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A Quiz:
Take this Quiz before you starting your business.
1. Can you handle not knowing where your next paycheck is coming from? Is regular income and benefits something that you can do without for a period of time?
a] 10 Points: I have other income from a spouse or part time job and I'm a person who handles risk very well - I won't go nuts over it.
b] 5 Points: For 3 - 4 months, I'll be ok and then things will start to look bad.
c] I Point: I have people who depend on me and I can't risk losing the house or not having health insurance. I'll save and plan for a better time to start.
1. Job Security
The truth is, starting your own business is the scariest thing you can do. Most folks go without insurance plans, retirement plans, salaries, and vacations during the start-up phases of a company. Long hours and no pay can take a toll very quickly. Start-up can last two years (it did with my business) where the only thing that keeps you going is the belief that you are on the right track.
Even after the business gets off the ground, the market for your product or service can change at any time. As the owner, you are usually the first one to cut back on your pay or vacation to help
keep the businesses bills paid. Once you have employees, your responsibilities will be for their salaries first, yours second.
Things to Consider
Start out part-time. This may be your best bet if you don’t have the savings to last the "winter" of the business. Keep your insurance plans, salary, and vacation time in order to keep your stability.
Once the business is established, go full-time.
Develop a freelance relationship ~ the beginning of a business is often about learning the craft or market. If you develop a freelance agreement with a larger firm that has already made it in your line of work, you can learn the ropes while knowing that they will send you a certain amount of work.
2. Do you have the cash reserves to pay your (personal) bills for the next 2 years without any salary taken from your business?
10 Points: Really? I guess so - we can cut back on purchases and entertainment - maybe move to a less expensive area.
5 Points: I'm planning to live on money obtained from loans or friends / family and we'll get the business off the ground fast.
1 Point: We live paycheck to paycheck right now and my credit is not good because of a divorce or other reason.
2. Little Money = Leverages You to be Hungry for Sales!
Starting a business takes money. I read the books about businesses that were started on a "shoestring", and I tried to do the same with my business. Starting on a shoestring is much harder and takes much longer for the business to reach a stable point, but puts much less risk on your personal finances.
Unless you are one of the lucky ones, not everyone will want your product or service. In fact, once you start trying to sell it, you may find that those people who said "What a neat idea" don't think that the real product is something that they really need or want. Suddenly you have your start-up costs (business cards, computer, printer, phone, PO box, product development, etc.) with no cash coming in. This is where one of two things usually happens.
OPTION ONE: You get hungry. I don't really mean physically hungry, but hungry for the sale. What will it take to make the sale? How many people do you have to talk to? Cold call? Network? You start to see that the business is going nowhere unless you start to really work. It came for me after about 6 months with no sales. I thought that the Internet would bring them to my door. I checked my e-mail and voice mail, but when there were no business messages, I shook my head and wondered "why?" What was missing?
In this new age of on-line business, the same old principals still are the best ones. Network with other business owners, join your local Chamber of Commerce, join as many women's business groups as possible, donate your time to Junior Achievement, your church, and other places that you can go to meet people. When you go to the meetings, take the risk of walking up to people and introducing yourself. Tell them about your product or service. Ask about theirs. Develop relationships. Ultimately, it is the relationships that will make your business work.
OPTION TWO: You close up shop and learn from your experience for the next time. This is not really giving up - you have learned a great deal this first time around. Next time, you will make the changes necessary to choose and build a great business.
3. In 5 years how much do you want to make/year from your business (personal salary)?
10 Points: If I can make the salary I'm making now (before the business) in five years and have a profitable business, I'd be happy.
5 Points: I expect to be paid for my hard work and risk. I expect to make more than double what I make right now.
1 Point: Show me the money, baby! Starting a business is the way to become a millionaire, and that's what I'm after.
4. WHAT TYPE OF PERSONAL LIFESTYLE DO YOU WANT? WILL YOUR BUSINESS ALLOW FOR THE HOURS AND PERSONAL REWARDS THAT ARE IMPORTANT TO YOU?
