Business Article - Running your own business
Are you an Entrepreneur?
Some simple homilies for those new to business and who may be wondering if they are suited to the life of an entrepreneur: it is not for everyone. Michael Kelly, a successful businessman and an investor in Symbios Group Limited, pontificates.
Running your own business can not only provide you with a good living but can also be immensely satisfying. The very act of setting out an aim and then actually achieving it, however modest that aim, can provide a terrific ecstatic lift. Running a business is just like that. The thrill of organising any profitable commercial activity, particularly when it is all devised and headed by you, is euphoric.
However, not everyone can make a success out of being an entrepreneur, particularly so if they lack some key attributes.
Any business has to be run primarily to make a profit. If it does not make a profit, it clearly makes a loss and so eventually, it will die. If it makes a profit, it will grow and provide more security, more employment and more profits – and more tax for the country to share. A successful business means a profitable business, not just one with a large turnover.
Having the right personal characteristics to be a successful businessperson is like listing the ingredients of a tasty cake; all the ingredients need to be present in the right proportions to get a good result. Sometimes, if one individual has a few missing ingredients, collaborating with someone else who can make up for them can be helpful.
This is a summary of some of the essential personal ingredients for success: -
Drive – an attitude of mind
- Determination – a key motivator
- Persistence – sticking at it, regardless of hurdles
- Enthusiasm – be excited by your proposals
- Positiveness – you know you will succeed and jump hurdles
- Risk taking – accept that risk is necessary to achieve rewards.
- Energy – be prepared for hard work and long hours
Character – sound and straight
- Common sense – a basic prerequisite
- Honesty – being trustworthy: dishonesty will kill off any business.
- Good judgement – making good, thought out decisions
- Integrity – being reliable, delivering on promises, and eventually respected
- Consistency – don’t change your mind too often.
- Open mindedness – listen to others
Academic Skills
- Literacy– ability to express well on paper
- Numeracy – ability to create & understand a business plan and basic accounts
Useful Abilities
- Creativity
- Computer literacy
- Languages (if trading abroad)
- Bookkeeping or accountancy skills
- Salesmanship
- Relevant technical knowledge
Capital
It is quite proper to ask friends, parents or other supporters for the loan of seed capital (possibly 30% of the total required) and use a bank loan for the balance (70%).
If you reckon you have most of the right ingredients and love the idea of running your own business, the first action is to pick a business involving something you enjoy and feel you would be good at doing. Then: -
Initial Actions
- Discuss your ideas with a successful friend
- Research your market
- Analyse and compare the competition
- Identify a niche
- Draft a conservative business plan
- Talk to an experienced accountant
- Talk to a friendly banker
- Organise finance
- Redraft the business plan if necessary
- Organise communications (fax, telephone, e-mail etc)
- Draft sales literature, notepaper, business cards
- Launch!
Other Points
- Start slowly, constantly analysing progress
- Promise less to clients, customers & associates but achieve more
- Draw the absolute minimum amount of personal cash early on
- Aim to repay short-term debts before you reward yourself
- Control costs ruthlessly
- Run a cash book and review it weekly
- Insist on monthly management accounts showing actual income and expenditure compared to planned, and explain the variances
- Good ideas are easy to come by – making them profitable is tougher
- Work hard and long in the initial months
- Listen particularly to the advice of successful business people
- Exploit emerging technology
Even with all these ingredients, life is seldom predictable. Setbacks will occur but with good planning and a cool head, they can be beaten. Similarly, opportunities will turn up and sound judgement and good advice will enable you to exploit them.
Finally, remember a business has to be a success – it has to make money – otherwise it will eventually fail – and worse still end up as a big personal liability. So take it very seriously but enjoy it as well. If it is not fun – do not do it.
One further point: it is worth stressing the importance of forming a good relationship with a bank. Cash is the lifeblood of any business, and cash flow and its management is vital. Banks like lending money – that is where their profit comes from. However, they only lend to people likely to pay it back!
The easiest way to get on good terms with your bank is always to do what you say you will do – or do better. If you say to a lender that they will be repaid inside a month – mean it. Never over promise, thinking that it might impress. Under achieving will certainly depress! Banks prefer conservative estimates. Banks also understand plan changes, as long as they know in advance. Nothing is worse than an unauthorised overdraft: it is not only bad manners, but it signals to the bank that you are disorganised at best, or in trouble at worse.
