Starting a new business is both exciting and rewarding, but it is also full of challenges. The level of commitment that you will need should not be underestimated.
The success of your business will partly depend on your attitude and skills. This means being honest about a range of issues – your knowledge, your financial status and the personal qualities that you can bring to your new business.
Commitment, drive, perseverance and support from family and friends will go a long way towards transforming your business idea into reality and will be especially important during the early days.
This guide will help you decide whether you have what it takes to set up a new business. It also provides a look at the day-to-day reality of starting a business and outlines the skills and qualities that you will need.
The day-to-day reality check
Setting up your own business requires your full commitment. Here are some of the challenges you need to think about. Another valuable way to find out about the day-to-day realities of running a business is to talk to people who are in business already.
Personal sacrifice
The physical and emotional demands of starting up in business should not be underestimated. Starting a business is a life-changing event and will require hard work and long hours, especially in the early stages.
Financial insecurity
There can be times of financial uncertainty and this may have a knock-on effect for both you and your family. For example, you may have to forgo holidays. You may have invested personal savings or used your family home as security and in the worst case scenario you risk losing your investment or even your home.
Setting up your own business means that you will no longer be able to take advantage of the usual benefits associated with a permanent job. This includes the loss of “safety net” benefits such as pension rights, sick pay, paid holiday and other company perks.
Pressure on close relationships
You will need the support of your family and friends. They should be aware from the outset of the effect starting up a business will have on your life and it is crucial that they are right behind you. Their emotional backing may also need to be complemented by a practical “hands on” approach. Discussing these issues before they arise will help.
Isolation
Being your own boss can be a satisfying experience. However, shouldering all the responsibility for the success of the business can prove lonely. Unless you develop a network of contacts, there will be no one there to bounce ideas off.
The entrepreneurial quality check
Research has shown that there are certain qualities commonly found amongst successful business people.
A typical entrepreneur will have the following key qualities:
- Self-confidence – a self-belief and passion about your product or service – your enthusiasm should win people over to your ideas.
- Self-determination – a belief that the outcome of events are down to your own actions, rather than based on external factors or other people’s actions.
- Being a self-starter – the ability to take the initiative, work independently and to develop your ideas.
- Judgement – the ability to be open-minded when listening to other people’s advice, while bearing in mind your objectives for the business.
- Commitment – the willingness to make personal sacrifices through long hours and loss of leisure time.
- Perseverance – the ability to continue despite setbacks, financial insecurity and exposure to risk.
- Initiative – the ability to be resourceful and proactive, rather than adopting a passive “wait and see” approach.
The business skills check
As a business owner you need core skills to execute your ideas to ensure that your new business survives in the long term.
You should start by assessing your own skills and knowledge. This will help you decide whether you need to learn new skills or draw on outside help by delegating, recruiting or outsourcing.
Key business skill areas
- Financial management – This includes having a good grasp of cashflow planning, credit-management and maintaining good relationships with your bank and accountant.
- Product development – The ability to make long-term plans for product development and identify the people, materials and processes required to achieve them. In order to make such plans you will need to know your competition and your customers’ needs. People management – This includes managing recruitment, resolving disputes, motivating staff and managing training. Good people management will help employees to work together as a well-functioning team.
- Business planning – The ability to assess the strengths and weaknesses of your business and plan accordingly.
- Marketing skills – A sound marketing approach will help you set up and oversee sales and marketing operations, analyse markets, identify selling points for your product and following these through to market.
- Supplier relationship management – The ability to identify suppliers and positively manage your relationship with them.
- Sales skills – Without sales your business cannot survive and grow. You need to be able to identify potential customers and their individual needs, explain your goods and services effectively to them and convert these potential customers into clients.You can get advice on any of these issues at your local Business Link.
The market research check
You need to research your target market and your competitors carefully.
A common misconception is that entrepreneurs who fail simply lacked sufficient funding or did not put the right team in place. In many cases new businesses fail because they have not spent enough time on researching their business idea and its viability in the market.
There are certain criteria you can use to establish this:
- Does your product or service satisfy or create a market need?
- Can you identify potential customers?
- Will your product or service outlive any passing trends or capitalise on the trend before it dies away?
- Is your product or service unique, distinct or superior to those offered by competitors?
- What competition will your product or service face – locally, nationally and globally?
- Is the product safe?
- Does your product or service comply with relevant regulations and legislation?
- Can you sell the product or service at a price that will give you sufficient profit?
Market research can play an important role in answering many of these questions and increasing your chances of success.
How much research you do will depend on the time and funds you have available. You could:
- informally canvass the opinion of friends
- talk to industry contacts and colleagues
- survey the public about whether they would use your product or service
- ask customers of competing products what improvements they would like to see
- set up focus groups to test your product or service
- monitor what your competitors are doing
- look at what has and hasn’t worked in your industry or market niche
- study wider economic and demographic data
Business Link has many useful guides on starting up a business. You can also download a newcomer’s guide to market and social research from the Market Research Society (MRS) website (PDF).
The financial commitment check
Securing the right financing for your new business is crucial, as there is no guarantee that your business will make money for you straight away.
You should aim to have sufficient reserves to last you for several months without an income from your business. For tips on how to keep afloat during the early months of your new business, see our guide: how do I survive until my business is off the ground?
You need to be honest about your start-up capital reserves. If there is not enough money to see you through until your business begins to make money, then you are not ready to start up. Being realistic at this stage is likely to save a lot of pain. If you decide to launch your new business without enough funding behind it, keeping it afloat will prove extremely difficult. For more information, see our guide on how to choose the right finance when starting up.
There are many different sources of potential start-up funding, including bank loans, overdrafts and private loans. Use Business Link’s interactive tool to find and secure the right finance for your business needs.
For expert help, contact an accountant, small business adviser or your bank manager.
Provided by Business Link