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CHAPTER ONE

Should You Be an Entrepreneur?

The American Dream is to own your own business and make enough money, so you can provide for your family and truly enjoy life. Over the past nine years, I cannot count the number of people who have come to me asking how they could find a small business to start or purchase that would enable them to achieve this objective. Many of the people felt they had a fabulous new business idea that would enable them to achieve the American Dream.

Unfortunately, the probability of a new business being very successful is relatively small. A very large percentage, perhaps as large as 709-75%, of new ventures fail in the first year or two, but if a venture is well planned and organized, the chances of success are dramatically increased. It is important to recognize that out of every 100,000 new businesses started, there are very few that end up with what has been achieved by such people as Steve Jobs, Mark Zuckerberg or Bill Gates. They all had an excellent idea, and they knew how to bring it to market. Clearly there are many other traits and characteristics that they brought to the party, but without these two, none of the products that you associate with these three people would have ever seen the light of day.

What then are the characteristics of a person that would make them a good entrepreneur? Let’s explore some of the most obvious:

* Passion - Without passion for your idea, it is virtually impossible to be successful in the marketplace. As many leading books and articles on marketing have indicated any new idea must have a CHAMPION who has such passion for the product or service that they will sacrifice almost anything to make it work.

* Energy - One of the great myths of prospective entrepreneurs is that they will be able to work their own hours and take time off for recreation or to be with family. WRONG! Any successful entrepreneur would tell you that the exact opposite is the case. Starting a new business requires an extraordinary amount of energy, and a willingness to commit to a 24/7 work schedule to make the business successful.

* Risk-taking Personality - It would be very difficult for a “risk averse” person to be successful as an entrepreneur. The nature of this type of effort almost always involves significant financial and personal risk, as one embarks on the dream of starting a new venture. For some people, the personal risk of failure is even more frightening to them than would be the loss of personal capital. The type of person who is accustomed to a regular weekly or monthly paycheck and counts on that to live, probably would not be a good candidate for an entrepreneurial venture. As a business owner, you are the last person in the chain to be paid. You could even have a successful business, but due to cash flow implications would not be able to pay yourself this month!

* Knowledge of the Business/Category - One of the major reasons that new businesses fail is the lack of knowledge of the owner in the business category they will be entering. For example, just because you love to cook, and have significant prowess in this area, does not make you an excellent candidate to start a restaurant. There are many things that one must know when running a restaurant that have nothing to do with cooking, and they can be the decisive elements in determining whether the venture is successful for not. A few examples would be ordering food, controlling slippage…food walking out the back door, traffic flow, hiring and managing employees, etc. At SCORE we tell people who have a desire to run a restaurant to work in one for a few years, so they can learn about the operational elements of this business before opening one for themselves.

* Understanding of the Marketing Elements Associated with the Business - This involves a very in-depth understanding of what it takes to successfully market your business, so you can generate the awareness needed to obtain customers. While it is possible to learn some of this area “on the fly”, it can be a very expensive lesson that could threaten the entire venture. I had a SCORE client that was trying to market a home care business with no prior knowledge of this category. Before he came, he spent virtually all his money advertising in local newspapers and on radio stations seeking clients. This was a complete bust as he only got one client from this effort. The secret was not to direct marketing funds at the end use of this service, but rather to the entities that recommended his type of service to the clients. The net result was this person ran out of money and aborted the venture. He is now an automobile salesman! The lesson here is obvious on hindsight, but we strongly recommend doing the work up-front to understand how your potential business operates before trying to build your own company.

* A Funding Source to Get You Started - It is almost impossible to begin a business without money. While there are stories of people starting a venture on a few hundred dollars, at SCORE I have not seen any successful efforts that have begun without a meaningful source of funds. We have clients coming in all the time wanting to start a business, thinking they can get money from SBA loans (something that does not exist), grants or unsecured loans.

Many people believe they will be able to obtain financing by finding investors that will believe in their terrific idea, however, this is basically a fantasy and not reality. In general, traditional funding sources such as banks and credit unions will not lend money to startup ventures. While there are exceptions to every rule, an entrepreneur should not count on banks to lend them money, and it is almost impossible to get a grant. Further, other than friends and family, it is extremely difficult to obtain funds from “investors” without a track record for yourself or for your idea that will give them a high confidence level that they will be able to generate a profitable return for the funds in a relatively short period of time.

* An Advisory Group that can Guide You Through the Process - A final key to succeeding as an entrepreneur is to have an advisory group to help you through the process. This could be friends, family or an organization like SCORE, who have the objective of guiding you and you and providing you with a sounding board on decisions that need to be made. The key is to find people with useful business experience who want to help you succeed without having any personal vested interest in your venture.