The Process of Becoming an Entrepreneur
By David Minor
The idea of becoming an entrepreneur may be very appealing to you. Before you take that giant leap, however, there are some very important things you will want to consider. While each individual's situation is slightly different, I think there are some basic considerations prospective entrepreneurs should think about when considering the creation of a new venture.
Do You Have What It Takes?
Initially, you should determine if you have what it takes to be an entrepreneur. First, you must have a burning desire to go out on your own. Keep in mind that you are going to risk yours and possibly other peoples' money on this venture. If you are going to take this risk, you better have the fire in your belly. Secondly, you have to be one who is willing to take initiative. In the entrepreneurial world nothing happens unless it is made to happen. You will have to be the one who makes it happen. Third, you must be able to deal with ambiguous situations. One of the most important characteristics of an entrepreneur is the willingness and ability to adapt to change. The willingness to be flexible and to adjust on the fly is critical. Next, you should be a good problem solver. Business is an ongoing puzzle, a long series of problems that must be solved. If you don't like solving problems, particularly ones that you may know little about, starting an entrepreneurial venture may not be the thing for you. Lastly, you should be perseverant in nature. Entrepreneurs don't quit easily even when it seems like the thing to do. You've got to be determined to succeed and do whatever it takes to develop a winning attitude and be willing to deal with adversity on a consistent basis.
Do You Have A Good Idea?
The next obvious question during this evaluation stage is to determine if you have a good business idea. Contrary to popular belief your idea does not have to be new and innovative, although that could help. In reality, most new ventures are started because the founder saw an opportunity to improve on an existing business idea. Regardless of whether your concept is new or not, you must determine if there is a need for the product or service you are going to be offering. You should also determine if there is a strong competitor already in the market? If so, that is okay but it will be important that you create a value proposition that is different than the competition. That could be as simple as delivering a better quality product or service, or having better prices. Regardless of the proposition, it would be advisable to create your own niche in the marketplace. Before you venture out, think about your capabilities of improving on an existing business and be sure you have the ability to sell your idea to your prospective customers, associates, and financiers.
Do You Have Access To Capital?
If you have an idea the next step would be to determine whether or not you can access the capital needed to start your business. Most businesses are funded with personal savings, credit cards, and loans from family or friends. There is an outside possibility that traditional bank financing may be available but this is not likely unless you have assets to back up the loan or you have someone willing to cosign the note. If you do, I would strongly suggest that you first pursue SBA financing, as banks are more likely to grant this type of loan to startups. You may also want to consider a home equity loan if possible. Venture financing (venture capital); which we have heard so much about in the past few years is in limited supply. Less than one-half of one percent of all startups are funded with venture capital financing. If you have a high growth, high potential concept then venture capital may be a possibility. Just keep in mind that few new businesses are funded with venture capital money.
Writing A Business Plan
Once you've ascertained that you have the entrepreneurial characteristics needed, you have a good idea and conceptually you think you can secure funding, I would strongly advise you to write a business plan. In reality, very few businesses go through this step but it is an extremely good exercise. Many books are available on this subject. The advantage of writing a business plan is that it forces you to thoughtfully consider numerous aspects about your future venture. Most business plans are actually created to help sell your idea to financiers of your business and to attract competent associates but in practice they are also tremendously helpful in enhancing your ability to succeed.
In the business plan you will do a thorough evaluation of the feasibility of your product or service. Through research you will determine the market potential of your offering and determine the profile of the ideal customer. You'll be forced to think about how you will reach and sell to that customer and at what price you will sell your product or service for.
A traditional plan incorporates financials that will exhibit realistic sales estimates, financial statements, and a cash flow analysis for the next twelve to thirty-six months. It forces you to evaluate very closely the financial needs of your business. The written document will quantify the startup capital that you need and through the projections and cash flow analysis that are done, you will also be able to project working capital needs for the first few years of the business. Cash flow is the lifeblood of any company. Anyone interested in investing in your business will take a very close look at this part of your plan.