Manage your bank relationships well, demonstrate conspicuous integrity, and they will then look after you when you need them most.
Summary
If you want to be the boss – promote yourself - set up your own business. First check out if you have what it takes – not everyone has, and failure in business can be painful. Be sure you really want to take the risks and work that hard. Research your market, talk to successful people about your ideas (better not listen to those who have never been their own successful boss). Read books about business in general and your chosen business in particular. Subscribe to relevant magazines. Join relevant societies and clubs. Get stuck in.
Then make a conservative plan for at least the next two years, indicating monthly income, all expenditure, broken down to its components, and the resultant cumulative cash flow. A new business will usually start out with a negative cash flow, but eventually it must turn the corner and replace the borrowed money. Allow for interest. Use a spreadsheet by preference. Under promise but over achieve. Read the next section about running a business.
Discuss the plan with your chosen accountant; arrange the finance and then launch with a blaze of publicity. Good Luck!
Running a business
My wife Dee and I have set up and run a number of successful business enterprises over the years, one employing over 600 staff. As a result, we have formed some useful opinions about what works and what doesn’t, some of which I have summarised below. Much is applied common sense, but it is important to actually adopt these principles rather than just read and talk about them. That is not to say do not read: on the contrary, read every possible management book you can find, but form a personal consensus and then act on it. I am now more able to detect the difference between a successful winner and a potential failure by his or her basic attitude to business.
- Consider carefully all the points discussed in the previous section and decide whether you are the right type of person to be an entrepreneur before wasting your time.
- Research your proposed market thoroughly and then plan meticulously, particularly cashflow. Identify critical elements of the business plan, and give them special attention and future focus.
- Choose you support team not by picking bored friends at a loose end, but select the best people you can find. Recruit more on attitude than on paper qualifications. A committed employee can always learn new skills: over-qualified but under motivated people can soon become unhappy passengers.
- Be candid with new staff. Do not over promise or overpay. Be clear what you expect of them. Write down their precise role and their performance targets. Measure their performance regularly against the targets you have set.
- Put round pegs in round holes - do not expect exceptional performance from untrained, unsuitable or uninformed staff. Provide the best training. If you think training is expensive, try ignorance!
- Care for all members of staff whatever their role. “Who cares wins“. Ruthlessness is not a winner's attribute.
- Staff pay comes before anything, so always reserve for it. They are not the risk taker, you are. In return for honouring all the commitments you make to your staff, you will eventually attract loyalty and ultimately respect.
- Ensure your customers enjoy the best possible level of service.
- Strive for excellence: constantly improve all procedures. Let you staff and customers know your mission statement.
- Analyse income & expenditure at least monthly: identify variances against plan and correct detected problems immediately.
- Constantly observe the market you are in and your competitors. Compare performances. Identify niches. Large companies need to dominate the standard commodity market and so leave niches to the smaller firms. Take advantage of being small.
- Good marketing is essential. Strive for free editorial comment rather than pay for adverts. If advertising is essential, national advertising usually beats local advertising for overall effect unless your market is local only.
- Exploit good opportunities when they arise: it could be a takeover or a new market for which you have appropriate skills, but always investigate.
- Perform a regular SWOT analysis: identify you firm's core competences and Strengths, then their Weaknesses: look at all Opportunities and identify Threats. Be open-minded.
- Always act fairly and honestly. Mistakes are inevitable: compensate disgruntled customers with an open admission and they will soon become supporters.
- Prepare careful agendas for regular operational meetings. Meetings are necessary to decide on specific actions and responsibilities, not just to talk.
- Remember the four principles of management: Plan, Organise, Motivate and Control. Insist middle management operate on these principles too.
This is not an exhaustive list, but a mind dump of those items that Dee & I have identified as being important in over fifty years of working experience, including in my case, twelve very useful years in the Army. Sandhurst trains cadets to become leaders – assuming the right basic qualities are there at the outset.
In a war, there can be massive confusion and on-going life and death situations, all in appalling conditions: leadership is essential to get oneself and ones comrades through this fog of war. Business is not quite so fraught and financial matters are seldom relevant on the battlefield where “loss” would have a more tragic meaning. However, in most other management activities there are similarities. As with the military system, leadership is probably the one word I would use to summarise the ultimate quality needed for business success as well.