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What It Takes To Be AnEntrepreneur The driving force behind thenumerous small- and medium-size businesses that flourish in our economy, is theentrepreneur. For those interested in starting and operating a business, it isuseful to understand who this unique individual is and whether they have similarpersonality traits.
Who Is anEntrepreneur?
Social scientists haveconducted numerous studies to determine whether successful entrepreneursevidence personality traits different from the general population.
They found that the typicalentrepreneur is:An opportunist capable of recognizing an attractive, potentially profitable venture; A risk taker willing to assume the risk of loss in return for the promise of an acceptable level of profit and other personal rewards; Goal oriented and a high-achiever who enjoys setting challenging objectives and has the ambition and perseverance to reach them through his or her own efforts; A highly motivated, hard working, high energy, self-starter with a strong sense of commitment who is willing to endure the frustrations and demands associated with making a business venture successful in return for the rewards; Self confident with enough faith in his or her ability to meet challenges, overcome adversity, solve problems, and make good decisions (It is the strong sense of self confidence that leads entrepreneurs to accept the above average risk associated with a new business venture.); Independent (The typical entrepreneur wants to be in control, to do things his or her way, to lead rather than follow, and to make decisions without interference from others.).
The following simple assessmentquestionnaire should give the prospective entrepreneur a general idea of whetherhe or she possesses personality traits consistent with this entrepreneurialprofile. To score your responses, assign one point to each "Yes"answer and a zero to each "No" answer. Add the point values and usethe following suggested guidelines for interpreting your score.A score of 17 or above indicates traits consist with those of the typical entrepreneur. A score between 13 and 16 suggests only moderately consistent traits. A score of less than 13 suggests a lack of consistency.
When interpreting your score,realize that the results are only suggestive and not conclusive. There aresuccessful entrepreneurs with scores less than 13 while a score of 17 or greaterisn"t an automatic guarantee of success. Success also requires a good businessconcept, organization and managerial skills, the necessary financing, a lot ofhard, demanding work, good timing, and a measure of luck.
EntrepreneurAssessment QuestionnaireAssuming you had the choice and understand the risk and sacrifices involved, would you choose a small business entrepreneur"s career over any other? Yes ______ No ______ Are you willing to take substantial risk, for example investing your life savings, if the potential reward is sufficient? Yes ____ No _____ Can you make a decision and stick to it even though the decision is unpopular with those that are affected by the outcome? Yes _____ No _____ 4. Do you enjoy having the responsibility for making decisions even knowing that you will be held accountable for poor results? Yes ______ No ______ Do you set goals before beginning an important undertaking? Yes ____No _____ Do you make a detailed action plan before beginning a major undertaking? Yes _____ No _____ Are you able to effectively organize the resources required to complete a major undertaking? Yes ______ No ______ Do you finish tasks or projects that you start in spite of difficulties or obstacles? Yes ______ No ______ Are you willing to spend whatever time and effort are required to complete a task? Yes ____ No ____ Do you enjoy meeting and dealing with people? Yes _____ No _____ Do the people you deal with trust you? Yes ____ No____ Do the people you deal with understand the concepts and ideas you attempt to communicate? Yes _____ No ______ Are you able to motivate the people you deal with to go along with your ideas? Yes _____ No _____ Are you in good health? Yes _____ No ______ Are you innovative or creative? Yes _____ No _____ Do you thoroughly investigate important undertakings before getting involved? Yes _____ No _____ Have you done a self-analysis to determine your personal strengths and weaknesses? Yes _____ No ______ Do you have technical experience in the type of business you plan to start? Yes _____ No ______ Do you have management experience in the type of business you plan to start? Yes _____ No _____ Are you willing to have people with expertise or talents you lack join you to operate the business you plan? Yes _____ No ______
Starting A New Business
A major factor contributing tothe poor success rate of startup businesses is the entrepreneur"s failure tocarefully investigate and plan a new venture. For this reason, experts advise atwo-fold approach to the pre-startup stage: do a feasibility study and, if theventure appears promising, prepare a comprehensive business plan.
The Feasibility Study
As the name suggests, afeasibility study is a careful investigation into the question: what is thelikelihood of commercial and financial success for the proposed new venture? Toproposed answer this crucial question, the entrepreneur must first determine whetherthere is a good fit between the knowledge, skills, and experience required toeffectively operate the business and the capabilities of the management team thefirm will eventually employ. Next, the entrepreneur must gather information onthe factors that are key to the venture"s success. These include:The sales growth potential for the firm"s industry and the market(s) in which it will do business; The customer group that constitutes the firm"s target market and how they can most effectively be reached; The firm"s strengths and weaknesses relative to its competition (The two important questions to be answered here are: why should consumers buy from me rather than from my competitors, and what competitive advantage does my firm possess?); The initial and near-term financing needed to sustain the business and how and where it can be raised? The degree of risk to which the business and the entrepreneur"s investment will be exposed and whether the potential rewards are sufficient to compensate for this risk.
