Starting a business is not easy. It’s so much more than just coming up with an idea, getting funding, and opening the doors. To succeed, what an entrepreneur must assume when starting a business? Entrepreneurs must assume many responsibilities and risks, such as expensive startup costs and long hours.
First, there are many legal considerations to take into account. For example, you’ll need to register your company as a legal entity, choose the type of entity (e.g., corporation or limited liability company), and determine how equity will be distributed among owners (e.g., by the percentage of ownership or by the number of shares). Read More.
Secondly, there are significant financial considerations to make, such as what your startup costs will be and how much capital you’ll need. This can all seem like too much to take on alone! If this sounds like you – read on for some tips on how an entrepreneur should start an independent business.
Section 1: Why Starting A Business Is Not Easy?
It’s a real question, what makes it so hard to start your own business? And, what an entrepreneur must assume when starting a business? The problem is that it’s not hard to start a business. But it’s very hard to make it work.
We know this because most startups will either fail or stumble into competitive mediocrity. That’s probably the worse outcome because breaking out of mediocrity is even harder. Of course, some start-ups do get it right and grow into profitable businesses. Read More.
But back to the question at hand: what must an entrepreneur assume when starting a business? In this article, I will look at the areas where businesses have been shown to fail. I will also break these down and formulate some thoughts that can help you start your own business.
1. Having A Good Idea For Your Startup
Too many people start their business with what they know or learned in a previous job. They also believe that the skills they have can be applied in the same way, just under a different business name. But the question remains, what an entrepreneur must assume when starting a business?
This belief usually ends up with one of two results. First, the startup joins other companies and competes for the same customers. Since the differences between the companies are limited, the battle for the customer boils down to price. So the only “winner” is the customer. Read More.
Economists call this perfect competition, and it may please the consumer, but it rarely makes the business profitable.
The second outcome is even worse. But more typical for a start-up: the company cannot compete on price and goes out of business.
How Can A Start-Up Avoid These Pitfalls?
The key is to develop a business idea that can operate in the opposite space of perfect competition. Monopoly.
- The Monopoly Mindset
If you build a monopoly business, you escape competitive pressures, and competition erodes margins and profits. Look at the difference between a company like Google and the American airline industry. Google made a profit of 21% on $50 billion in revenue, while the profit margin of US airlines was 20%.
A monopoly company is one that often takes a contrarian view and is guided by the first principle of thinking. Peter Thiel, in his book Zero to One, begins with his favorite question: on what important truth do very few people agree with you? Apply that question to business and the question is: What valuable business is no one building?
I admit that these questions are hard to answer. But that’s what makes starting your own business so difficult. And if you do not want to be stuck in perfect competition, then you need to answer these questions. Read More.
2. Focus On Cash Flow Today, Value Tomorrow
What must an entrepreneur assume when starting a business? There is a naive notion that you can start your own business with little or no money. Besides, it will generate sales and make money from day one, making your business dream come true.
Sorry, but that’s just naive thinking.
Let us go back to the monopoly companies for a moment. Google, Facebook, Twitter, and Tesla were companies that incurred large expenses before they started making money. How did they stay afloat? Investments.
Investors invest in a company when they can see what it is worth, not today, but in the future. Facebook, for example, started with no idea of how to make money. It took Facebook 3 years to introduce Facebook ads, so the company had no revenue for 3 years. Read More.
Investors started investing in 2005 and kept the company afloat until it found ways to monetize its users. Twelve years later, Facebook is worth over $600 billion.
You may be able to start a business without investors and keep it afloat. But consider the differences. If you do not have investor money, every sale is more about keeping the business going. That’s not the way to build a sustainable business.
Either invest yourself (if you have the funds) or find outside backers to fund the start-up phase.
3. Collaboration Is Key To Success
It’s amazing how many one-man businesses there are, just one person against the world. And that is exactly the struggle that every one-man business must face, with the likely result of mediocrity.
But it’s worse than that. So, what an entrepreneur must assume when starting a business? Because the problem with one-man businesses is that overhead is lost. A one-man business rarely pays itself a proper wage. But the money is taken out when there is a surplus. The overhead is lost in the fog of home-based operations, so no one knows what the actual operating costs are. Read More.
Unfortunately, that’s not the end of the bad news. Just about every one-man business limits its ability to grow and outperform others.