A good business plan will also include a competitive analysis. You will be forced to look at the competitors in your market and assess how they are delivering their products or services and at what prices they are charging. Through analysis you will determine the strengths and weaknesses of your competition hopefully with the idea of creating a niche that serves the customer better than your competitors.
The plan will give you a road map for where you want to go. Understand however, that once you start the business you will need to update the plan on a regular basis. Don't stay married to the plan because more than likely it will change and soon! As noted earlier, one of the most important characteristics of an entrepreneur is the ability to be flexible and adaptable and the willingness to change on the fly. Business situations change daily, weekly, and monthly. Your planning will need to adjust to changing market conditions.
Is It The Right Time?
Finally, it is important that you determine when the right time is to start your new venture. There are many scenarios. You could go to work in an industry you are interested in and learn on other peoples' money for a few years. This will give you important industry specific information. Should you choose this approach you would be well advised to create a nest egg to fund your future venture and minimize your personal financial commitments. You will need to save as much as possible for future startup capital. Don't take on the big mortgage or the high dollar car payment. Live with a roommate or if you are married try to survive on your spouse's income. Keep in mind also if you do learn on other peoples' money; you'll want to be fair and ethical. Don't take business with you or hire your current firms' employees. If they eventually come to you that may be okay, just make sure that your reputation is not damaged or your integrity questioned.
Starting your venture with little business or industry specific experience is very difficult but it can be done. Usually capital is harder to access but if by chance you have the resources or the capital requirements are minimal, starting earlier in life actually has some advantages. Your business experience, however, will have to come with on the job training. The industry specific knowledge you will need could come from active involvement in industry trade associations. If you have the financial resources you could also hire consultants. If you pursue this option I would also strongly suggest that you create a board of advisors with past business experience and contacts. By starting early in life your personal risks may be lower. More than likely you won't have significant financial commitments to fulfill hence the downside is minimized. It's a more challenging route than learning on other people's money but the upside can be phenomenal.
Gut Instinct
Preparation, planning, and oftentimes experience are all very important when determining whether or not to go out on your own. At the end of the day, however, it comes down to that gut instinct. Do you have what it takes and are you willing to go for it? Are you willing to commit the time, energy, and resources to succeed?
Entrepreneurship: A Rewarding Experience
No one can decide for you if starting a business is the right thing to do. Becoming an entrepreneur is a very personal decision. I would be less than honest if I did not say that my personal bias leans toward encouraging self-employment. That's because I know the benefits of owning a business. Most people start a venture to create personal wealth or to have more flexibility and freedom in their career. All are valid reasons for pursuing ones desire to become an entrepreneur. What adds meaning to entrepreneurship, however, involves much more. Building something from scratch is a very rewarding experience. You may also derive incredible personal satisfaction by making a difference in peoples' lives by creating wealth, opportunities and employment for others, and creating an environment and culture that your associates enjoy and in which they feel fulfilled. In my opinion, all of these benefits make the struggles of pursuing the entrepreneurial dream worth it.
Prior to joining TCU, David Minor was the founder and president of Minor's Landscape Services, an Inc. 500 award winning company. This award recognizes the fastest growing privately held companies in America. The company, which employed over 300 people in Fort Worth and Dallas, was sold to TruGreen-ChemLawn in 1998. As vice president of the Landscape Division with TruGreen, David helped direct the acquisition and integration of dozens of companies totaling over $550 million in revenue.
David is a past president of the Associated Landscape Contractors of America. He was also named the country's Professional of the Year by LANDSCAPE & IRRIGATION Magazine in 1995, was recognized as Tarrant County's Entrepreneur of Distinction in 1990, and was recently named one of the top 10 Entrepreneurship Program Directors in the country by Entrepreneur Magazine. He currently serves on the Board of Directors for Summit Community Bank, and Diamond H Recognition, Inc. and is the Chairman of the Board of The Landscape Partners.
