Why do people start their own business
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Published: Mon, 5 Dec 2016
There are many reasons why people want to start their own business(es). The most obviously reason is about making money, which is translated into making a better life for himself/herself and also the family. However, studies have shown that some people start their own businesses for other reasons as well.
Some do it for the time that they will have to share with those closest to them. If one is an employee, his time is controlled and dictated by this job. There are times when his child is sick, or he needs to send his wife for a medical checkup. Unless he takes a day off, and provided that his boss approves his day off, he is stuck. However, having one’s own business, he is also the boss. So, who is the boss to say he cannot take 2 hours off to run a family errand.
People like to be recognized for their achievements. But by who’s standard? In an organization (it is even worse when the organization is big), many employees’ achievements are overlooked and made to look like as if they are something employees were paid to do anywhere. However, when a mistake is done, the repercussions are big. Have you heard the saying that “Being an employee is a thankless job. When you do right, your boss does not see. When you do wrong, the entire organization talks about it”.
With businesses, there are opportunities to grow, to broaden the mind, to meet more people. Do you know why so many people meet and marry their spouses from the organization? That is because they never get to meet anybody else outside the organization. At times, these may not be the best match, but there is very limited choice. Employees’ circles of friends seemed to be limited people at work and maybe people from church. After a while, the circles may even shrink. Why? Well, people move on, especially those who have started owning their own business.
Now, I do believe that it is a basic human desire to be able to help others, whether financially or otherwise. That is why those in need of financial assistance will always make a plea via the public media as the donations just keeps pouring in. Have you ever felt frustrated that you are not able to chip in more because your own finances are not much better, perhaps. That is why many people have started their business based on this purpose and desire to help others.
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There are perhaps a lot of other reasons why people want to start their own businesses. Wanting to start is a common desire but knowing how to do it is a whole new ball game. Then comes the obstacles of starting a business so of which are:-
And the list goes on.
Yeah, there are many businesses out there where it does take a lot of time to start, heavy financial investments, no special unique products which are not already sold in the market and nobody to sell it to. Would you be interested if there was a business out there where you choose the amount of time you want to put into the business, very little money down, excellent products and a mentor who will guide you to building the network that you want and need for your business?
If you are, then this is just the business for you. This is the perfect business to start you on your dream of owning your own business. Give yourself this one chance.. go and have a look at this opportunity.
Q1.2: The Seven Pitfalls of Business Failure
Summary: When you’re starting a new business, the last thing you want to focus on is failure. But if you address the common reasons for failure up front, you’ll be much less likely to fall victim to them yourself. Here are the top 7 reasons why businesses fail and tips for avoiding them.
The latest statistics from the Small Business Administration (SBA) show that “two-thirds of new employer establishments survive at lease two years, and 44 percent survive at least four years.” This is a far cry from the previous long-held belief that 50 percent of businesses fail in the first year and 95 percent fail within five years.
Brian Head, Economist with the SBA Office of Advocacy, noted that the latest statistics are a much more accurate assessment of new business success rates, and that “as a general rule of thumb, new employer businesses have a 50/50 chance of surviving for five years or more.”
Better success rates notwithstanding, a significant percentage of new businesses do fail. Expert opinions abound about what a business owner should and shouldn’t do to keep a new business afloat in the perilous waters of the entrepreneurial sea. There are, however, key factors that — if not avoided — will be certain to weigh down a business and possibly sink it forevermore.
1. You start your business for the wrong reasons.
Would the sole reason you would be starting your own business be that you would want to make a lot of money? Do you think that if you had your own business that you’d have more time with your family? Or maybe that you wouldn’t have to answer to anyone else? If so, you’d better think again.
On the other hand, if you start your business for these reasons, you’ll have a better chance at entrepreneurial success
You have a passion and love for what you’ll be doing, and strongly believe — based on educated study and investigation — that your product or service would fulfill a real need in the marketplace.
You are physically fit and possess the needed mental stamina to withstand potential challenges. Often overlooked, less-than-robust health has been responsible for more than a few bankruptcies.
You have drive, determination, patience and a positive attitude. When others throw in the towel, you are more determined than ever.
