Decide if running a business is for you

At one time or another, most New Zealanders think of starting their own business. But before you dash off your letter of resignation, quit your full-time job and wave a cheery goodbye to your boss and co-workers, you need to have a realistic idea of what running your own business entails and whether it suits your personality and individual needs. Crucially, you also need to know whether you can afford to take this rather bold step.

While being your own boss, running the show and benefitting from company profits sounds like a lot more fun than working for a boss, the harsh reality is that running your own business is hard work. A large number of start-up businesses fail because of inexperience, poor management, lack of planning or insufficient capital. Is starting your own business really the right move for you?

Do you have the passion?

Passion is probably the most important ingredient you’ll need to start a successful business. You need to be passionate about what you want to do. You should want to eat, sleep, breathe and talk about your business every day. Yes, you’ll probably have unmotivated days… but if you’re not generally fired up with enthusiasm for your new business, you probably shouldn’t start it.

In the early stages of setting up your business, you’ll probably be working much harder for much less financial reward than the pay you received at your 9–5 job. This means you’ll need a good dose of passion to see you through the start-up phase and to the point that your business starts turning a profit.

Do you have the skills?

Although you don’t need to be competent in all areas of business when you set out, you’ll need a minimum level of skills and knowledge before you start out on your own, and the ability to recognise when you need to ask for input and advice from others.

Experience in the type of business you want to run

Your chances of starting a successful business will be much lower if you have limited or no experience in the type of business you want to run. If you’re not aware of industry norms, your customers’ preferences, or the best suppliers or service providers to use, you’ll be setting out on a steep and potentially costly learning curve; particularly if you’re setting up a business in competition with other established businesses.

If, for example, your heart is set on running a pizza business but you have no idea how to make a pizza, your first step should be to get a job working in an established pizza business. Once you’ve got an idea of what is involved, you’ll know what to look out for and how to set up a stream-lined cost-effective operation of your own.

General business skills

Very few business people start out armed with the full arsenal of business skills they’ll need, from understanding the accounting side of business, to staff management and sales. You’ll need to be willing to ask for and take advice and to learn on the job.

If you enjoy challenges and have the ability to think on your feet, starting a business may be just right for you. However, even though you can surround yourself with people who can fill your knowledge gaps – whether as full or part-time staff, or as consultants – ultimately, you’ll have to make the decisions and carry the financial can for the success or failure for your venture.

What other skills will I need?

Apart from understanding the finer details and operations of your business, and having the ability to see the bigger picture and plan ahead, you’ll also need to learn to become a motivated leader and manager of people. This includes developing or honing your leadership and communication skills.

You’ll also need to be prepared to take risks. You won’t have the security of regular pay and will need to make some scary decisions and bear full responsibility for the outcomes.

Do you have support?

Starting up your own operation can be both tough and lonely. You’ll need support from several quarters to help you succeed.

Family support

When working for yourself you'll probably end up working long hours. There may also be many occasions when you need to be away from home often to attend business meetings or trade shows. So running your own business requires commitment and understanding from your whole family.

Be upfront with your family about both the time commitment you’re going to need to make to your business, and the benefits it will have for the family in the longer-term if you’re able to set up a profitable and sustainable business.

Without a regular pay cheque, your standard of living might also need to drop. Your partner might need to take a job to support the family for the first few years as you set up your business, or your family might need to adjust to having less disposable income. These financial issues can create a lot of stress if they’re not discussed and understood upfront.

A supportive network

You’ll need to cultivate a supportive network of friends, peers and business experts to help you in times of need. You’ll need friends who understand the commitment you have to your business and who’ll pitch in to help or provide an ear to listen to problems, or act as a sounding board for your ideas.

You’ll also need to develop a network of business peers and experts who you can turn to for input and advice – from how to deal with a staff issue, to recommendations on service providers or trade shows.

Supportive staff

The hardest part for most small business owners is accepting that they can’t do it all themselves. If your business is to grow, you’re going to need to find and retain suitably qualified and loyal staff. It is with their input and support that your business will be able to grow.

Do you have enough money?

Starting your own business requires a capital investment, often more than you might initially think.

Work out best and worst-case cash flow forecasts

You’re probably well aware that you’ll need enough money to set up your business, and support both yourself and your business until your business is able to turn a profit and pay you a living wage. But have you done a cash flow forecast and worked out how much money this amounts to?

Business start-ups don’t always run according to plan. Do you have enough money to see you through if your worst-case forecasts turn out to be far closer to reality than you’d hoped? If not, it might pay to keep your 9–5 job for a little while longer until you can build up a larger capital sum. Alternatively, it might pay to build your business up as a part-time venture before you quit your day job and run your business full-time.

Be realistic

Be realistic with your forecasts – for both your business and personal financial needs. Many potentially successful businesses fail when they are on the brink of success because there is not enough money to see both the family and the business through to the point where it is able to make a profit and pay the owner a salary.

Next steps

Content provided by The Small Business Company