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Monday, March 9, 2015

Foundations of Entrepreneurship

Many are those who dream of being in control of their destiny in the workplace. Unfortunately, success does not favor the majority of those who actually take the leap. In most cases, it would have been better to never to have ventured out. A lot of pain and lost resources can follow.

A new Swiss-German study may give some useful information to consider for us dreamers. It has to do with personality types. The study reveals that disposition is a good predictor of who is likely to find more success as an employee or entrepreneur.

Employees tend to be specialists. Entrepreneurs lean to the "jack of all trades" work style. This predictor breaks down if that person has a high score for job or income security. And a second tipoff appears if the person had an apprenticeship or internship. Both suggest a leaning to specialization that corresponds to an employee work style.

The "jack of all trades" person has a combination of a bundle of life experiences and a bunch of contacts. This contributes to the broad range of "connectedness" that proves of value to starting a business. Good insights.

Having been down this road a couple of times, I have a few other observations. If a newbie to entrepreneurship asked for my counsel, I'd incorporate a few more immediate "checks."

Spousal support. Single people can bypass this one. But launching an enterprise with a skeptical, disinterested, and generally unsupportive spouse is a red flag. A very positive and encouraging spouse is a true asset ... and especially if this spouse contributes in some way to the operation of the business.

Skill level of the leaper. Starting a venture beyond your skill level and relying solely on smarter people is very risky. Good luck in raising capital.

Field experience. Likewise, a great idea in a field where you see opportunity but lack true understanding is a huge obstacle. An exception here can be a franchise where there is an abundance of training and coaching.

Uniqueness of the market entry. There are several ways to say this. Competitive advantage. Unique selling proposition. Bottom line, if your new business contributes nothing new to the marketplace, why do it?

Basic to mid range accounting knowledge. No business survives unless profits exceed losses. But learning the details of what drives a profitable business comes in accurate financial reporting. And the entrepreneur has to be able to grasp that data and keep it flowing accurately, usually with a good bookkeeper or accountant's help.

Willingness to sacrifice. Hard times are likely to come. If needing image and fine living are critical to you, the party may come to an end sooner than you'd like. Can you learn live frugally?

Sound financial footing. Undercapitalization is a primary cause of business failure. But a lack of adequate personal capital can be equally as dangerous. Six months to a year of monthly expenses saved up is the basic guideline.

Don't hire full time employees. Until you must! Benefits are very costly and so are other entanglements. Use free lance, contract, and part time talent whenever possible.

PMA. Positive Mental Attitude. That is likely an inadequate way of saying you need mental toughness to launch your own business. Lots of naysayers along the way. Lots of unexpected roadblocks. Are you an overcomer?

Luke 14:28-30: "Is there anyone here who, planning to build a new house, doesn’t first sit down and figure the cost so you’ll know if you can complete it? If you only get the foundation laid and then run out of money, you’re going to look pretty foolish. Everyone passing by will poke fun at you: ‘He started something he couldn’t finish.’" (The Message)

You may be a self-starter but do you have what it takes to be a finisher?  Big question.

And like all consulting advice, it's a whole lot easier to talk about these things than to actually do them.

That’s The Way WE Work. Click on the link to the right to connect via Facebook.

Catch “Let’s Talk with Mark Elfstrand" weekday afternoons from 4-6pm on AM 1160 Hope for Your Life. To listen to the live broadcast or a podcast of previous shows click here.

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