Failures don’t defeat you. You learn from your mistakes, and use these lessons to succeed the next time around. Head, SBA economist, noted that studies of successful business owners showed they attributed much of their success to “building on earlier failures;” on using failures as a “learning process.”
You thrive on independence, and are skilled at taking charge when a creative or intelligent solution is needed. This is especially important when under strict time constraints.
You like — if not love — your fellow man, and show this in your honesty, integrity, and interactions with others. You get along with and can deal with all different types of individuals.
2. Poor Management
Many a report on business failures cites poor management as the number one reason for failure. New business owners frequently lack relevant business and management expertise in areas such as finance, purchasing, selling, production, and hiring and managing employees. Unless they recognize what they don’t do well, and seek help, business owners may soon face disaster. They must also be educated and alert to fraud, and put into place measures to avoid it.
Neglect of a business can also be its downfall. Care must be taken to regularly study, organize, plan and control all activities of its operations. This includes the continuing study of market research and customer data, an area which may be more prone to disregard once a business has been established.
A successful manager is also a good leader who creates a work climate that encourages productivity. He or she has a skill at hiring competent people, training them and is able to delegate. A good leader is also skilled at strategic thinking, able to make a vision a reality, and able to confront change, make transitions, and envision new possibilities for the future.
3. Insufficient Capital
A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed and they are forced to close before they even have had a fair chance to succeed. They also may have an unrealistic expectation of incoming revenues from sales.
It is imperative to ascertain how much money your business will require; not only the costs of starting, but the costs of staying in business. It is important to take into consideration that many businesses take a year or two to get going. This means you will need enough funds to cover all costs until sales can eventually pay for these costs.
4. Location, Location, Location
Your college professor was right — location is critical to the success of your business. Whereas a good location may enable a struggling business to ultimately survive and thrive, a bad location could spell disaster to even the best-managed enterprise.
Some factors to consider:
Where your customers are
Traffic, accessibility, parking and lighting
Location of competitors
Condition and safety of building
Local incentive programs for business start-ups in specific targeted areas
The history, community flavor and receptiveness to a new business at a prospective site
5. Lack of Planning
Anyone who has ever been in charge of a successful major event knows that were it not for their careful, methodical, strategic planning — and hard work — success would not have followed. The same could be said of most business successes.
It is critical for all businesses to have a business plan. Many small businesses fail because of fundamental shortcomings in their business planning. It must be realistic and based on accurate, current information and educated projections for the future.
Components may include:
Description of the business, vision, goals, and keys to success
Work force needs
Potential problems and solutions
Financial: capital equipment and supply list, balance sheet, income statement and cash flow analysis, sales and expense forecast
Analysis of competition
Marketing, advertising and promotional activities
Budgeting and managing company growth
In addition, most bankers request a business plan if you are seeking to secure addition capital for your company.
A leading cause of business failure, overexpansion often happens when business owners confuse success with how fast they can expand their business. A focus on slow and steady growth is optimum. Many a bankruptcy has been caused by rapidly expanding companies.
At the same time, you do not want to repress growth. Once you have an established solid customer base and a good cash flow, let your success help you set the right measured pace. Some indications that an expansion may be warranted include the inability to fill customer needs in a timely basis, and employees having difficulty keeping up with production demands.
If expansion is warranted after careful review, research and analysis, identify what and who you need to add in order for your business to grow. Then with the right systems and people in place, you can focus on the growth of your business, not on doing everything in it yourself.
7. No Website
Simply put, if you have a business today, you need a website. Period.
In the U.S. alone, the number of internet users (about 70 percent of the population) and e-commerce sales (about 70 billion in 2004, according to the Census Bureau) continue to rise and are expected to increase with each passing year. In 2004, the U.S. led the world in internet usage.
At the very least, every business should have a professional looking and well-designed website that enables users to easily find out about their business and how to avail themselves of their products and services. Later, additional ways to generate revenue on the website can be added; i.e., selling ad space, drop-shipping products, or recommending affiliate products.
Remember, if you don’t have a website, you’ll most likely be losing business to those that do. And make sure that website makes your business look good, not bad — you want to increase revenues, not decrease them.