10 POINTS: I WANT A MORE FLEXIBLE LIFESTYLE, BUT I KNOW THAT A BUSINESS CAN TAKE 12 - 15 HOUR DAYS DURING THE FIRST FEW YEARS.
5 POINTS: I WANT TO BE THERE FOR MY KIDS AND EXPECT TO BE HOME WHEN THEY ARE OUT OF SCHOOL. MY BUSINESS GOALS ARE SMALLER BECAUSE OF THIS.
1 POINT: EMPLOYEES WILL RUN MY BUSINESS AND I'LL BE ON THE BEACH MOST OF THE YEAR - RIGHT?
4. PERSONAL LIFESTYLE AND PERSONAL HAPPINESS
WOMEN BRING A GREAT TWIST TO THE TYPICAL BUSINESS OWNER LIFESTYLE. MANY OF US ARE STARTING OUR OWN BUSINESSES SO THAT WE CAN SPEND MORE TIME WITH OUR FAMILIES. MOST OF US DON’T WANT THE 40 FOOT YACHT, OR SPORTS CAR. WE WANT TO SEE OUR KIDS' GAMES, CHANGE OUR KIDS' DIAPERS, SEE THE FIRST STEPS, AND GENERALLY CARE FOR OUR FAMILIES. BY STARTING OUR OWN BUSINESS, WE SET THE MOOD AND EXPECTATION AT WORK. FLEX TIME, PAID SICK DAYS, CHILD CARE AT WORK, AND OTHER CREATIVE PRACTICES ARE OFTEN USED BY BUSINESS OWNERS TO PROMOTE BALANCE BETWEEN WORK AND HOME.
MAYBE YOU WANT TO START A BUSINESS THAT WILL ALLOW YOU TO BE A STAY-AT-HOME MOM. THAT’S WHAT I DID. THE CARPET IN MY OFFICE IS STAINED FROM BABY SPIT UP AS SHE CRAWLED AT MY FEET WHILE I WORKED ON THE COMPUTER. I MADE MY BUSINESS PHONE CALLS DURING HER NAP. THANK GOODNESS SHE WAS A GREAT SLEEPER, OR IT NEVER WOULD HAVE WORKED. AT SOME POINT, THOUGH, YOU WILL FIND THAT THE MELDING OF EXECUTIVE AND MOMMY HAS VERY LARGE CHALLENGES. MY FIRST DAUGHTER IS NOW IN DAYCARE (SHE’S 3) AND I CAN NOW SCHEDULE APPOINTMENTS DURING THE DAY AND NOT WORRY ABOUT HER TALKING WHEN I ANSWER THE WORK PHONE. CONTRARY TO OTHER KIDS IN HER CLASS, WE SPEND TIME TOGETHER IN THE MORNING HAVING BREAKFAST AND TALKING. SOME DAYS I QUIT WORK AT 3 PM SO WE CAN GO TO THE PARK.
BE SURE TO REMEMBER WHAT YOUR PERSONAL GOALS ARE, TOO.
5. Have you been in the "power position" before? Are you a better leader or loner?
10 Points: I have experience running a business before. It might not have been successful, but I learned a lot along the way.
5 Points: I've been in management roles in companies like the one I want to start before. I've been successful in those positions.
1 Point: I've always wanted to be the leader, but it has never worked out. I'm more of a "loner" and like to work on my own.
Power to the Woman at the Top
Owning a company puts you in the power position. You are leader. You need to make decisions, create a vision, and convince everyone else around you that you have it going on. Take some time to learn what makes a good leader. Read some books ? listen to those whom you view as good leaders. There are qualities that most successful people share.
Have you been in a power position before? Have you hired and fired employees? Have you decided what products to carry and which business relationships to make? Many entrepreneurs have risen to these positions in other businesses in which they have worked. This gives you practice and feedback from those around you. Starting out without this experience can give you some major headaches later.
If you don’t have direct experience with power and leadership, be sure to surround yourself with people who have these qualities. Consider putting together an advisory board ? a group of business people who meet on a regular basis to look at what your business is doing (financially and other) to give you input. Even though you might have to pay these people something, their advice can cost you thousands later.
