This week's post is from Cathy Belch. Cathy is an accountant, who does a lot of work for us. At some point we hope to have her full time. Take it away Cathy.....
Being new to the world of blogging, this post is a first time effort for me. When Frank asked for a piece for the site, I had a moment of fear, followed by curiosity. I had heard of such things, but after I have spent my day; as any good accountant should, in front of the computer, I admit I am not drawn to idle scanning on the internet once finished and home. But, I do know a good subject to comment on for the site. And if I could impart a bit of wisdom it would be to send each new entrepreneur a dose of realism.
As you begin a venture into business ownership you inherently put on glasses with rose colored lenses. You think this new world will open up to you that is merry and bright. Nor more boss making unreasonable demands, or punching the clock. Vicious politics no more! In the distance you can see the dollars signs on the horizon, the sound of “FORE” or “Tally Ho” echo in your mind. Perhaps you envision a beautiful, windowed corner office with you secretary bringing you the morning tea and crumpets. But, okay, let me hold onto your glasses and we will sip our realism and discuss why, or more importantly, why not, start your new enterprise.
The statistics may help in realizing the advise is not meant to stifle your enthusiasm, but direct you in reaching your goal successfully. The latest postings found on the internet sites currently show on average 33% of all new businesses fail within the first six months. Fifty percent of new businesses fail within their first two years of operation and 75% fail within the first three years. This is an improvement over historical figures commonly believed to be that 50 percent of businesses fail in the first year and 95 percent fail within five years. Most sources reflect numbers from sources such as Dunn and Bradstreet or the SBA.
Now that you are forming the word “But”, let’s talk details and help you with the first job at hand. Which is, how to decide whether or not to move forward with your idea. Are you truly good at the work you will be doing in your new venture? Ask for input from colleagues, friends and family. If the answer is not a definite YES!; don’t lose your dream. Form a plan for improving your skills or knowledge while you are still working at your current job or situation. You may even be able to gain financial assistance from your current employer while moving closer to your dream. If you are good, or even better, if you excel at your work, is there a real demand right now? Timing is everything. If you are still answering yes; then the next step is commitment. Put your ideas onto paper and form a good business plan. Talk to other successful business owners to gain insight to their success. Talk to those not as successful to learn what they think may have been the reason for their venture to have failed.
Select owners in markets outside of what will be your new market. You won’t be a potential competitor that way and the advice may flow more freely. If you can persuade a local owner, all the better, just be aware that an unknown source may steer you in the wrong direction to decrease the chance of competition from you. I have gained a lot of great advice this way. Listen to all the advice, sift through it with family and friends. Those that know you and your personality will often have great ideas and different ways of processing information. This is great practice when you are in business for yourself. You will have to be able to manage others, be it employees, business partner, vendors or hopefully lot of customers. All with the desire to tell you how to run your new venture. Get used to it now.
Now that you have some ideas on paper, you are ready to move into the next phase, which is preparing a business plan for the first 3 years. Set up a realistic budget for start up, purchases of inventory, and /or supplies. Then move into estimating how the sales and expense will work. Ask your friendly S&K partner or current CPA to review it. This brings us to financing. How will you fund your new entity? And more importantly, how will you pay it back? How will you survive financially while your business is being established? Be prepared to personally guarantee loans, and vendor purchases until you are an established creditor.
My last and hardest question, do you really have the right personality? Guess who all the problem customers, and irate vendors are going to be calling? You! So if you are not able to manage more than just the work, then how, and whom will take on dealing with these issues? I have seen many people who basically do not like to deal with conflict and problems, start a business that puts them dealing directly with the public. You may like sewing, and be the best seamstress in the world, but if you are not great with people, then you will need someone to handle that side of things for you. A good office manager and accountant that you are comfortable with and trust can be the key to your success. Remember, if you contemplate involving family members, you can remove a non family member, without having to worry about how to handle the Thanksgiving dinner staring over the turkey at them.
My last bit of advice is work hard and play hard. Be willing, and able, to devote a lot of time and long hours to your venture until it is established. You are the new Advertising and Marketing Department. Before you even begin your business you are the business. Keep business cards with you all the time, and network to build your relationships. Don’t drive your car around town running errands, with last week’s road rally mud all over it, if you are starting a car detailing business. You never get a second chance to make a first impression. And who knows, even an internet date might lead to a new client even if the dating side does not turn into a new romance. So, that is your does or realism for today.
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