When it comes to the success of any new business, you — the business owner — are ultimately the “secret” to your success. For many successful business owners, failure was never an option. Armed with drive, determination, and a positive mindset, these individuals view any setback as only an opportunity to learn and grow. Most self-made millionaires possess average intelligence. What sets them apart is their openness to new knowledge and their willingness to learn whatever it takes to succeed.
Q1.3: Important Factors in Setting Up a Business
Setting up a new business takes imagination, research, analytical skill, time and money. Whether you buy an existing business or start a new one from scratch, the steps you take must have a structure that, formed comprehensively and executed cleanly and efficiently, give you the best likelihood of succeeding.
You should create a feasibility study and business plan that you can present to advisers and funding sources, whether they’re loan officers or potential investors, that offers dispassionate analysis and displays your enthusiasm for the project.
Maybe you have an idea for a new business, or there may be an interesting business for sale in your area. Either way, it’s critical that you see the potential and risks to help inform your decisions as you move forward.
Your community may lack a certain retail or service business, or there may be a business for sale that you believe you could sustain and improve. You might have ideas that would lead you to build a business that competes with a similar one, believing you can provide higher quality products, more variety or better and/or faster service.
If you a need for a business and believe it could work, it’s just a matter of finding a client base to satisfy.
A feasibility study reveals, in statistical data, the size of your potential customer or client base. State governments put great volumes of demographic data on their economic development websites, so you can gather counts of individuals, numbers of households, age brackets, education and income levels and other demographic information—all identifiable by zip code, county and community.
If your idea involves school children, you can find data relative to student enrollments by age, gender and school district, for public, private, parochial and home-schooled children. Specific state agencies have data on preschool children, children in foster care and those who are otherwise wards of the state, as well as all manner of data on seniors and incarcerated individuals.
Once you’ve gathered sufficient data about your potential trade area, you should estimate how many people and geographies don’t fit your model. For example, your bicycle shop might find many more customers in a community in the central plains states, where the topography is relatively flat, than in downtown San Francisco, which is full of very steep hills. In addition, some communities advertise themselves as being bicycle-friendly. Your demographic data might suggest that opening a day care business in a predominantly retirement-aged community is a bad idea because there are not enough children to support your operating expenses.
Use conservative estimates to determine your potential market and market share. Loan officers and potential investors want certainty that you haven’t padded the numbers to increase revenue projections, so be prepared to defend your numbers.
Write a comprehensive business plan that includes sections on management (your experience and fitness for the specific effort you propose), operations (how you’ll actually conduct the business), marketing (how you’ll reach your target audience) and key advisers and staff (where will you get the human capital to ensure success). Your plan should also include data from the feasibility study that supports your estimates of market share and the time line to profitability.
Again, use conservative estimates of revenues and liberal estimates of expenses. Funding sources will want confidence that you’ve thought things through carefully and thoroughly.
You may have the luxury to work full-time on your project, but if you have a day job that requires your attention then you’ll have to set aside evening and weekend hours to set up your business.
Getting permits, licenses, FDA approval and patents take time. You might get a building permit or a business license in a few days, but FDA approval for a food or cosmetic product can take years. Patent research in the hands of a dedicated patent attorney takes time and can be expensive—as much as $30,000 or more. The same holds true if you’re renovating a property and your new effort requires an architect’s “stamp,” which might cost 10 percent of the construction cost.
Simply put, plan on having your project take more time than you originally thought.
You may start your business with your own funds, then get support from friends and family. The next “layer” of funding can be a bank or Small Business Administration loan. SBA funding typically tops out at $150,000. Beyond that there are “angel investors,” who are individuals of means who take financial risks with entrepreneurs in return for an expected high return on their investment (ROI).
If your project requires large sums of investment money, you may be able to find venture capital called professional money with a solid, conservative business plan. Venture capital money requires a very high ROI, though, because of the great risk of failure among start-up businesses.
Tax increment financing (TIF) funds help entrepreneurs rehabilitate distressed properties in certain communities. While TIF funds are set up as loans, some, most or all of the funding can be forgiven if the entrepreneur and the new business satisfy certain requirements, such as creating a certain number of jobs.
