The best way of choosing your business venture is to look at your experience and educational background. A thorough review will provide leads on the business field you should enter - do what you know best. Even more important, you must like the business field you are going to enter to bring the enthusiasm and self-confidence you need to make the business go.
The basic survival skills include a working knowledge of basic recordkeeping; financial management; personnel management; market analysis; break-even analysis; product or service knowledge; tax knowledge; legal structures; and communication skills.
Women are at last making inroads into business, not only as executives but as owners. There are many obstacles, chief among them the doubts that lenders, suppliers, and in some fields, customers have about women's ability to run businesses. These can be overcome with self confidence and a strong belief in your ideas. You should not be discouraged by being rebuffed by people who simply don't understand. As more and more women enter business and succeed, the process will become easier and easier.
There are, of course, many reasons for the failure of new small businesses. One way of looking at the causes is to remember that a new business is starting at zero momentum; newly entering a market, having to establish supplier relations, finding proper financing, and training employees. To coordinate all these facets and start them simultaneously is a tremendous job. If you don't have experience and management capability, success won't be very likely. You'll also find that undercapitalized businesses, those without enough cash to carry them through the first six months or so before the business starts making money, don't have good survival prospects. In such cases, even businesses with good management can founder.
There are many methods, but basically what you're trying to do is set a value on the assets and earnings record of the firm. The simplest way is to determine the "payback period," usually two or three years. That is, the net profit for two years would equal the goodwill value. A more complicated and accurate method called the "net present value" method is based on the cost of capital and a risk factor. For that method an accountant's help would be valuable.
A good public image takes a long time to establish (and only minutes to lose).
There is no set formula, but a good image depends on:
- The service, products, and customer treatment you provide;
- The market you're in;
- How you stack up against your competitors;
- The quality of your public relations and advertising programs.
If you're new to a market - and if you do what you say you're going to - you may establish an excellent reputation in 18 to 24 months.
As with most personal services, you must have rapport with your attorney. The best way to determine this is to talk to lawyers by phone or visit them before you make a selection. Get recommendations from friends, or your banker. You're looking for someone you can trust and who will take an interest in you and your business.
No, but it's wise to get the best advice possible when you're starting out. An attorney is one source of the expertise you'll need to draw on.
Each legal form, sole proprietorship, partnership, or corporation, has its advantages and disadvantages. The one you should pick depends on your circumstances, including:
- Your financial condition,
- The line of business you're entering,
- The number of employees,
- The risk involved,
- Your tax situation.
Don't assume, if you plan a one-person business, that sole proprietorship is the way to go. See your lawyer.
One way is simply to call competitors and ask their prices. Their prices will give you a lead. You could ask competitors' customers for the same information if you didn't want to go directly to the competition.
The principles of determining market share and market potential are the same no matter how large the geographical area. You must first determine a customer profile, the size of the market, and the number of competitors. You could also use a readership survey given to you by a magazine in which you intend to advertise.
Pricing is based normally on a combination of cost and market competition. Trade associations are a prime source of such information.
Average net profits vary with the type of business - retail, wholesale, service, manufacturing, construction. They also vary for the type of business structure - proprietorship or corporation. Dun & Bradstreet publish ratios which give you these figures, as well as lots of very useful cost information.
Net profit (before taxes) is basically total sales for a specific period less cost of goods and operating expenses during that period. (For a retail business, cost of goods would be your cost of merchandise sold.) Net profit is a function of both rate of return on investment (ROI) and return on total assets. ROI is net profit divided by capital invested by the owners of the company.
ROI is used to measure the effectiveness of management in attaining the owners' desired return on their investment. Generally, the larger the ROI, the more attractive a company is to potential investors.
Return on total assets is the net profit divided by total assets. This measures the net profitability of the use of all resources of the business. It is another tool for measuring management effectiveness in the use of all resources borrowed and equity.
The better the credit references the greater the possibility of loan approval.
Your accountant and bank can provide financial counseling which can be very helpful in starting and managing your business. They can also give you invaluable information on the local area and your market that can be critical in making decisions in your business.
Working for yourself shows enterprising tendencies, but it doesn’t always embrace the entire enterprise experience.
An accountant, a baker or a teacher can be self-employed, but they are usually doing much the same work as a fellow professional who works as an employee. To be a true entrepreneur they’d need to do something like find an innovative system of balancing the books, a different way of teaching students to read, or a new line in confectionery – and then market it successfully.
Not all entrepreneurs are inventors, and not every inventor is an entrepreneur.
Many inventions are not marketed, perhaps because the inventor doesn’t have the ambition, business sense or marketing ability that an entrepreneur requires. An inventor might link up with someone who does have these skills to create a successful business.
Entrepreneurs do need an inventive mind though – to see possibilities, to anticipate needs, and to spot (or even start) trends.
Many entrepreneurs begin by working at weekends, in the evenings, trading on line, selling goods at fairs and markets and using every minute of free time to pilot and perfect their plans. Don’t underestimate the effort and dedication involved in even a small-scale venture.
Often they grow from a particular interest, skill, hobby or just personal circumstances. Or they could be a response to a gap in the market, or designed to solve a frequently-encountered problem. Possibly they mesh with a current fad or fashion. Maybe they’ll even create a need where none previously existed.
Many businesses start in the spare room or on a kitchen table. Initial outlay can be small, it’s when you have to rent premises or find equipment that cash-flow problems might begin. At this point, in money terms, outgoings usually outweigh any incomings.
While all sorts of funding possibilities exist and are outlined in the Glossary and Resources sections, they usually don’t kick in till you’ve tested the market and produced a business plan as evidence. No one is going to give you a loan until this is in place. By this stage, if you’re employed, some of your salary might be channelled into supporting your venture. If you have no job you might need to find one to keep you going, or alternatively live off your wits, your savings or your friends and relatives.
Enterprise is growing in popularity and that trend is likely to continue. It’s estimated that today’s graduates will have at least three discrete careers after leaving university and that working for oneself is going to be part of the equation. The internet, which has swept away many traditional working practices, is a perfect base for enterprise.
Look at some of the sites listed in the Resource section for links to formal mentoring opportunities and actual internships – inevitably rebranded as ‘enternships’ – for budding entrepreneurs. Or use a little ingenuity and contact local start-ups or established entrepreneurs. Many will be prepared to give you their time, share their know-how and maybe even lend a helping hand in the form of a placement.