There are many reasons people look at going into business for themselves. It could be that they hate their current job and yearn to be their own boss. Maybe a tradesperson feels that he or she could run a better business than the company they work for. It’s important that people go into business for the right reasons. Failure lurks around every corner and if someone is in business for the wrong reasons, he or she is much more susceptible to it.
There has been some research on what makes an entrepreneur successful. One study found that the entrepreneurs they interviewed had the following charactoristics in common.
- A propensity to take risks
- A need for achievement
- A belief in one’s ability to control the outcome of a situation
- A tolerance of uncertainty
- A need for autonomy
In my experience, these charactoristics are useful in running a business. Different people have them to different degrees. Some of these charactoristics are developed in the business owner as he or she becomes more experienced. The Business Development Bank of Canada, a federal crown corporation, has an online quiz that will test you in the attributes above.
It is important to have a passion for the industry the business is in. If someone starts a business based solely on where the best possible financial returns are and without passion for the space, it will be very difficult to succeed. Things will get tough, so tough that only a passion for the business can carry the business person through. A person without passion in this situation will quit before they become successful. Very few businesses become successful without experiencing a period of adversity.
It is important to have the right foundation in place before getting started. Most new businesses won’t be able to pay a predictable salary to the owner right away. If a business owner has an expensive personal lifestyle, he or she needs to be prepared to reduce that lifestyle to one the business can support.
A person starting a business also needs to be able to contribute cash towards the start of the business. Every business needs some cash to get started. The amount can vary widely depending on the nature of the business, from a few thousand for a home based business to millions for a manufacturing business. Some of this needs to come from personal savings, while the remainder can come from borrowing against personal assets or through business loans.
Family support is essential. Starting a business takes a lot of time and financial sacrifice. Starting a business without complete, informed buy-in from your spouse and family will lead to a lot of stress when things become difficult. This will compound the problems the business is having. While it is necessary to put some money at risk when starting a business, a business owner should never take a risk so large that failure would wipe his or her family out financially. Sure there are those stories of the plucky entrepreneur who maxes out his credit cards to start what becomes a billion dollar business. Unfortunately, the guy who did the same thing but had his business fail and push him into bankruptcy, costing him his marriage, never gets any press. He represents the vast majority of people that try this move.
Starting a business is difficult and requires a lot of hard work, but it can be very rewarding for those who prepare themselves well to accept the challenge.