Owning your own business. Working for yourself. Building your own empire. These are the fundamentals of the American dream: entrepreneurship. But it isn’t for everyone, as the statistics will show: The U.S. Small Business Administration reports that more than half of startups fail within the first 5 years.
Why do so many businesses fail? Is it because the owners didn’t like what they were doing? Most likely not, as people often start a business based on what they want to do, what they have a passion for. Logically, then, it makes sense that it’s something about how people run their businesses that cause them to fail.
Is starting your own business right for you, or are you likely to end up among the larger, less fortunate half? Here are a few questions to ask yourself first.
Are you willing to wear more than one hat when it’s needed?
Many entrepreneurs start their own business because they really enjoy doing something. For instance, someone who likes to find and restore antiques might open an antique store or start an eBay business. But it needs to be said: If all you want to do is to do the fun stuff, starting your own business might not be the right choice for you.
Running your own business means doing more than just what you love. You also have to be willing to research and write a business plan, budget your finances, market, manage your employees and contractors, and hire and fire as necessary. In fact, many small business owners report that a great percentage of their time is spent doing these things, rather than what they thought they would be doing.
As you can see, there is a lot involved in running your own business. If all you want to do is bake cakes all day, you may want to reconsider whether you really need to start your own business in order to do that. Finding a job where you can do what you want, without having to worry about the rest of the details, may actually be more realistic.
Do you have a realistic idea of what needs to be done in order to run a successful business?
Do you want your business to be successful? Of course you do, you might think, but in reality many who start their own small businesses don’t stop to think about the difference between starting a business and making it successful. You don’t just have to be willing to do all the various parts of running a business that I’ve mentioned above, you also have to be good at what you do.
Take marketing, for example. Whether you are making cold calls, writing your website, or finding ways to push your product, both online and offline, marketing your business is an art form — and not everyone is an artist. A good entrepreneur is also good at all the various things you will need to do in order to give your business a fighting chance in an increasingly competitive market.
Are you comfortable outsourcing when necessary?
All of the above notwithstanding, as your business becomes more established, you will need to begin freeing up your time so that you can focus more on providing your product or services. This means outsourcing tasks such as building a website, online and offline marketing campaigns, and accounting. The more of these tasks you are able to outsource, the more time you will have to spend on the real focus of your business.
Of course, outsourcing requires two things: the money to pay employees or contractors, and enough of an understanding of the job to hire them and know if they are doing a good job. In other words, hiring an accountant doesn’t relieve you of the responsibility of maintaining financial records and an effective budget. Likewise, even if you hire a copywriter, you still may need to wear your marketing hat from time to time — even if it’s only to honestly assess whether your contractor is doing the job you hired him for.
Do you have a plan in place?
I cannot stress enough the importance of a business plan when you are starting your own business. A business plan is typically required if you are seeking financing, but even if you aren’t, it can mean the difference between a successful business and yet another failed startup.
A business plan is so important primarily because it forces you to consider — and plan for — pretty much every aspect of starting (or continuing) a business. Part of the business plan focuses on marketing: In order to write it, you need to identify your target market, determine how you are going to reach them, and decide how your business will fill a need in the current market. What will make your customers buy from you instead of the other guy?
A business plan also addresses the financial side of running a business, whether or not you are looking for a loan. It requires you to project income and expenses, which will give you an idea of what you need to make — and how you need to budget — in order for your business to be viable. Today there’s some great business plan software packages that make the task much easier than in years past.
This is not to try to scare you away from entrepreneurship. There is nothing as rewarding as starting your own business and seeing it succeed, year after year. If you could honestly answer yes to all of these questions, you likely have what it takes to be a successful entrepreneur.