What must an entrepreneur assume when starting a business? And when you start your own business with a co-founder, or better yet, a team, you have the opportunity to collaborate. The moment you share your ideas and thoughts with others, you open the door for feedback. Feedback leads to further discussions and thoughts that are not possible in a one-man business.
In a one-man operation, every thought will be blinded by confirmation bias, which leads to mediocrity.
4. Timing And Time
Time and timing are two things that are often confused in the startup world. It is often assumed that they are the same thing, but that is not the case.
What must an entrepreneur assume when starting a business? Timing is the element you need for your business to succeed, and it’s impossible to control. You need to prepare for your visionary idea to come too early or too late. We rarely hear of failures that are due to timing because they never turn into anything. This makes them very hard to learn from. Read More.
One way to get around this problem is to reverse engineer a successful startup and examine what role timing played. How might you learn from that?
With timing, on the other hand, you can exercise some degree of control over it. But you can also easily lose control over it.
Not surprisingly, a start-up business has more control over the time it has available if it follows the points made in the previous chapters. When it comes to starting your own business, a monopoly idea, investors, and a collaborative approach will buy you time.
However, as I indicated earlier, not having these elements at your fingertips is just as damaging. When you lose control of the time you have, pressure builds.
Working under pressure is not necessarily a bad thing. But it often depends on what the reason is. When the clock is ticking and you need to make sales to stay afloat, the dynamics at play change.
So avoid that pressure and buy yourself time by starting your own business with the right elements in place.
5. Strategy, Planning, And Tactics
A business plan is the legendary document of any business, outlining the future of the business. When you start your own business, a business plan is a standard requirement. Read More.
Creating such a plan takes a lot of time and effort. Unfortunately, once it is written, it usually ends up in the bottom drawer, gathering dust and crumbling.
Planning is an extremely important part of a successful business, and the business plan is the roadmap that you will follow. A roadmap allows you to see what needs to happen, when, and how.
Every business startup involves a certain amount of uncertainty, and any entrepreneur who takes on too much is likely to end up on the road to failure or mediocrity.
To avoid this, the business plan must provide room for experimentation and iteration. A way to figure out what works and what does not. Too many startups begin with a preconceived idea that is fixed. If it does not work, and it often does not, iteration becomes a way out of the impasse. Read More.
A good business plan contains a strategy that includes this, including tactics that will allow the business to evolve.
Having a working business plan that you can refer to will certainly make starting your own business easier.
Section 2: The Risks and Responsibilities of Entrepreneurs
Most entrepreneurs are risk-takers by nature. Or, at least calculated visionaries with a clear plan of action to bring a new product or service to market to fill a gap in the industry.
On a personal level, many entrepreneurs take big risks by leaving their secure jobs to put their efforts (and sometimes their own money) into starting a business.
For entrepreneurs, there is no guaranteed monthly income, no guarantee of success, and spending time with family and friends can be challenging in the early days of starting a business. Read More.
Here are some of the most common risks that every entrepreneur and investor should evaluate and minimize before starting a business.
IMPORTANT TAKEAWAYS
- Entrepreneurs face numerous risks. Such as bankruptcy, financial risks, competitive risks, environmental risks, reputational risks, and political and economic risks.
- Entrepreneurs need to plan wisely in terms of budgeting and show investors. That they consider risk by creating a realistic business plan.
- Entrepreneurs should also consider technological changes as a risk factor.
- Market demand is unpredictable as consumer trends can change rapidly, causing problems for entrepreneurs.
Section 3: Legal Considerations For Starting A Business
Nothing can be more exciting than the thought of opening your own business. But starting your own business involves going through numerous processes, so your excitement can easily evaporate just thinking about it.
Top attorneys say that knowing and dealing with the legal issues involved in starting your business can help you go through these processes correctly and efficiently. It will also reduce the likelihood that you will make costly and time-consuming mistakes that can delay or negatively impact your plans to open your business. Read More.
Opening a Business: The Legal Aspects
To start your own business, you have to comply with several legal requirements. Here are the most important ones:
1. You need to understand the legal structure of your business.
One of the many important decisions you must make when starting a business is deciding on the legal status or structure of your business.
The legal structure you choose will affect how you run your business. It will also affect how you pay your taxes and keep your books.
The most common legal forms for businesses are:
● Partnership with limited liability
● One-person business
● Limited Liability Company (LLC)
● Corporation
● S-corporation
To decide which status is best for your new business, consider any liability issues that may be associated with your business. Also, think about what type of tax structure is best for your business.
