Before you start a business or enterprise

Are you thinking about establishing or purchasing a small business as the next step in your working life? Here are some issues you need to think about.

What’s great about owning a small business?

Just imagine:

  • identifying a product or service that people want
  • doing what you love to do
  • doing something useful, or for which there’s a clear need
  • creating something new
  • improving people’s quality of life or work.

Imagine doing any one of these, and being paid for it. Imagine getting full credit, both monetarily and in client satisfaction, for your great business idea.

The wonderful thing about small business is that enterprise-ready ideas are all around you. Consider these activities as business opportunities:

  • cleaning
  • mowing lawns
  • washing cars
  • walking dogs or washing pets
  • looking after younger children
  • umpiring sports matches
  • teaching people to swim
  • organising discos, dances or school excursions
  • finding information on the Internet
  • designing and producing greeting cards
  • printing brochures for local churches or associations
  • baking biscuits
  • translating for people who don’t speak much English
  • reading for blind or elderly people
  • lending books, toys or bikes.

People are prepared to pay you for these things for all sorts of reasons:

  • They don’t have the know-how.
  • They physically can’t do it by themselves and need assistance.
  • They don’t know where to find the information they need.
  • They don’t have the necessary equipment, such as the sound system or the computer.
  • They want to use something, but don’t want to commit to buying it.
  • They’re very busy.
  • The job has to be done and there is nobody else to do it.

What’s not so great about owning a small business?

When you start a small business you face lots of challenges.

It’s important that you understand all the responsibilities you’ll have, and as many of the foreseeable challenges as you can. On the other hand, it’s also important to recognise the rewards of working for yourself and providing a quality product or a needed service to your customers and the community.

The most challenging things about operating a small business, particularly at the start, are:

  • risking your money, or that of your investors
  • working long hours
  • being available (and pleasant) to clients
  • staying physically fit, healthy and energetic
  • dealing with cash-flow, production and other operational problems
  • dealing with interpersonal conflicts
  • keeping up with your industry or field and responding appropriately to the way it changes
  • making business-critical decisions.

All these challenges boil down to one big challenge: taking responsibility. As a small business owner, you’re the person who is accountable for the way the business operates.

Are you suited to self-employment?

Starting and running a business, or any form of self-employment, requires a range of skills and attitudes. It can be very demanding.

When you work for yourself, you are responsible for:

  • coming up with ideas and solutions for problems
  • planning all the tasks that need to be done
  • hiring workers and organising work for them
  • making the products or delivering services
  • meeting deadlines
  • finding customers and assessing their needs accurately
  • keeping records
  • making sure there is money to pay the bills and to pay yourself and others who work for you.

Ask yourself the following questions. Your answers may confirm that you are ready to go into business on your own, or they may alert you to some skill areas that you need to develop.

Personal characteristics

  • Do you need other people around you to motivate you, or can you effectively schedule and complete work on your own?
  • When unexpected events occur, can you still think creatively and solve problems?
  • Business life doesn’t always go well. Can you cope with the stress that often goes with responsibilities and deadlines?
  • If you face knock-backs, are you resilient enough to absorb them, and then to go back out there and keep selling your product or service?

Reason for going into business

A lot of people like the idea of being self-employed. But sometimes this attraction is based on incorrect perceptions. Are your reasons any of the following?

  • ‘I want to be my own boss.’ When you start your own business, certainly you’ll be your own boss. But this means that you’ll be responsible for every aspect of the business. Do you really want that much responsibility?
  • ‘I want to work fewer hours.’ Many people think that in their own business they’ll be able to control their own working hours, and that this means they’ll be able to work less. This is rarely true. Most business owner-operators work at least 50 hours a week.
  • ‘There’s a gap in the market that my product / service can fill.’ If your industry knowledge has led you to this conclusion, and you’ve done some market research that confirms your belief, you probably have a good reason to consider going into business.

Previous experience

  • Have you ever worked for a small business? If you’ve only worked in large organisations, you may need to find out what’s involved in small business operations.
  • Do you have much industry knowledge in the field you’re considering?
  • Have you previously been employed only in one area of business operations (e.g. computing, administration, production, marketing), or have you had experience in several or all areas? When you run your own business, sometimes you need to be ‘the entrepreneur’, sometimes ‘the technical person’ and sometimes ‘the accounts department’. Can you make the switch when required?

Management and communication skills

  • Do you have managerial skills? Most successful entrepreneurs have a good balance of entrepreneurial and management qualities.
  • Do you have leadership and communication skills? Can you effectively instruct other people, such as staff and suppliers, in what you want done?
  • Can you coordinate several business functions—sales and marketing, production, clerical and accounting? Even if you’re not actually carrying out all these functions, you need to coordinate them all: human resources, superannuation, insurance, marketing, bookkeeping, everything!

Financial management

  • What is your financial history? Have you ever been declared bankrupt? It certainly affects your credibility with both customers and suppliers if you have.
  • What about your current financial situation? Is there enough money behind you to start a business? You should consider obtaining financial advice.
  • What do you know about bookkeeping and accounting? This is one of the most important areas of running a business, and it’s often neglected. If you’re not up to date with all your financial details, it’s easy to get into debt before you realise.

Knowledge

  • Do you know about other industries, particularly the industries and economic factors that will influence your business?
  • Do you have a good knowledge of the stock market, consumer patterns and industry trends?

Personal life

  • Do you have a partner? Does your income need to support both of you? Does your partner work? Will they be working with you in the business, or will they be working a whole different job? Do their working hours affect your ability to run a business?
  • Do you have children, or commitments to children? It’s not always convenient in business to structure your schedule around commitments such as picking up children, child care and school holidays.
  • What are your recreational commitments? Do you belong to any clubs or have sporting commitments that will affect your ability to be present for the business?

Long-term goals

Where do you think you’ll move on to, beyond this business venture?

  • Will your business idea be ‘for sale’ in a few years to fund a different enterprise, or your retirement?
  • Are you likely to want to move to somewhere else? If so, will your business have the capacity to move with you, or can it really only work in the place where you established it?

When you’ve thought about all this, you should do some research about small business ownership. Start with these links:

Links on these pages lead to many different sources of information relevant to starting and running a small business: