The first and most important question you can ask yourself is whether you even have what it takes to start a business. First, I would like to differentiate the difference between a self-employed individual and a business owner. Someone who is self employed is someone who seeks employment with individual clients. An example is a babysitter or a handyman. There is usually only one person doing the work and if that person were to die, there is usually very little to pass on to their family. In this article I am not talking about self employed individuals. I am talking about starting a business. I consider a business something where you leverage labor, money and technology to service customers you yourself could not service. If you where a handyman who keeps getting more customers than you can handle, you could hire others to handle the business. You would take the service charge and pay the individuals a per job or hour fee.
There are some traits that you need to have in order to be a business owner. You need to have leadership, a reasonable risk tolerance, a long term outlook and a driven personality. Not everyone has what it takes to be a business owner. There are gurus out on the internet that will never tell you thing. There are some who say that if you just learn the right strategies or read the right book, you will have what it takes to be a business owner. This is total nonsense. There are plenty of people who do not have what it takes to be a business owner. Some people might lack the drive while others lack the intelligence. (To put it politely)
Here are a few questions you need to ask yourself when considering starting a business.
Is my idea a real business?
You are asking yourself whether your idea is a business, hobby or a self-employment opportunity. A hobby is simply something you do on the side that will never grow into a profitable business. A self-employment opportunity could be anything from being a babysitter for extra cash, to cleaning homes. The key is that for whatever reason you do not plan to ever hire others to service your customers. A business is a system. You need to be a “handy man” to be a self-employed handyman. However, you could have not an ounce of handiness within you and still build a handyman business. If you have the business skills you can hire 10 handymen, market their services, and you can even hire a manager that would dispatch the handymen to their jobs.
Don’t get me wrong. I have no problem with people who want to do the same job for the rest of their life. However, as a handyman you will either have to save hundreds of thousands for retirement on your own, or run around town fixing leaky pipes or handing wallpaper when you are 85 years old. On the other hand, at 40 or 50 years old, you could hire a manager to take over operations of your business, and simply make sure that he is properly running it. Doing this may cut into profits, but you still have 10 handymen making money for you. And if you don’t want to do this, managing your business will be easier than having to do the physical labor yourself. This brings me to my next question —
Do you have the leadership ability to run a successful business?
This question is harder than you think. Most people cannot answer this question without first being put in a position of leadership. This is however, a very important thing to know about yourself. If one of your handymen kept calling you to help him on jobs, would you —
Warn him to pick it up or he will be terminated,
Let him go and hire a better handyman,
Or answer his calls and help him complete his duties.
Two of these choices show leadership, while one of them shows weakness. Before reading on, guess which one is the weaker position.
Although firing him may be considered mean, both choices show business leadership. Simply giving in and helping him is really your unwillingness to take charge and tell him that he needs to figure out how to do his job or he can work someone else. It may be seen as virtuous for the owner of a business to be willing and able to get down and dirty with his employees’, however the owner of a business should not have to babysit and pick up the slack of his or her employees. If this means turning over your employee base then so be it.
However, leadership is not just about being able to fire someone or being tough. He must also be able to provide the proper support and positive reinforcement to keep your employees or contractors motivated to do the job that you hire them to do. This is also as important as being able to make the tough decisions. Many people are unable or unwilling to give positive feedback to those they lead. This disability can cause a team to start to deteriorate. As a leader you must be able to give those you lead positive feedback when they do their job well, and negative feedback when they stray from their duties.
The next question is what’s my financial risk tolerance?
I don’t care what guru tells you that you don’t need to takes risks to grow your business. Everything in business is about weighing the risks and rewards. Hireling another handyman and buying the tools he needs to do his job is a risk. Business could slow down and you could be out a few hundred dollars. Risk tolerance is essential for business management. If your risk tolerance is too low, you will never grow your business. If your risk tolerance is too high, you would be willing to mortgage your home and children’s college education to grow your business.
When it comes to risk taking, you must understand that there are good risks and bad risks. You should not jeopardize your entire business or financial future for the chance of financial success. On the other hand, you cannot risk your business becoming irrelevant because you do not have the shin thick enough to take the necessary risks to grow your business.
Are you near or far sighted?
When building your business it is not like building a house. You must continue to grow your customer base. You must be able to expand to new markets and constantly search for new streams of income. Many people are unable to see past their next paycheck. They see the idea of sacrificing comforts today as not worth the possibility of financial security in the future. This is probably the one thing that either prevents people from starting a business or causes small businesses to fizzle out quickly. This may mean cancelling your yearly vacation to save up the money to buy a mower for your landscaping business. You might have to cancel your cable and some other frivolous monthly expenses to be able to make rent on a building while you set it up to start a restaurant. Even in the world of internet marketing (which is where I do the bulk of my work) you will have to be able to give up hours of free time a day to work on the marketing of your websites or blogs. I am constantly told that I am lucky that I can make money from home and that they wish they could do it to. It would be so easy.
I calculated that with the amount of time I put into my internet business, I make roughly $3.44 an hour. This is to illustrate the amount of work that is necessary to build any business. You will probably be making less than minimum wage for the first couple of years. My personal goal is not to blow up big quick, but to build up my residual income. As of right now I could quit working on my business and quit my part time job (and my wife as well) and still pay my rent, power and car payment. This is the biggest benefit of building a business, but is also the hardest part of a business to work for. I get monthly payments from hosting and advertising fees that I have to put forth minimal efforts to earn. Every time I build a website or service a website hosting, my monthly income increases by $9.28 a month. This may sound like nothing. However, if I were to host 100 websites a year for 10 years, I could retire with an income of $9,280 a month by the time I’m 35. This is what I am talking about when I say you must look out for the long term.
This brings me to the last question. This is the question that should be asked first. If your answer is no, then none of the other questions matter. Do you have the drive to see your business plan through even under the hardest of conditions? I have worked overnights delivering donuts so that I could reinvest my profits directly into my business. I make worked on sites till I fell asleep at my desk. I have worked 60 hour weeks at my “part time job” in order to get to the point where I finally have confidence that my business can stand on its own. This is what I mean by drive. It takes a special type of person to build a successful business. Most people show up to work and give you a dirty look when you say good morning. Or they reply with some kind of comment like “yeah right.” Then there are others like myself who show up every day, whether it’s my business or my part time job, with a smile on my face glad to be working.
Success is nothing more than a mindset. If you operate with the mindset that you are successful, then you are. Who cares if nobody told your finances yet. It will get the hint eventually. Also, be mindful that misery loves company. You should not be taking financial or business advice from people with horrible finances or no business experience. It seems as if everyone is a financial expert, as their own financial house of cards is in ruin. You need to surround yourself with successful people who are not afraid to tell you the truth. Have no qualms about shunning those who have a negative outlook on life. It is in your best interest.