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Is Small Business Ownership for You?

August 9, 2009

By Small Biz Bee

Answer the following questions:

  •  Do you enjoy making decisions and being in charge?
  •  Are you willing to take risks and accept the outcome?
  •  Are you adequately capitalized?
  •  Are you flexible, and can you adapt to change well?
  •  Are you good at short and long term planning?
  •  Do you have strong people skills and build relationships easily?

Does your idea fit the following criteria?

  •  Will it provide an adequate return compared to the risk you’re taking
  •  Do you know what your unique selling proposition is
  •  What is the market potential?
    • 1) How big is the market
    • 2) What share can I get
    • 3) Is that enough?

If you answered the above thoroughly, and it looks like your idea can still pan out – now it’s time for the rubber to hit the road – it’s also the time that ‘perfection paralysis’ hits most people.

It’s natural to feel anxious, or nervous about taking the leap into business ownership. And knowingly or unknowingly many people fall into the trap of trying to get things “more perfect”, or do a little more research, before they start up – if for no other reason than to delay actually having to start up.

Perfection Paralysis Danger Spots

Some of the most common areas people fall into perfection paralysis are:

  •  Writing the business plan
  •  Doing market research
  •  Will the finances work?
  •  Self Imposed

Let’s work through each.

Writing the Business Plan

I’ll say that I am an advocate of having a business plan. However, if writing a business plan the size of a phone book is what is keeping you from starting up – by all means write the simplest plan you possibly can initially.

According to a new study, the Small Business Administration found that writing a plan early in the business planning stage could increase your chance of success with your new venture.

But the main reason it increases success is because it forces you to get started doing something for your business. The simple exercise of writing the plan was enough for a lot of people to go through with starting a business.

Simply put those who plan, do!

A fellow entrepreneur and small business blogger, Mike Michalowicz at the Toilet Paper Entrepreneur, suggest keeping your business plan extremely simple early on, and he doesn’t even call it a business plan, but a early on. And I’d agree with him that a simple plan can be the best when just getting going.

Elements of your business plan can change over time (ex. Costco’s original business plan talks about growing to 10 stores – they now have over 500!), and you can always go back and add or develop something to a greater degree once you’re in business. Don’t let the plan writing stand in the way of getting your business off the ground.

Essential Elements of your First Business Plan:

  •  What do you plan to do, what are the goals for your business?
  •  What does the market look like? What are the opportunities, where are the threats?
  •  What is your marketing strategy? How will you advertise, and to whom?
  • What is your management strategy? Go it alone, hire employees, or hire other mangers?
  • Do the finances work?

Keep in mind this first plan is just for you, it will help you know what you want to do and how you will get there. And it will get you started doing something!

Doing Market Research

Market research is important, and can’t be taken lightly, but it is also a place that people will proactively procrastinate. Let’s try to simplify it a bit.

In your market research you are trying to answer the three main questions we talked about earlier:

  1. How big is the market for your idea?
  2. What share can I get?
  3. Is that enough? And we’ll add one:
  4. How will I capture my piece of the pie?

Market Analysis

Keep it this simple. We’re trying to keep you moving, not get bogged down in the minutia. However, you need to thoroughly answer the following questions.

1) Who is your competition and what are they doing?

Look at who you will be in direct competition with and analyze their customer base. Go to where they do business and “secret shop” them. Take time listening to their customers, and look for ways you could turn those folks into your customers.

2) Where are the opportunities?

Where are the greatest opportunities for your business? Are there untapped markets, or specific customer demand? Are their holes in the way your competition is doing business that you can fill?

3) What are the threats?

Look for danger. Competition in the same market and niche as you is a threat. Fickle customer base for your products is a threat. The time, or lack thereof you have to devote to your new venture could be a threat. Do your best to think about the threats not only today, but 6 months to a year down the road. Does your business not currently have competition but due to low barriers to entry that could change in a few months? That would be a threat. If you aren’t coming up with any threats – you’re not looking hard enough.

4) The internet is your friend

Look for any research that’s been conducted in the market you want to enter. There is a plethora of information on the internet and much of it can help you get an idea of market size, and potential.

5) Get some free help

Use a service like the one provided for free by SCORE to get some counseling about your particular idea and the market. The experts at SCORE can help you see your market more clearly and decide if your business has a chance to compete within it.

Much of your market research will be cobbled together yourself. Learn as much as you can about your market, and then make some conservative assumptions about your potential to operate within the market as you know it.

Will The Finances Work?

Once you have a clear picture of your market based on the above, you can work through a model (almost) as simple as our Lawn Care example from the last article.

Financial projections are full of assumptions, and the natural reaction is to try to get as close to “perfect” as possible when doing them – I’m mean we’re talking about the money here right? That’s important!

But not so fast, while financial projections are important, it’s more important to understand you’re never going to get this step 100% right and you’re goal is to do projections that give you the best chance of staying in the game when you screw them up.

A Few tips for Doing Financial Projections

1) Be conservative with every projection

You won’t get the market share you think you will. You won’t grow as quickly. You won’t retain customers at the rate you expect. You won’t be adopted by your target market as quickly. Your expenses will be greater. Expect the unexpected expense to occur more than you’d expect it. Etc, etc, etc/.

2) Success does not come to those who make the most accurate financial plan from day one. It comes to those who understand what they don’t understand and build their plan around it.

3) If you find yourself working and reworking the numbers, without a fundamental change in your business idea, model, or market outlook stop in your tracks! Why? Because you’re shopping for variables to make your idea work, which is pure fantasy. Sure it may be easy to say “Nah, I think I’ll get 10% of the market instead of the 9% I originally thought, and now look…I’m rich!”, but unless you have a clear plan on how you are going to get the additional 1% of the market, you’re just making stuff up.

My point here isn’t to discourage you, it’s to set you up to do projections that keep you in the game. If you can conservatively estimate all aspects of your business and it still looks like a go – then right on! But if your success hinges around whether your projections are 100% correct from day one – Danger is on the horizon!

Don’t spend days, weeks, or months working projections to the penny – you just don’t know enough to do that yet.

Self Imposed Perfection

The last area perfection paralysis runs rampant is in what I call self imposed.

These are the assumptions or beliefs you hold that keep you analyzing and never doing. They are ideas you may believe but hold little factual validity, or reasons you give yourself for never getting past the planning stage.

Things like:

  •  Now is a bad time to start a business
  •  The timing just isn’t right for this
  •  I need to learn more about XXXX before I XXXX
  •  I’m not “ready”
  •  There’s not enough time

You’re never going to have more than 24 hours in a day. The time will never be absolutely perfect to start a business. If you’re not “ready” write down why not, along with a plan for what you’re going to do about it.

My point is it will never be perfect. And talking yourself into believing things need to feel perfect before you start your own business is just a form of procrastination.

Keep Moving Forward

The key to avoiding perfection paralysis is to recognize it on one level for what it is – Proactive procrastination. So you’ve got to take these steps, and continue to move forward to combat that perfectionism.

Work through the steps we’ve outlined over the last couple days and as long as your idea continues to pan out, keep moving forward. You’ll gain confidence in yourself each step along the way, and that last step will seem less daunting when you get there. Nobody has ever launched the perfect business, at the perfect time. Yours will be no different; just don’t let it stop you.

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