Friday, March 11, 2011

What You Need to Know Before You Start Your Own Business

Ever thought of running your own business? Some entrepreneurs might tell you to be careful what you wish for, while others may say it's the greatest thing they've ever done. Before you decide to jump ship and launch your own enterprise, read this column I did for Gannett/USA Today:

Mark Zuckerberg may be the highly successful entrepreneur who created Facebook, but Carol Roth sighs when she hears his name.

Roth, who has been helping both large and small companies get off the ground for more than 15 years, says too many people think they can successfully run their own business when the reality is that 90% of businesses fail within the first five years."Everyone wants to jump on that bandwagon," she says, referring Zuckerberg's phenomenal start-up success. "They don't realize how difficult it is to start a business, how tough it is day in and day out. They just see someone making an obscene amount of money and want to do the same thing."

Add to that the challenge of finding financing and attracting customers in a fragile economy and Roth has some tough advice for those wanting to jump into the start-up arena: Don't quit your day job.

"If you're really that interested in a certain business, then go volunteer or work there part time," she says. "See what it's really like. See if you're good at it."

According to a study by Hiscox, a Bermuda-based insurer, a third of 500 U.S. business owners with 100 or fewer employees admit they've made several major goofs when it comes to running their own show. Among them: not accurately estimating costs, making bad hires, not having marketing and selling skills and failing to get enough financing.

Roth says this lack of planning and skills is even more serious for those who are unemployed and think the answer is to start a business. Often with already depleted reserves, the jobless need to think twice about launching a start-up.

"If you can't woo a potential employer to hire you, then you probably won't have the skills to woo hundreds of thousands of potential customers to your business," she says.

For those thinking that starting a business, Roth, author of The Entrepreneur Equation, (BenBella, $24.95) advises this:

• Be realistic. "Before the recession, people had the perception that their job was secure.

"But that changed, and it created a sense that they didn't have control. But what they don't understand is that even if they are entrepreneurs, they're still controlled by other people like customers, investors or a franchise parent. They have this perception that they'll have freedom that's not a reality," she says.

• Understand it takes more than an Internet connection. When the recession began, statistics showed that more people than ever before started their own businesses, but Roth says many of those went nowhere.

"The problem is that technology really lowers the barriers in terms of starting a business," she says. "But it doesn't mean it's any easier to (execute) a business. It may cost you $100 to start it, but how much does it cost to operate it?"

• Seek brutally honest feedback. Roth says those not willing to tell you "you've got spinach in your teeth" are not the ones to question about your business idea.

• Avoid being swept away by your passion. "I don't know how this got woven into the American dream that you have to make a living from something you enjoy most in life," Roth says.

"It's called work for a reason. Just because you want to be a professional singer doesn't mean you should try and earn a living at it," she says. "Can't you sing karaoke on the weekends? And remember that following your passion may mean that it ceases to become fun once it becomes work."

• Stay away from the snake oil. "There's a whole breed of hucksters out there praying off people's desire to follow their passion to make money.

"You want to have a passion or zest for what you do, but it's got to come from an opportunity. Starting a business is about the customer, not you," she says.

• Accept that it's stress, stress and more stress. You may think you have stress in your job, but launching your own business not only can mean longer hours and more stress, but much less pay.

"You give up a lot. It really is a totally different lifestyle, and you've got to decide if it's worth the extra time, effort and sanity," she says. She adds that new business owners need to be prepared to miss a lot of perks from their old company life — from a technical support team to paper clips.

"You'd be surprised how the little things really do add up to make your life great," she says.


1 comment:

Sheba said...

Its good to know there is still a few honest people in the world, who tell the truth. Most people tell a lie because they are evil and misery loves company.