2 . The Trademark
Before you choose the official name of your business, you should first do thorough online research. Find out if another business operates under the name you have come up with for your new business. Read More.
This way, you will avoid infringing on another company’s trademark and getting involved in a trademark dispute.
Once you have chosen your official business name, consider registering your trade name and logo (if you already have one) as a trademark. This way, you can prevent others from registering their business under the same name.
3 . The Licenses
You will need different types of licenses or permits before you open your business. The number of licenses you need for your business depends on the type of business you want to open. At the very least, you will need a business license, a commercial license, and a sales tax permit.
If you want to open a restaurant, pub, or catering business, you will need to register with your local food standards and health and safety authorities. If you plan to entertain on your premises, you will also need to obtain the relevant music and entertainment licenses. Read More.
It is best to research further and contact your local authorities to find out more about the specific licenses you will need to legally operate your business.
4. Zoning Laws
If you are still looking for a suitable location for your store, business, or office, you need to make sure that the area you have in mind is suitable for the type of business you want to operate.
Again, do your research or check with local authorities to make sure you can open your business in that area.
Do not make the costly mistake of assuming that your business park is suitable just because your business is similar to those already there. There are cases where zoning laws were changed while other businesses were already operating, and those businesses may have been granted exemptions that do not apply to new businesses like yours.
5. Relevant Health And Safety Legislation
As a business owner, you have several important health and safety responsibilities. These include ensuring that your employees work in a safe, healthy environment.
You also must look after the welfare of everyone, including customers and visitors inside, outside, and around your business premises.
It is highly recommended that you carry out a risk assessment to identify the risks that your business poses to individuals. You then need to mitigate these risks or hazards as much as possible. Read More.
This may include changing some standard operating procedures and removing some fixtures and fittings to ensure the safety of staff and members of the public.
Section 4: Financial Considerations For Starting A Business
A new venture means freedom like you have never experienced before. It could also mean untold wealth, but only if you are wise with your finances. Too many businesses close prematurely because the finances were not in order, but that does not have to be the case for you.
When starting a new business, you need to make some financial considerations. After you have secured the initial funding, you should prioritize the financial aspect of your business.
Here are some considerations that will help you succeed.
1. Maintain A Credit Line
To keep your business running, you will likely need access to funds other than your initial investment. Taking out a revolving loan helps many businesses stay afloat.
“A revolving loan is a unique form of credit that is very different from a traditional loan,” explains Jason Smith of Small Business Loans. “With a revolving loan, the lender grants you a specific credit limit.
This limit is determined by several factors but ultimately depends on what the lender believes you can borrow. Once a limit is set, you can max it out if you need to. If you do not exhaust the limit, you will not have to pay any of it back or pay interest on it.
Credit cards and business lines of credit are the two most common forms of revolving credit, each with its advantages and disadvantages. A line of credit is important for bridging gaps when money is tight.
2. Minimize Overhead Costs
Everything you spend in a business eats into your profits. Prioritize your purchases to minimize costs.
“Make a list of everything you need to buy or lease to get an accurate sense of your startup and operating costs,” recommends John Gin, financial advisor and contributor to Nola.com.
“Do you need large purchases like a store or office space, manufacturing equipment, and computer equipment? What about smaller purchases like office supplies and software? It’s beneficial to have a detailed list of your needs when creating a plan and calculating your costs.”
Also consider labor costs, utilities, real estate-related expenses, and other costs of running a business. Look for ways to minimize expenses so you can maximize profits.
3. Monitor And Track Expenses
“Most startups fail for a variety of reasons, but one is far more common than others – they run out of money,” says Jonathan Long, founder of Market Domination Media.
“You need to know where every single dollar is coming from and where every single dollar is going. If you do not have a handle on your cash flow, you are putting your business in a very dangerous position.”
Consider hiring a full-time employee to manage your expenses. You could also invest in quality software like QuickBooks to manage accounts and send money to the right places. Not only will this prevent a serious cash flow disruption, but it will also make tax season easier.
4. Make The Right Investment
Spending money is the best way to make money in business, but only if you are smart about your investments.
“When you think about investing, you also need to think about your priorities,” says Nazlin Amirudin of the online publication Entrepreneur Insight.
“What does your startup need versus what you want to have? For example, you can save the cost of renting an office in a popular area by working in co-working spaces instead… Remember, this is just the beginning. There are many more things you need to invest in going forward.”