Other Considerations and Resources
Along the way, you’ll probably need the advice and counsel of an accountant, attorney, contractor or architect.
The SBA has offices in most major cities and a number of medium-sized ones as well.
Become familiar with the National Business Incubator Association (NBIA). Incubators provide physical space and certain amenities—perhaps phone, fax, copy and Internet service—at no or minimal cost. They can provide access to consulting, accounting, legal and other resources, again at zero or minimal cost. They may charge a modest rent or take an equity position in your new company. In some cases the incubator may take a royalty or share in your licensing revenues.
Learn about the Kauffman Foundation, a comprehensive resource for entrepreneurs.
Q1.4: 5 Resources You Need To Succeed To Start A Business
Anyone can start a business. But to start a business that succeeds and continues to flourish isn’t so easy. According to Statistics Canada, at least half the new companies in Canada go out of business before their third anniversary, and one in four new enterprises don’t survive longer than one year.
If you’re going to start a business that has staying power, there are five resources that you must have in place before you open your literal or figurative doors. To turn a start up venture into a successful business, you must:
Successful entrepreneurs are people who are fully committed to their business ventures. You have to be prepared to put your heart and soul into what you’re doing. You have to truly believe in your product or service, and be prepared to work long hours to get others to believe in your product or service, too. You have to be ready to go without treats such as holidays, and even necessities such as salary, for what may seem like an endless stretch of time. And you have to do all this without the safety net that salaried employees are used to, such as benefits and pension plans.
Be a “Type D”
People commit themselves to all kinds of things; causes, hobbies, other people. Just being able to make a commitment doesn’t automatically lead to business success. If you’re going to get where you want to go in business, and start a business that will endure, you also have to be what I call a “Type D” person; someone who has desire coupled with drive, with strong discipline and determination.
You have to not only have the business ideas, but be able to execute them. Successful business people are tenacious; obstacles are temporary barriers to work around. They may take “No” for an answer, but only for as long as it takes them to reframe the question from another angle and ask again.
But desire and drive alone are not enough to start a business; you don’t want your business to be a temporary comet streaking across the sky. Discipline and determination are what give successful business people the endurance to follow through on their business ideas, and weather the storms and calms of the economic climate.
Knowledge is another resource you need to have in place before you start a business. Continue on to the next page to learn what types of knowledge and skills you must have if you want to start a business with staying power.
Get The Business Knowledge You Need
Many people have tried to start their own businesses without bothering to acquire the business knowledge they need to make their business a success – and their businesses have failed.
To start a business, you have to be knowledgeable about many different aspects of business and have many different skillsâ€¦ or at least have done the research to find and hire the people who have the skills you lack.
If you aren’t knowledgeable enough about accounting to keep your own books, for instance, you’re going to need to hire a bookkeeper and/or an accountant. If your business is Internet-based, you’d be wise to hire a company to design your web site and handle the back end, unless you personally are an expert in site development.
When you’re creating your business plan, one of your first steps needs to be a frank assessment of your skills and expertise. What aspects of the business are you qualified or willing to handle, and which aspects will necessitate either more learning on your part or calling in outside help?
Managing people is only one skill set you’re going to need to start a business that’s going to be successful. You also need to be knowledgeable about sales and marketing. For example, suppose you’ve developed a better mousetrap. Who are your competitors? What are the mousetraps they’re offering like and how are they priced? What makes your mousetrap better? Is there even a need for a better mousetrap out there? Where is “out there”? Do you have the skills needed to identify and contact customers? Are you good at selling mousetraps? Can you develop a feasible marketing plan and promotional material?
And what about business operations? Do you have the business knowledge to manage inventory and fill orders? Where all you going to store all your mousetraps and how are you going to get them to your customers? Have you found the suppliers you need and developed relationships with them? Have you set up a customer support policy?
Business knowledge before you start a business is critical. All the drive and determination in the world isn’t going to help you if you don’t have the knowledge to actually run a successful business and don’t bother to research and plan for your success appropriately. A friend of mine had long dreamed of opening a bookstore. So he did. Unfortunately, he hadn’t bothered to study the competition or the demographics of the market in the area. It took less than a year for his bookstore to fail. He had the desire and the drive, but didn’t have the knowledge he needed to apply them.
