourself is not likely to lessen as your business grows. In addition to spending time delivering your service, you will be marketing your services, running your business, doing paperwork, solving problems, and developing new products and services. Be realistic about how many hats you have to wear as a business owner and how much time it really takes to get everything done. One client of mine said, “Yes, I have flexible hours. I can work until 2 A.M.!”

Myth 4: “All I need is a good idea.” There are many wonderful ideas and products that have never seen the light of day. It’s much easier to come up with ideas than to implement them. However, even if you follow through with building the better mousetrap, your business may not succeed. Even if you have a good idea and the technical expertise to create the product, you also need to be able to get others excited about the product and invest money in its production. You may need the services of an accountant, lawyer, banker, distributor, or vendor to make your product successful. All of these people need to buy into your idea or product. In short, you need not only a good idea, but also the ability to communicate your vision, a great business plan, and the ability to produce and sell the product with the help of your backers.

Myth 5: “After a few years, I’ll make lots of money.” Unless you are lucky or backed by venture capital, you probably won’t get rich quick. It takes three to five years to build a profitable, viable business. If you leave a corporate job to start your own business, this is a rule of thumb for income:

In the first year of business, you may only make approximately 20 percent of your most recent salary.

By years three to five, your profits can begin to grow substantially.

You might be asking yourself, “If consultants make $1,000 to $3,000 a day, how can they not make a lot of money?” The answer is that most consultants bill for only about 55 percent of their time. The other 45 percent they spend on nonbillable activities, such as accounting, marketing, planning, and dealing with what I call “administrivia”—everything else it takes to run a business. In your first year of business, you will spend a much higher percentage of your time on nonbillable activities, such as marketing your business so that people know you exist.

If you’re going to launch a business, it’s best to have a dose of reality. Do your research and weigh all the factors carefully so that you can make an in formed decision. Then, if the positives outweigh the negatives, by all means go for it!

Take the Entrepreneur Quiz!

HAVE YOU BEEN DOWNSIZED? Are you thinking about a career change? Are you taking early retirement? Have you said to yourself many times that you would start your own business if you only had a marketable idea? In the current economy, this may just be the time to develop a product or service and take the plunge into self-employment. Even if you have never thought of yourself as an entrepreneur, you may already have the characteristics needed to become one. And even if you don’t, you can develop them—if you are willing to take on the risks involved in being an entrepreneur as well as being motivated by the rewards. The questions that follow will help you determine whether you are ready to take the plunge into business ownership.

Scoring the Quiz

8 to 10 Yeses: Ready to Move Ahead. If you answered Yes to 8 to 10 questions, you’re ready to move into starting your own business. You are willing and able to take calculated risks supported by solid information and based on experience. You are probably energized by the work you do because it’s stimulating and innovative and offers you opportunities to master challenges. You are an independent thinker who is willing to listen to the advice of others but you prefer to make your own decisions. However, don’t launch too fast. Be sure to write your business plan, including a marketing plan and best-case/worst-case financials. Poor planning is still one of the most common reasons for business failure.

5 to 7 Yeses: Move Ahead Slowly. If you answered “Yes” to 5–7 questions, you have some of the key entrepreneurial characteristics, but you need to move ahead slowly. Assess your strengths and weaknesses, and determine what you need to develop before you start a business. You might consider buying a franchise or an existing business instead of starting a business from scratch. You might also test your mettle by starting your business part-time while working for someone else full-or part-time. Grow your business slowly, and only give up your employment when it grows large enough to be a viable business.

0 to 4 Yeses: Consider Working for Someone Else. If you answered “Yes” to 4 or fewer of the questions, it’s likely that you would be more comfortable working for someone else. You’re not sure of your ability to be your own boss and do what it takes to run a business. Perhaps you are interested in starting a business because you love delivering the service or making the product. If so, you might consider working for a company that values and fosters the entrepreneurial spirit, or join a start-up team within a larger company. However, if you really want to start your own business, your determination can compensate for not having all of the entrepreneurial characteristics.

And of course, if you have a solid business idea, have evaluated the financial prospects carefully, have business partners you trust, and lots of capital, you might want to go for it.

Three Fear-Busters

No matter how you scored on this business “readiness” checklist, here are three things to keep in mind to help you get beyond the fear of taking the plunge into starting your own business:

1. You don’t have to start immediately. It takes time to plan, and once you start your business it takes time to build it up. On average it takes between three and five years to build a solid, successful, profitable business. Make a plan, set your goals, and take one step at a time.

2. Marketing and selling your product or service is much easier if you believe in yourself. Base your business on your interests, strongest skills, and expertise.

3. You don’t need to do it all alone. Get support from friends and family, advice from business professionals, business coaches, colleagues and take advantage of community resources. Don’t fall into the trap of being the “lone wolf.” This is a common mistake new entrepreneurs make. Ask for help when you need it—in the long run, you will save time and money!

Chapter Two

READY, SET, GO!

The Entrepreneurial Mystique

THERE’S A MYSTIQUE about the word “entrepreneur.” People tend to say, “I’m not an entrepreneur. I’m a downsized executive who has a small consulting practice,” or “I’m an independent contractor.” I ask, “What’s the difference?” Part of the mystique is thinking that the only real kind of entrepreneur is a person who has a brilliant idea and starts a business using venture capital, and the fledging enterprise becomes the next Microsoft.

Not true. According to the Random House Dictionary, an entrepreneur is someone who organizes, manages, and assumes risk for a business or other enterprise. In other words, an entrepreneur is—or can be—you.

Of course, some entrepreneurial ventures are more financially risky than others. If you are thinking about starting a business, you need to assess your level of comfort with risk, both financial and personal. Most people would try out their business schemes at least once if money were no object. However, it takes more than money to keep your venture growing and healthy. You need a passion for what you’re doing, a persistent drive, and the confidence to keep up with marketplace trends.

What Type of Entrepreneurial Option Fits You Best?

The kind of entrepreneurial option you choose will have an effect on the risks you are willing to take. To determine what type of entrepreneurial option is best for you, assess your business vision versus how much risk you are willing to take. Choosing your own business fit is one of the most creative and difficult aspects of going solo. In addition to thinking about whether your idea is marketable, consider what type of work reflects your passion and promises personal and professional fulfillment. Such a business will thrive because of your enthusiasm and commitment.

Here are two common approaches to becoming a business owner:

1. You want to be your own boss, but you don’t have a clear idea of what business to start.

2. You want to start a business based on your expertise, but you’re afraid of the financial risk.

However, if your business fits your unique skills, talents, and interests, and you have a solid plan, you can be successful either way.

(Continues…)

Excerpted from The Accidental Entrepreneurby SUSAN URQUHART-BROWN Copyright © 2008 by Susan Urquhart-Brown. Excerpted by permission of AMACOM. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.