5. Maintain A Cash Reserve
It will not take long to deplete your initial savings. You can rely on lines of credit and loans, but it’s often better to have cash on hand.
“A savings plan can help your business avoid paying interest on major purchases, create a financial cushion during economic downturns, or expand your business when the time is right,” says Craig Sievertson, SVP, Small Business & Consumer Loan Manager at Banner Bank.
No matter what your business goals are, having a solid financial cushion can help increase the long-term stability of your business.
Section 5: Tips For Starting A Business
What must an entrepreneur assume when starting a business? Starting a business is an extensive but rewarding endeavor. Part of starting a business is doing things the way that makes the most sense for you, but a little guidance can also help. Consider these tips for starting your own business and implement them as needed:
1. Know Your Strengths And Weaknesses
Every small and big business owner has certain skills, abilities, knowledge, and experience that give them an advantage when it comes to building and running a business.
However, no business owner is so accomplished that they can be an expert in every single process involved in building a new business. Read More.
While you may have to take on many different tasks, especially in the early stages of your business, do not spend too long on them or expect to jump into a highly complicated task without prior training. Develop a good understanding of your skills and weaknesses so you know where to best focus your efforts.
Business Planning
What must an entrepreneur assume when starting a business? Do not be afraid to learn how to handle new responsibilities and workloads. It’s a requirement for growing small businesses.
You also should not shy away from working with business partners, family members, employees, independent contractors. And others to meet important needs and ensure that important matters get done successfully.
2. Develop A Simple Business Plan And Expand It As Necessary
One of the first things you should do as a small business owner is creating a business plan. You must develop this important document to guide your future work and hold yourself accountable.
But it’s also important that you do not go too in-depth in the early stages of developing your concept. ABC News contributor Tory Johnson said that a simple business plan is often the best approach in the early stages of developing your business.
A shorter plan, about one page or 500-600 words, can point you in the right direction without having to answer questions that will not have solutions until later in the process.
Johnson suggested focusing on your products or services, target market and customers, basic pricing and costs, and the work required to turn the concept into reality. Read More.
As the work progresses and your idea gets closer to operating. You can expand your business plan. As you go along, include more accurate estimates, actual costs, longer-term projections, a mission statement. And a summary of the business, and other elements that are common in fully developed documents.
3. Find Something You Are Passionate About
Having a passion for something does not necessarily mean it’s your favorite activity or type of business. It does mean, however, that you do not tire of running that type of business quickly.
That you enjoy parts of it, and that ideally, you can use a combination of existing knowledge or skills related to parts or all of the business to your advantage.
An important element of starting a successful small business is finding an existing need and targeting it, whether it’s providing accounting services to other businesses or starting a bakery. Read More.
Pairing that need with something that excites, interests, and motivates you can lead to significant growth and return on investment.
This advice is relatively basic and most useful when deciding what type of business you want to start, rather than getting a specific concept off the ground.
Focus on your passion early on and combine it with a strong business plan to have the best chance of creating a lasting and popular business.
4. Identify Your Target Customers And The Existing Market
It is possible to develop a great business concept and use it in the wrong area. Therefore, you must understand the area in which you want to start your small business as well as your target customers. An idea that might work very well in a large, densely populated area, you may not get the necessary number of customers or foot traffic in an area with fewer residents.
Assessing the market for your products or services, researching potential competitors, and estimating how your business will hypothetically perform can help steer your idea in the right direction.
You can also look to competitors and similar businesses for ideas and guidance, albeit indirectly. Visiting their stores, looking at their websites and marketing materials, and other information-gathering efforts can help you complete pieces of the puzzle.
5. Ask For Help Without Being Afraid
Even when a business is on the right track, unexpected problems and opportunities for growth and improvement can quickly arise. Overcoming these problems and opportunities is critical to long-term stability and prosperity.
As a small business owner, do not be afraid to seek alternative business financing in the form of a small business loan from National Funding. Our quick and easy application process can get your business a quick decision and the funds you need in a matter of days.
Section 6: Conclusion
The life of an entrepreneur is not easy, but it can be very rewarding. It’s an exciting career that offers many benefits, and it’s an opportunity to make your dreams come true. It’s important to find the right balance and also to know when you need a break.
The things you need as a business entrepreneur are confidence, perseverance, courage, and optimism. Just be prepared to take some calculated risks. Once you start seeing results, you’ll find that entrepreneurship can be one of the most rewarding jobs ever.
I wish you the best of luck on your journey!