I recommend a book called "The E Myth Revisited" that talks about why many businesses fail and how our personalities contribute to the success or failure.
6. How does your age effect your business decision? The younger you are the better you may be able to handle risk, but how will a business failure or success affect the rest of your life plans?
10 Points: I'm at a point in my life where major change and risk are OK. I'm ready for a major challenge and know that failure teaches many things.
5 Points: It's now or never for me. I've put this on hold long enough.
1 Point: If this business fails, I'm ruined financially and personally. I've got all of my life savings on the line - failure is not an option.
How Age Affects Your Plan
What is your life plan? Take a look at where you are now and decide how long you want to run this business. Will you sell once you reach a certain gross sales number or once you reach a certain number of years in business? Maybe you want to pass this business down to your children. Whatever your plan, start the business with this in mind.
If you want to retire in a few years, can you grow the business in order to be ready for retirement? What will the business sell for, and will this be your main source of retirement? Maybe bringing in a partner will help the business reach this point by the time you want to retire. Maybe the partner will buy you out and continue on his/her own.
If you have a long time until retirement, time may not be as much of a factor. Consider what else you want to do in life. Do you want to start a family or have more children? Who will run the business while you care for a new baby? Could your husband be relocated? How will this affect your business?
7. Do you have the physical stamina to handle the stress and demands that a business venture will place on you? Business owners tend to need a lot of energy, do you have the reserves?
10 Points: I am healthy and work to stay that way. Exercise and eating right give me solid energy each day.
5 Points: I don't have much time for exercise, but I know how to use coffee and soda to get me though the day.
1 Point: I've been ill in the recently and my health is not good. My doctor has told me to "take it easy".
Physical Stamina
Owning your own successful business will be the hardest job you have ever had. It is also one of the most rewarding. The stress of bills, late payments, bounced checks, risk, employees, and much more can take their toll on your health. Long hours are also usually put in for the sake of the business. Lots of business owners start their day at 6 a.m. and don’t end it until midnight. Can you do this? Will your health suffer?
Something that can really help is to find a fun way to exercise during the start-up phase that can easily continue during the growth phase. I did a lot of gardening with my daughter that first year in business. I found it helped my stress levels to get out there and dig and plant and prune. I am now in my own office space where it is more difficult to take the time to exercise. However, a lunchtime walk or run allows time away that can help put it all in perspective.
The road to success is lined with tired people who forget why they try. It doesn’t have to be that way.
8. Do you love (or at least like) your current physical location? As a business owner, you will become part of the community for years to come. Is this where you want to be?
10 Points: I am already involved with the community and my family is here. I love the area and have a lot of support.
5 Points: We just moved to this city and its been OK for us. My family is not nearby.
1 Point: I don't like my location. There are few opportunities here and that is why I want to start a business, so I can make some money.
Location, Location, Location!
Not only will your business depend on your location, but you will be "planting your business tree" there and will need to be able to maintain it for years to come. Things to keep in mind when deciding on a place to open your business:
Local Economy
Is your local area growing and building? Are the market trends good? Even if you have to locate your business further from you home, try to find a place that is building up and bringing people in. The worst thing you can do is pick a place that is in the "bad area of town" because it is less expensive. Your address can be the first thing people will ask for, and it can say a lot about your business.
Job Market
Since unemployment is low in most areas in the U.S., consider what type of employees you will need and find out if there are many in your area. The amount of money that you will have to spend to pay top dollar or in the recruiting phase could be indicators that you should locate the business in an area with a different employee pool.
Do You Love It?
It really helps if you love the community in which you work. Become "vested" in the community by joining the local Chamber of Commerce, Business Association, Visitor and Convention Bureau, City Council Committees, and other local organizations that could use your help. Why plan on retiring "one day" to some great location- why not move there now and start your dream business there? It’s like a partial early retirement!
9. How much are you willing to risk financially? Most entrepreneurs put it all on the line (savings, credit, home) and many will lose it all. What can you lose? Are you willing to lose it?
10 Points: I can handle risking it all. I have support from my spouse / family and I know that I can recover if the business does not work out.
