Key points to ponder before starting a business
You’ve always wanted to start a business of your own, but are unsure of the direction you should take or whether you should take the plunge at all. The following will help to clarify your decision.
- Can you do it? – You’ve always dreamed of running a scuba diving business in Mozambique, a beachside pub in Ballito or a party planning business catering to the rich and famous in Cape Town. The question is, do you have the training, skills, experience and personality to do any of these things successfully? If you don’t have the certificates and athletic ability, starting a business offering diving courses is not an option. Similarly, without the right social networks your Cape Town venture would probably be stillborn. Yes, you can employ others with the necessary skills, but then you’re putting the success of your fledgling business at the mercy of someone else. If their talents are highly sought after, you may also have to pay them more than you can reasonably afford.
- What’s your Unique Selling Proposition? – If you’ve decided you have the necessary abilities, the next step is to define what marketing-types call your ‘USP’ – the things that will make you different and stand out from the pack. If you start a business without a USP, the only options you’re left with are to compete on price (not ideal because established competitors may simply undercut you until you’re out of business) or on brand values (which let you charge more, but take years or decades to develop). If you think you have a USP, be sure to test it first. Canvass opinion from real potential customers, not family and friends who are likely to tell you what you want to hear.
- Can the market sustain it? – So you have the skills and a USP, but is there a sustainable market for it? A great idea that people may buy once for its novelty value is not a sustainable business model. Neither is something they will only buy every few years or once in a lifetime– unless you can charge a hefty premium and have a large number of customers who will purchase at different times in the business cycle. Beware of products that are based on fads, as they can move from being trendy to decidedly ‘uncool’ almost overnight.
- Do you have sufficient money? – Can you afford to bring your big idea to market? Typically, you’ll need more funds than you think and what banks are willing to lend you. Even if you have the capital to fund the purchase and set-up, remember that starting a business is a long-term project and you typically only start to break even after a year or more. During that time, you’ll still have to buy stock, pay the bond and meet all the usual monthly living expenses. If you’re in an industry like manufacturing or consulting, customers may only pay you on 90 days or more, which further exacerbates the problem.
- Do you have the dedication? – To start a business you need to be willing to put in the effort to make it work. Experienced entrepreneurs talk about frequent 18-20 hour days and sacrifices involving family, friends and previously favourite pastimes. Children’s birthday parties, competitive mornings on the golf course and Friday afternoon drinks after work can all be expected to fall by the wayside in the initial stages. If you have young children, medical problems, don’t deal well with stress, or are unwilling to give up your dreams of being provincial squash champion, then starting a business may not be for you. Or, at the very least, you should consider a business that requires less hours or lets you work from home.
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