So You Want To Be An Entrepreneur?

The beautiful thing about entrepreneurship is not only the ability to work for yourself and determine how your time is spent, but it is also the satisfaction that comes from building something great. Nothing feels better than being responsible for creating something that started as an idea and grew into a viable business that met a need and made a difference.

Stories abound about people who one day decided to stop what they were doing to pursue a dream and start a business that made a difference. Jeff Bezos was a Wall Street financial advisor before transitioning to the world of e-commerce and launching Amazon at 31. Martha Stewart was a full-time model and a Wall Street stockbroker until she decided to pursue her love of gourmet cooking and creative presentation, which is now known as Martha Stewart Living Omnimedia. Spanx founder Sara Blakely sold office supplies door-to-door for seven years before her line of slimming footless pantyhose launched to success in 2000. Jonah Peretti was teaching middle school computer science teacher before launching viral new media sites Buzzfeed and The Huffington Post in his 30s.

While success stories abound, so do stories of failed dreams and regret. When you compare those who have succeeded as business owners to those who have failed, there are a few common denominators. Some of which are within the control of the entrepreneur, while others are not. Things outside an entrepreneur’s control include an economic downturn, unanticipated health related concerns, natural disaster, etc.

There is no doubt that things outside an entrepreneur’s control can destroy the dream. However, it is more likely that failure is a result of things that are well within the control of the entrepreneur and rarely the cause of uncontrollable factors. Controllable factors usually include a failure to plan, failure to understand the amount of work required to launch a new business, failure to anticipate the funding needed to reach breakeven, and failure to appreciate what it takes to orchestrate all components of the business in such a way that results in success.

If you have a business dream, want to quit your job to pursue a business dream, or are going to reach out to friends and family to help fund your business dream, the best place to first look when trying to determine if you have considered everything it will take to succeed is inside yourself. While a good business plan may consider all the factors that go into creating a good business. It is the belief you have inside yourself that will ultimately determine success.

If you do not truly believe you can succeed you will fail. This is because you will always have a “Plan B” in place. You’ll quit when it gets tough or give up when you see an easy out. If you do not believe you can succeed as a business owner or you do not believe in your business concept, you might as well stop before you start and save everyone the heartache. You need a “burn the boats” mentality if you are truly going to have a shot as an entrepreneur.

However, if you do believe you can succeed as a business owner and you believe you have a viable and winning business concept, then developing a well thought business plan will be your next step and critical for setting yourself up with what is needed to make the dream real. By understanding the realities of business ownership and what it will take to build a strong business, you position yourself to be mentally and physically able to withstand the ups and downs that come with entrepreneurship. When you are aware of the time, effort, money, and commitment necessary to succeed, you’ll be less likely to quit when the going gets tough.

Below are some points for consideration when working through the business planning process.

• Business Need Identification. Identify the problem you are trying to solve and make sure there is a need for it to be solved. If the problem is not big enough for someone to pay to have it solved, then you may not have a valid business idea.

• Why This Industry? Clearly articulate why you have chosen to develop a business in this industry. What are the barriers to entry? Why have businesses failed in this industry? Identify services and products offered.

• Competitive Analysis. What does the competition look like? What products and services do they offer? How are they different from one another? Who is their target customer?

• Differentiating Factor. In most cases, the business being envisioned is not original. Most businesses are a variation of an existing business. What makes your business different than a comparable business? Why would someone choose your business over someone else’s? Be honest with yourself and do not sugarcoat this question. The more realistic you are the more likely it is you’ll find a differentiating factor that matters.

• Risk Factors. What are the issues that threaten success? Is it qualified people to employ? Supply chain? Available real estate? Knowing the risk factors allows for worst case scenario planning and ensures you are prepared should the risks become a factor in the future.

• Business Operating Plan. Develop a detailed business plan that walks through the operational components of the business. Clearly identify what needs to be done to run the business on a day-to-day basis. This will help you understand all aspects of the business and prepare for the development of a proforma.

• Marketing Plan. How will you get your business noticed? How will people find you? How will they keep finding you? How will you find them? How will your brand image and voice be developed?

• Target Customer. Who is your target customer? What do they look like? How do they behave? What are their interests? What do they spend their money on? Where do they live?

• Time Commitment. Think long and hard about how much of your time will be required to achieve the dream. Talk to others who have done something similar. Ask about time commitment, pitfalls, financial commitments, etc.

• Initial Investment. Understanding what it will take to buildout and open the business, as well as startup capital to keep you open until breakeven will be necessary for acquiring enough funding to get your business launched. Architectural design, construction, millwork, furniture, fixtures, and equipment are a few of the associated costs you will need to consider.

• Pricing Model. How will you determine your pricing model? This is critical for you to understand. Price your products and services too low and you delay reaching breakeven. You also risk being perceived as a discount brand. Price yourself too high and you risk being viewed as overpriced and out of reach by your target audience.

• Revenue Projection. Develop realistic revenue assumptions that are based on empirical data. You do not want overstated revenue projections. Overstated revenue leads to discouragement when they are not met and a burn rate that could eventually deplete cash reserves, making it difficult to get the funding necessary to remain open. Remaining open long enough to reach breakeven is required if you want a chance to reach profitability. Therefore, revenue projections and burn rate accuracy are critical components to success as a young business.

• Operating Expense Analysis. Develop a proforma that maps out all your costs associated with the business. Plug this data into a spreadsheet with your revenue projections. Be sure you’ve included everything. Missing an expense can destroy projections and lead to problems that compound over time. Examples of expenses include:

  • Fixed and Variable Cost Identification

  • Overhead: rent, utilities, phones, internet, insurance, etc.

  • Labor (wages, taxes, benefits, etc)

  • Cost of Goods Sold

  • Supplies (general and office)

  • Marketing and advertising

  • Travel and lodging

  • Technology

  • Professional Services (legal, accounting, payroll, etc.)

  • Cleaning and laundry

  • Software licenses

  • Finance fees

  • Merchant services fees

  • Dues and licensing

  • Equipment lease

  • Interest

  • Etc.

While you cannot plan for everything you will face as a business startup, you can learn from those who have come before you and use their lessons as a guide. If you can account for 90% of what it takes to realistically launch your business, you can adapt and adjust to the 10% that is unknown.

Believing you can succeed, planning so you are prepared to succeed, and executing so you do succeed are key components of a successful new business launch. You cannot do well in one aspect of life while failing to do well in another. Life is interconnected. You must be solid in all aspects of life to be solid as a person. Business is no different. Fail to plan, plan to fail. Fail to believe, plan to fail. Fail to approach the business realistically, plan to fail. It only takes failing in one aspect to fail in all.

Randy Stepp is a Principal Renaissance Leadership Group. RLG is a business development consultant firm. Visit Renaissance Leadership Group at www.renaissanceleadershipgroup.com to learn more.