Each year, thousands of Canadians come to the conclusion that, maybe, this is the time to start a new business.
The reality is that many of those new businesses fail — but a few are enormously successful.
Other people who are already in business come up with new ideas that may or may not be related to their current enterprises in order to expand into new and different markets. Whether it is a new business or an expansion, this is not a decision to be taken lightly or rushed into.
For some, the idea of owning a business is exciting and prestigious. We think of advantages such as freedom of control, creativity, and, yes, profits — and it’s not bad for the ego either. The privileges of owning your own business are accompanied by responsibilities and challenges: loss of job security, long hours, fluctuating income, and a lot of stress (positive and negative). Before you make the jump into business, prepare yourself by being aware of some of the attitudes and skills needed to overcome the risks.
By definition, entrepreneurs are on the leading edge of business. They are the ones who have actually gone where only dreams take the rest. This doesn’t mean they are unafraid or unrealistic, but only that they’ve decided that the rewards of turning their visions into reality are worth the risks. More often than not, they have a burning desire to accomplish something — and forming their own enterprise is the only way they can satisfactorily do that. So the first question to ask yourself is whether you feel an urge to accomplish or create something.
While we often hear about people who tried to start a business only to go broke, if we took the time to learn about them and their failures, we would have a more concrete explanation of the qualities required for success and the reasons for failure. Numerous studies show that the three biggest reasons for failure are insufficient capital, poor market research, and lack of business training.
Part of that business training revolves around an understanding of the local environment for your product or service. If you’re going to practise your profession in Greater Victoria, for example, there are myths about the community you need to understand and recognize as myths to ensure you develop your business model in the right direction. For example:
- Victoria is no longer a government town: provincial bureaucrats now make up only about seven per cent of the workforce.
- Tourism is no longer number one in terms of gross earnings: advanced technology is.
- Victoria is no longer a retirement destination since few of those who are over 65 years of age can afford to move here from other parts of Canada, and seniors make up only about 17 per cent of the local demographic (compared to about 13 per cent average for most Canadian cities).
Do your research. You wouldn’t buy a new car without finding out about its probable longevity. In the same way, you also need to carefully research the sustainability of your business idea.
Don’t be scared off by friends and your brother-in-law who tell you “90 per cent of new businesses fail.” The numbers are not that bad! In fact, across Canada, about 45 per cent of new businesses are no longer in business after two years.
By contrast, Business Victoria has worked with over 2,000 new startups in Greater Victoria over the past decade and, on average, 92 per cent are still around after two years. The reason? Solid market research, access to realistic funding, and ongoing counselling and training. Those are encouraging numbers.
The next question to ask yourself is why you want to start your own business. The world’s successful entrepreneurs are generally seeking a combination of independence and wealth. After all, the potential for greater financial reward is more achievable in self-employment than in almost any other form of work.
Studies of entrepreneurs identify the following motivations for self-employment:
- To make more money for my time than I can make in the traditional world of employment;
- To stimulate myself professionally;
- To stop having my creativity and energy ignored or dampened by unresponsive corporate structures;
- To prove to myself that I really can do it;
- To prove to someone else that I really can do it (Mom and Dad, ex-spouse, etc.);
- To learn new skills and expand the talents I know I possess;
- To be independent;
- Not to have to answer to anyone for taking my son’s birthday off work or for choosing red over blue for that brochure;
- Because I know my business idea can work and make a difference to the world.
Your reasons for wanting to start your own business are probably a combination of the above. It’s important to clarify your motivation and remind yourself of it often, especially in the start-up phases: knowing and remembering why you started your own business will help you to keep going, even when the going gets tough.
By the time you meet the original challenge you set for yourself, you’ll be such a success and have reaped so many other rewards, that you won’t even consider going back to working for someone else — ever. In fact, one study by the U.S. Small Business Administration says that 80 per cent of entrepreneurs would not consider going back to traditional employment.
This article was written by Ken Stratford for Douglas Magazine.