5 Points: I will not put my home on the line, but the rest of it is optional. Losing my savings and my credit would be hard, but I don't think that will happen.
1 Point: I don't have anything to lose. My credit is bad, I don't have much in savings and I don't own a home.
Risky Business
You have a dream. How much are you willing to risk? It is necessary to have a "nest egg" before you start your business. No matter how hot your idea, there will be more bills than income for a long time to come. Most major companies start with funding in the millions. They convince venture capitalists (VC's) that their idea is going to make a lot of money. The VC?s take part of the business stock and hand over money with the agreement that they will get it back and then some.
Most of us start out hoping that the money will start to come in at the same time that the nest egg is running out. Making sure that this happens on schedule is a tricky thing. Go into the venture not expecting to take any money out for your own salary for two years. Your money that is earned will go back into the business to buy more supplies, equipment, product lines and advertising. If you are actually able to pay yourself something little in the second year, pat yourself on the back and celebrate (cheaply)!
If you find that your nest egg was not big enough, there are financing options. Hopefully at this point your business has made some sales and has started building those bridges that lead to success. Before you approach any family, friends, or a bank with a desire to borrow money, you will have to tell them that your business is getting better. How much better will depend on the money source. Banks will want the most recent information you have, including your profit and loss statement and your projections for the future.
10. List the top 5 reasons why you want to start this business. Then list your top 5 personal life goals. What conflicts do you see? How many are similar? Can you make changes so that your personal and professional goals are closer to each other?
10 Points: I've done this exercise - it was easy - more than 3 were connected and the other ones were close. I think I'm on the right track!
5 Points: I thought about this and see that some are the same, but those that are not are very different. How can I make $500,000 in sales and still travel like I want?
1 Point: I like to take life as it comes and I change my mind a lot. Coming up with that many goals didn't work out - planning is not a strength for me.
5 Reasons Why You Want to Own a Business
Your five reasons should take you some time to develop. These are really your life goals. Maybe one goal is "greater happiness". How does starting your own business add to this goal, and how does it subtract? Maybe another goal is "more time with family." Does starting your own business meet this goal. Maybe it will not meet it now, but will it in the future? Is this acceptable?
You might want to make your goals even more concrete. "I want to develop a business so that I have lifelong financial stability and don’t need to depend on another person for support." If this is your reason, be sure to choose a business that will have the best chance for market stability and long term growth.
After you make up these 5 reasons, print them out and post them on your bathroom mirror. Look at them over the next month or so every day. At the end of the month, have they changed? Do you still feel positive that your new business will help meet these goals?
Finished.
Add up the number of points from the answer that you selected for each question. Based on your total, check the summary below to see the WomanOwned.com take on your chance for business survival.
100 - 80 Points - The time is right and you have the makings of an entrepreneur. Most of your expectations are reasonable and you have a healthy understanding of what this process will take. It also sounds like you have support from others - you'll find this to be very important as you start your venture. Knowing where to turn in a crisis or when it all just seems to be too much will help you stay with it.
60 - 79 Points - There are some areas of business ownership that you need to explore before you get started. I would suggest that you call and interview a few small business owners and ask about how their businesses got off the ground. See if they will answer the hard questions - how long until you could take any money out of the business, how long until you were profitable, what was your biggest surprise? Save some more money to help you through the rough times and work on your family / community support and contacts.
45 - 59 Points - Business ownership is going to be a shock to you and you may not recover, financially or personally. If you still think that you want to give this a try, there are many things you can do to help you get ready. Take a job in a business that interests you and learn by watching what the owner does. How do they lead? How do they live? How long did it take them to get there? Get your personal and financial life in shape - fix your credit, save some money, build your support systems, and get healthy. If you take care of these things, come back here in the future and try this again and see where you score.
44 Points or Less - Business ownership might be a dream, but it is not for you. You don't have the resources or support to make this happen. If you decide to start something anyway, try a part-time business so that you can retain some regular income along the way. Consider working in small businesses to learn the ropes, but I expect that a job in a larger company will provide you the stability that you need.
Once you are done with this quiz, you need to develop your business plan.
The business plan will be the roadmap that your business will follow to success.
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