What Entrepreneurs Need to Know Before Starting a Business?

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By: Site Engineer, Staff

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Small business start-up is beyond mere registration of the business, printing of business documents and hiring of business premises. A solid business start-up should start from proper planning of the business with a focus on the aims and objectives.

Many entrepreneurs have been held down from starting their own business because of some general and personal reasons which, if overcome, secure a sure way for adequate take off their business. Despite those factors that prevent business start-up, a number of issues need to be cleared before a solid take off foundation is laid.

Under the articulated plans, the entrepreneur should carefully state his goals and objectives for the business in question. It is now based on these goals and objectives that a start-up should take place.

The factors that prevent business start-up, planning to start a business, the economic role of a small business, and what approaches to take while deciding on development approach, are all treated here comprehensively in this article.

Factors That Prevent Business Start-Up Which Entrepreneur Need to Know

  • Anticipated cash flow problem
  • Change in home circumstances
  • Cost of business premises
  • Unacceptable risk
  • In the appropriate location of business premises
  • Lack of knowledge of accounting/financial techniques
  • Inappropriate sizes of outlets
  • The unstable, political, social and economic environment
  • Very high and uncontrollable lending rates
  • Insufficient start-up finance
  • Anticipated problems of outlets
  • Competing demand from family/domestic sources

In addition, there are some personal problems that prevent business start-up such as:

  • Fear of success
  • Lack of self-confidence
  • Family commitment
  • Inadequate encouragement from spouse/partner
  • Not having mastery of the task or jobs they would encounter
  • Financial commitment
  • Content with current job
  • Personal doubt of success

Many businesses remain unprogressive because of these general and personal perceived and real reasons above. One should be able to get off them in order to start-up.

Planning is the Key Issue in Start-up Business

Planning is very important in business, an entrepreneur that neglects careful preparation at the beginning is doomed from the start, as he may not be able to overcome problems and exploit opportunities as these come by.

The desire to start a business of your own is made difficult by lack of answers to a number of basic questions like:

  • How good is your health?
  • Can you make decisions?
  • Can people trust what you say?
  • Can you stick with it?
  • Can anyone sum a business?
  • Are you a self-starter?
  • How do you get your business registered?
  • How do you feel about other people?
  • What sort of book-keeping system to adopt?
  • Do you need a license?
  • Can you lead others?
  • Can you take responsibility?
  • Do you need the services of professional?
  • How good an organizer are you?
  • How good a worker are you?

The answer should be provided to these questions above and the result of the answers must be above average for a successful business operation otherwise, you are likely to have difficulty.

It is advisable to get a partner to compensate for your weaknesses.

What are the Characteristic Features of Small Industries?

Some industry must be local in its area of operations, relatively small in size within the industry, and largely dependent on internal sources of finance for its growth.

There are some characteristic features of small industries, thus:

  • Low capital base
  • The output is generally low and targeted to catchment’s markets
  • Low technological base
  • Employees are low skilled

The term “small scale business” is relative. You can start your own with as little as $250 and nurse it to a big one. You can also start off with as much as $700. It all depends on the idea you want to invest in and your start-up capital. You may not bother about high technology and highly skilled labor. For example, setting up a small-scale soap making cottage industry does not require high-level technology and very large capital to start it.

What to Consider First Before Engaging in a Business

These include:

1. Feasibility Study/Survey

It is important that no matter how small the enterprises you are considering, you need a business plan or survey. You need to consider why some people are into some types of business. Considering location and research on the relevance of the business you are about to start to the community. Try to measure the capital outlay, likely problems and the payback period of investment, and conduct detailed marketing research with the assistance of a marketing expert.

2. Set Goals

Make a comprehensive list of what you want to achieve in business. Fix your entire being on your goal and be prepared to change often. If you want to succeed in business, you may not be another mega-millionaire, but you will succeed in endeavors. Create an aura of success, around you. Even if you are not a big-time business, act as though you have already achieved without being egoistic and overspending.

3. Self-Assessment

It is necessary to evaluate yourself to ensure that you are fully prepared your personal skill, knowledge, and experience. Does the business fall within the realm of your discipline? Do you need to learn new skills, techniques and so on? You should also remember that you must work for long hours hence should be prepared.

4. Commitment and Dedication

You need to have a total commitment to succeed in your business. Most people, who have recorded success in business today, put in long hours often at the expense of everything else. You must be mentally and physically engrossed in your business.

5. Your Characteristics and Temperament

You need to make a detailed study of your personality, motivation, and value. You need to know how well you can cope with insults and embarrassments.

6. Be Unique

You need to be unique. You do not have to be the same as everyone else. Be unique and different. Capitalize on your self-image and trust your intuition. Within the sector you want to participate, you can bring in new ideas or improve on existing ones. Chart a different course for yourself if possible. Many successful artists today are those who are unique in their own ways. In this highly competitive world, it is only when you are unique in your endeavor that you may be noticed.

7. Paying the Price

Are you able to shoulder the price and sacrifices that are common to new businesses? Profit may not be realized at the preliminary stage. You need to know how well you can cope with all the challenges that might arise.