If the feasibility study doesnot indicate a good match between the required skills and management abilities, or ifsolid evidence supporting the likelihood of success does not exist, the businessis probably doomed from the start.
A well-prepared business planis comprehensive blueprint for the firm. It details the business concept; howthe firm will be organized, financed, marketed, and operated; the strategiesused to guide operations; and the background and skills of its key people. Bypreparing a formal business plan, the entrepreneur is forced to:Convert pipe dreams to realities by crystallizing thoughts and submitting them to paper so they can be objectively evaluated; Gather the information necessary to clearly identify where the firm is headed, the market opportunities that make this possible, how management intends to take advantage of these opportunities, and the data to support the assumptions underlying plans and projections; Evaluate the firm"s strengths and weaknesses relative to its industry, its market, its competition, and its customers and spell out how strengths will be exploited and weaknesses overcome; Identify the major factors that contribute to the firm�s success or lead to its downfall; Fully develop the firm"s business concept and flesh out the strategies that will drive it; Think about realistic, attainable goals for the business and how progress toward them will be monitored and measured; Think carefully about each part of the business, understand how the parts must tie together to form a going concern, and identify the human, physical, and financial resources that are required to effectively run the business.
The sizable investment of timeand energy required to do a feasibility study and write a solid business planusually prompt new entrepreneurs to question whether the effort is reallynecessary. Business experts say, "absolutely and positively, YES."They agree that a strong research and planning effort are the most importantweapon the entrepreneur has for dramatically increasing the odds of success.What"s more, a realistic feasibility study and business plan serve as evidencethat the firm is in the hands of knowledgeable management. This is evidence thatany prospective financier or investor expects to see.
Buying An Existing Business
Before you buy an existingbusiness, be cautious and investigate carefully beforeyou invest. Buying a going concern involves as weighty a planning and decisionprocess as that required to start a business from scratch. Both ventures requireenough information to provide a convincing answer to the following question: isthere sufficient evidence to indicate a strong likelihood that the businesswill, under my management, generate sufficient sales, cash flow, and profit tocompensate for the risk assumed and the money, time, and effort invested? Toanswer this question, the entrepreneur must carefully investigate both thecompetitive environment surrounding the business and the internal factorscritical to its success.
The firm"s competitiveenvironment refers to the external threats and opportunities that affect itssuccess but are outside the direct control of management. The entrepreneur�sinvestigation of this area should focus on the following key factors:
Industry Outlook Thelongevity of any business is directly affected by the success of the industry inwhich it operates. If the industry is in, or moving toward, a state of decline,then member firms cannot be far behind. To understand the dynamics of the targetfirm�s industry, the entrepreneur must understand:The risks it faces; The factors that determine its success or contribute to its failure; The current stage of its life cycle; The outlook for long-term success.
Market Outlook Closelyakin to the health of the firm"s industry is that of the market(s) it serves.The entrepreneur should be satisfied that this market has a strong economicbase, is either growing or has the potential for sustainable growth, and has alegal and political climate which is business friendly. Again, it is a rarebusiness that can be successful in a weak or hostile market environment.
Customer Base Without asolid, loyal group of customers, it is impossible for the business to generate asatisfactory return on investment. To assess the quality of the firm�scustomer base, the entrepreneur must have a clear understanding of:The characteristics that define the firm"s target customer group; How the firm"s products/services meet their needs; Why this group buys or should buy from the firm rather than from competitors; How they can be motivated to buy from the firm; Whether the size of the customer base is expanding or contracting; Whether the unit and dollar sales to the customer base are expanding or contracting.
Competitive OutlookUnderstanding the firm"s competition and how it stacks up against thatcompetition is as necessary for success as understanding its customers. Theentrepreneur should identify:The firms against which it competes; Why customers buy from them; What its competitors do right and the mistakes they make; The strengths and weaknesses of its competitors; Their competitive advantages or disadvantages relative to myfirm.
Location If location iscrucial to the success of the business, the entrepreneur must be satisfied thatthe firm is attractively situated and, if so, that there are no major changes inthe works which would adversely affect this site. If the current location is notsuitable, the entrepreneur must determine whether a move can be made or whetherone would be cost prohibitive. If the latter is the case, it usually rulesagainst a decision to purchase the business.
Internal factors refer to thoseelements of the firm"s operations that are under the direct control ofmanagement. These include the human, physical, financial, and intangible assetsneeded to run the business.
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Physical Assets The firm�s physical assetssuch as buildings, equipment, and inventory must be carefully evaluated toensure that fair value is received for the price paid. The asset base must belarge enough to accommodate the expected level of sales and sufficientlyproductive to meet expected operating needs.
Financial PerformanceEarning a satisfactory return on investment is the primary reason for businessownership and the entrepreneur must be satisfied that the firm"s financialoutlook is promising. Financial records should be analyzed to determine whether: