Your Next Career – Entrepreneur
With the growing number of layoffs, “reorganizations”, and the trend toward off-shoring of jobs, there is not such thing as certainty in the corporate or “9 to 5 (midnight!)” business world. As more and more individuals are faced with making choices for themselves and their families, business ownership is becoming a popular alternative to one more corporate job.
For individuals making the decision to leave the corporate business world for a business of their own, it is important to understand the options, the scope of the challenge, how to get started, and the elements of running a business. Before making the first dollar of investment in a business, it is important to understand what it takes personally and professionally to make a business happen. Many of the most costly mistakes a business makes occur in the first year of operations and in the setup.
To Own a Business or Not to Own a Business – That is the Question
So where do you begin your decision-making process? The first step is to understand why you want a business.
– Have you always dreamed of your own business?
– Do you have a passion for a hobby or other interest that would make a good business?
– Do you dream of independence and being your own boss?
– Are you tired of others calling the shots and reaping the benefits of your experience and expertise?
– Do you see no other alternative due to the job market where you are?
There are as many reasons to own a business as there are individuals who start a business. Because a business requires a commitment of time, money, and energy, understanding your motivations and priorities will help you determine how much you are willing and able to contribute to owning a business. It isn’t simple. It isn’t easy. It is worthwhile.
To Start a Business from Scratch or To Buy an Existing Business – That is the Next Question
Going into business doesn’t necessarily mean starting from scratch. You may want to buy an existing business. You may want to invest in a franchise. You may want to join an existing business as a new partner or owner.
Each way of going into business has its pluses and minuses. There is no one “right” way. There also is no guaranteed success. For instance, many people think purchasing a franchise is a “guarantee” of success. While franchising enables you to leverage an established name, proven operating systems, and a host of other positives, it won’t provide you with all the answers to dealing with employees, customers, finances, generating sales, and other key business success factors. Those are still variables in your business which you will need to address in a franchise just as you would in any other business.
Some advantages of buying an existing business include having an established name, reputation, and customer base. Another advantage is having a “history” of the business’ results. Disadvantages of buying an existing business are that you have an established name, reputation, and a history. Why are these elements on both the positive and negative side? Because, depending upon the business and your ability to evaluate the opportunity, you may not know how past performance will predict future performance. We’ve all seen the “under new management” signs on restaurants and retail establishments. The name didn’t change but the owners and managers have. How successful a business is “under new management” is determined in part by how good or bad the old management was – whether someone will give a business with the same name a chance if past experiences were poor – as well as how good or bad your “new management” will be.
Starting a business with your own ideas from the bottom-up is also an alternative bringing its own set of opportunities and issues. Because you are starting with a clean slate you won’t have inherited issues from previous owners or managers. You also won’t have an established name or operations. A brand new business requires decisions about every aspect from what type of legal entity to establish (sole proprietorship, corporation, limited liability company…) to the name and where you will get your customers.
What Business Will I Start – When, Where, and How Much
In addition to all the ways of going into business, the entrepreneur needs to determine the nature of the business to own. Are you going to sell products or services? Are you going to be retail – direct to consumer or business-to-business? Are you selling someone else’s products or creating products of your own?
Once you have decided on the type of business and the way you want to start the business, then decisions about timing, location, and funding come into play. The type of business and whether you are starting from scratch, buying an existing business, buying a franchise, or joining an existing business impact your next steps.
Buying a franchise, joining an existing business, or acquiring a business outright may be the quickest ways to get into business. They can also require the largest upfront capital (cash) outlay. The initial purchase price and subsequent payments can consume a substantial portion of the funds available.
Starting a business from scratch can have lowest upfront capital outlay, but take much longer to build momentum and consume just as much (or more) capital over time. For instance, you could pick a name for your company, incorporate it yourself, and be open for business for less than $300 in most states. You are now “in business” and, depending upon your business, that may be all it takes to get started. It certainly won’t be all it takes to be operational and successful.
With the exception of most established businesses, every method of going into business will require answering “Where and When”. You will need somewhere to do business. If you are a franchisee, then the franchisor will be a major player in determining your territory and where operations will be located. If you are on your own, you will have to decide where your customers are and if location is significant to your business. Part of the “where and when” is determined by “how much” it will cost to get the location – rent, construction/remodel, and all the equipment and fixtures. Understanding the scope of operational asset needs will be critical to getting this “right”.
The Personal Side of Business
In making the decision to start and run a business, the personal part of the equation has to be considered. Everything – time, money, and resources – is impacted by the demands of owning and running a business. What it takes to start, run, and succeed at business includes personal choices and priorities.
One perspective that is often missing in starting a business is the realization that in shifting to being the business owner from being an employee is that in your business you ultimately are both. You answer to yourself, your employees, the bank, investors, and customers – depending upon the business. It takes a broad range of skill sets and abilities to succeed, your own and those you hire as employees or consultants or contractors.
Another perspective to keep in mind is that the business is an investment, just like a 401(k) plan or a mutual fund. The money you put in is to generate long term returns, not just money for today. This very well may be your “retirement” plan. What you build can be more than making a living. It can be an inheritance for your family and the means to a healthy and wealthy retirement. Consequently, it is important to understand when you will want to exit and what that means to you. Is this a business you will build to sell or a business that you will build and pass on to your children? Is this a business that you will gladly and enthusiastically work in and on “forever”?
Final Perspective – In Conclusion
The business and the personal are not the same. They each are intricately interwoven and are dependent upon each other. The decisions you make to establish a business are impacted by personal considerations that cannot and should not be ignored nor discounted.
Furthermore, once the business comes into existence it will be a demanding task master – demanding attention, money, time, and your heart and passion. It can also be a greedy child wanting more and more. Like the greedy child, it will grow and transform and take care of you in your old age – if you tend it well and pay attention to its needs.
A business of your own can mean independence professionally, personally, and financially. It is challenging. It can be frustrating. It is time consuming. It is rewarding. It is whatever you make it. And that is the best thing of all.
Copyright ©2005 F.O.C.U.S. Resource, Inc.