8. Quick Decisions

Make decisions quickly and with firmness. That is what makes you different and why you will rise to the top.

9. Market Frictions

The principle of free enterprise actually entails freedom to venture into any business ideas provided one has the ability. However, having the capital to start does not alone guarantee success in business. There is a need to study the market peculiarities of the business you are venturing into. Find out whether you have to be a member of a union and other matters that may obstruct your success.

10. Exploit Your Integrity

If your business goal is not worthy of your inner desires, it will be hard to attain it. If your methods are not sincere, you will receive opposition. If your actions are not honest, you will suffer the consequences. Turn all negatives qualities into positives aspects; then watch yourself achieving. Above all, use your integrity.

The Economic Role of Small Business

Irrespective of all sorts of risks in which entrepreneurs exposed to, their jobs perform valuable services for the rest of us. Small businesses play a number of important roles in a country’s economy, thus:

(i) Job Opportunity

Small businesses provide more jobs for the populace than large businesses. Stop and think for a minute about the people you know who have jobs. Where do they work? For big companies? For the government? Or for small businesses? If you are typical at least half of your friends and relations work for small businesses, and the number that does so are likely to increase with the increase in entrepreneurship development in the country.

(ii) Bringing Out New Products and Services

Another important way small businesses contribute to economic growth is by fostering innovation. A recent study of innovation in 150 industries found that small firms or individual inventors produced 40 percent of the new products, a remarkable percentage given the fact that small companies spend less than 5 percent of the nation’s research and development money.

(iii) Supplying The Needs of Large Corporations

In addition to providing new products and jobs, small businesses fill an important role in the operation of the large corporation, acting as distributors, serving agents and suppliers. In fact, some of the most successful companies in the country have based their business strictly on the use of small outside suppliers.

(iv) Providing Specialized Goods and Services

Originally many small businesses exist because they meet consumer’s special needs. Today, comfortable consumers have “custom” tastes. They often seek out the individualized on a different item. Some small businesses have thus become successful by meeting some of these far-fetched “needs”.

Deciding on a Development Approach

One major aspect of both entrepreneur and small business ownership is determining which development path to pursue.

There are three general approaches, which are:

1. Starting a New Firm

A new firm started from scratch by an entrepreneur is often referred to as a start-up. A study of some entrepreneurs others clues about the types of new firms, or start-ups, that one might create. The finding identified the following reasons why these individuals started new firms:

  • Pursuing the Unique Idea: The venture develops because of an idea for a product or service that is not being offered. The product or service is not technically sophisticated or difficult to produce.
  • Escaping to Something New: In starting a new firm, the entrepreneur in this category is attempting to escape from his or her previous type of job, which the individual feels did not offer prospects for sufficient rewards in terms of salary, challenging work, promotion opportunities or other factors.
  • Rolling Over Skill and Contacts: Before establishing the new firm the individual in this category worked in a position that involved technical skills and expertise closely related to those needed in the new enterprise. The venture offers goods and services that rely on the owner’s professional expertise and are most often generic service (g., auditing, or advertising).
  • Leveraging Expertise: The individual is one of the top people in his or her technical field. The entrepreneur brings in partners to help start the firm.
  • Creating an Aggressive Service: The entrepreneur creates an aggressive service-oriented firm, usually a consulting firm in a highly specialized area.

2. Buying an Existing Business

The second major approach to developing a new venture is purchasing an existing business. This can also apply to acquire and manage a small business. Entrepreneurs typically acquire an existing business when they believe that they can quickly change their direction in a fairly substantial way so that it will grow into major new areas. Several of the major considerations that go into purchasing an existing business is to be observed perfectively. It is usually imperative to obtain professional help, particularly from a lawyer (to review such matters as current contracts with the supplier and to set up a proper acquisition agreement) and an accountant (to audit the financial records and help determine a purchase price).

3. Purchasing A Franchise

Another major approach to developing a small business is purchasing a franchise. A franchise is defined as a continuing arrangement between a franchiser and a franchisee in which the franchiser’s knowledge, image, manufacturing or service expertise, and marketing techniques are made available to the franchisee in return for the payment of various fees or royalties and conformity to standard operating procedures.

A franchisee is an individual who purchases a franchise and in the process, is given an opportunity to enter a new business, hopefully with an enhanced chance of success.

Advantages of a Franchise

  • Established reputation
  • Proven business methods
  • Training
  • Mass advertising and
  • General assistance of the franchiser, so that the new venture risk is minimized

Disadvantages of a Franchise

  • The considerable difficulty involved in canceling franchise contracts
  • Lack of independence in regard to making major modifications
  • The substantial expense that may be involved in establishing a franchise with a well-known company.
  • The likelihood of continual monitoring by the franchiser
  • Questionable deals by some franchiser who may fraudulently collect money and will not deliver

However, individuals who lack expertise in a possible business specialty, a franchise may be the answer. It will equally be noted here that obtaining a franchise license does not guarantee profit and is not the ultimate, there are more to that for a guaranteed profit in any organization.

 

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