So let’s assume that you are a Type D Personality with all the business knowledge necessary to start a business. Are you a shoo-in for success? Not unless you have the money you need to start a business. Continue on to the next page to learn about finding start up money.
Find Adequate Business Start Up Money
Unless you personally have deep pockets, such as inherited wealth, figuring out where you’re going to get the money to start your own business and getting the financing in place beforehand is going to be one of the most important components of planning your business.
Finding adequate business start up money is especially critical because there’s no guarantee that your business is going to make money right away, and certainly no guarantee that your new business will bring in enough money for you and your family to live on. You can’t start a business without start-up capital, the total amount of money you need to open your doors for business, and to keep them open until sufficient revenue can be depended on.
You’re also going to need operating capital to start a business, the amount of money it takes to keep the business going. Operating capital includes expenses such as salaries, wages, rent, expenses, supplies, utilities, advertising, depreciation, and interest payments. Small business advisors recommend that start-up expenses include at least six months operating capital.
If you don’t have deep pockets of your own, where do you get the business start-up money you need? According to a 1998 study of small- and medium-sized enterprises by Thompson Lightstone and Company, fifty percent of small- and medium-sized business owners report that they currently borrow from a financial institution, such as a bank. Twelve percent of SMEs finance their companies through private loans from friends or relatives and three percent by loans from non-related individuals. Forty-one percent use personal credit cards to finance their businesses.
Personal assets, such as savings, (including RRSPs, pension funds, severance allowances), remortgaging property, credit cards, and personal property, are the most common initial source of business start up money for small businesses. This may be because people starting new businesses have no alternative; if you don’t have much collateral or an established credit history, getting a small business loan can be difficult. (See my article, “How To Get A Small Business Loan”, to learn how to increase your chances of making a successful small business loan application.)
In Right From Home: How To Start a Successful Home-Based Business, Barbara Mowat and Ted James state that money borrowed from family, relatives and friends makes up more than fifty percent of the loans to home-based businesses. They advise avoiding misunderstandings and bad feelings by always getting agreements about loans in writing and making sure that all loans are set up with proper security, any terms or conditions, and a payment schedule. This is sound advice to follow whenever you borrow money.
What else do you need to start a business with staying power? Support. Click to continue reading…
The last of the five resources you must have to start a business that will be successful is a good support system. When you’re thinking of business support, look first to the home front.
It’s no coincidence that most successful small business operators are married. While we like to talk about “going it alone” and “running our own show”, you can’t start and run a successful small business without the support of other people. And who better than a supportive spouse to listen to your ideas or problems, and provide the encouragement or advice that keeps you going?
In Entrepreneurship: A Profile For Canadians, (available from the Canadian Foundation for Economic Education), William E. Jennings points out that the successful entrepreneur usually has an exceptionally supportive spouse.
He adds that these exceptional spouses don’t just provide love and stability, but also specific support for the business, such as helping to provide the capital needed to start a business, or working in the company without pay to keep costs down. Spouses who contribute financially by working outside the business are also a common small business scenario.
Having a supportive spouse is especially critical if you want to start a home-based business. As Barbara Mowat and Ted James say, “in reality, you don’t start a home business, your whole household does” (Right From Home; Starting A Successful Home-Based Business). You can’t start a home-based business without considering what your family members think about the idea, what role(s) your family members might play in your business, and how your business is going to affect your home life. Without the active support of your family, your home-based business will fail. Talk out these issues beforehand and explore how supportive your family is before you start a business.
Other business people are another valuable source of business support. No matter what kind of business you’re thinking of starting, someone has been there and done that. Talking to other business people who have already established a successful business can go a long way towards avoiding pitfalls and provide insight into what works and what doesn’t.
I’ve always found that other business people are willing to share their knowledge with others; if you can’t find someone locally to talk to, there’s a ever-growing network of business communities online (like this one!) where you can get the information you need, and sometimes good advice, too. You’re always welcome to post your questions and comments on the Small Business Canada forum. And my Business Support library has links to Canadian organizations where you can get advice, find a mentor, or just talk to someone.
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