Feb 12 2011

Thinking of Starting a Small Business? Part 3

Part 3: Starting a Small Business: The Abilities of Successful Entrepreneurs

3) What abilities do you need when starting a small business to become a successful entrepreneur?

According to studies conducted by the Bank of Montreal Institute for Small Business, “The Six Success Factors” for starting a small business are:

  • self-motivation,
  • business and industry knowledge,
  • organization and management capabilities,
  • marketing skill,
  • customer/vendor relations,
  • and vision.

Business and industry knowledge should be near the top of anyone’s list of requirements for small business success. After all, how many skis or snowboards are you going to sell if you don’t know anything about the products or the sport? You can acquire this knowledge through trial and error when starting a small business, but you will probably have to declare bankruptcy before you learn all you need to know. My theory is that lack of knowledge is one of the prime reasons so many new business fail.

While successful entrepreneurs themselves didn’t rate being well organized highly, ((William E. Jennings, “A Profile of the Entrepreneur” in Entrepreneurship: A Primer for Canadians), it’s logical that organizational and management abilities are also absolute necessities for being a successful entrepreneur. You’re not going to be able to satisfy many (if any) clients or customers without these skills, and you’ll certainly quickly run afoul of the Canada Revenue Agency without them!

People keen on starting a small business sometimes forget about the managerial and administrative skills necessary to run a business; if you’re going to start a successful small business, you need to have or develop expertise in business planning, money management, managing people, directing business operations, and directing sales and marketing operations. Business Management Basics will help you learn how to manage these aspects of starting a small business.

What are the other abilities you’ll absolutely need to be a successful entrepreneur? When twenty-one inductees into the Babson Academy of Distinguished Entrepreneurs were questioned about the principal reasons for their success, only three abilities were mentioned by all twenty-one successful entrepreneurs; responding positively to all challenges and learning from mistakes, taking personal initiative, and having great perseverance (“Assessing Your Potential for an Entrepreneurial Career”, Manitoba Industry, Trade and Tourism, 1999.) As the authors point out, all three of these successful entrepreneur behaviors can be learned!

(What do you think are the most important characteristics of a successul entrepreneur? Add your thoughts on being a successful entrepreneur here.)

Investing the time to learn the skills you need before you start your own business is especially wise because once you’ve decided to put so much energy into starting a small business, you’re going to want it to develop into a viable, thriving enterprise. Sadly, there’s a percentage of small businesses started in Canada each year that survive less than two years. Read on for tips on how you can avoid business failure.

4) Business Failure Statistics

Business failure statistics show that about 96 percent of small businesses (1–99 employees) that enter the marketplace survive for one full year, 85 percent survive for three years and 70 percent survive for five years (Key Small Business Statistics – January 2009, Industry Canada).

Microenterprises (businesses with 1 to 4 employees) have a slightly lower business failure rate than other small businesses; after five years in business, 70.4 percent of micro-enterprises survived compared with 66.9 percent of other small businesses (Ibid).

Looked at another way, though, “smaller” businesses fare less well than bigger ones. Survival rates of Businesses with revenues of less than $30,000 had significantly higher business failure rates than those observed for businesses with revenues of more than $30,000. Of those businesses with revenues of less than $30, 000 that started in 2001, 55.0 percent survived after three years and only 36.1 percent survived after five years (Ibid).

Reasons for Business Failure

Most business failure occurs small businesses fail because of mismanagement. According to Statistics Canada, (Failing Concerns: Business Bankruptcy in Canada, 1997), most businesses fail because of weak general management, weak financial management, or weak marketing capabilities.

Almost half of the firms in Canada that go bankrupt do so primarily because of their own deficiencies rather than externally generated problems. They do not develop the basic internal strengths to survive.

“The main reason for failure is inexperienced management. Managers of bankrupt firms do not have the experience, knowledge, or vision to run their businesses. Even as the firms age and management experience increases, knowledge and vision remain critical deficiencies that contribute to failure” (Ibid).

Avoiding Business Failure

How do you avoid business failure when starting a small business? Preparation and planning are key.

This article is all about the first step in starting a small business, exploring your attitudes and abilities to determine whether or not you want to start your own business. From here, if you’ve decided that starting a small business is right for you, the next step of preparation is to decide what kind of business you want to start, and begin working on your business plan. You’ll find information on how to write a business plan and samples of business plans that you can use as models in my Business Plans library.

In Conclusion

When you’re wondering if you’re suited to start your own business, quizzes are fun, but it’s important to remember that getting a low score on any of these “tests” doesn’t mean that you’re not cut out to be an entrepreneur and that you should forget all about ever starting a small business. Research leads to many generalizations that are not true in the individual case – and you may be the exception.

What do you really want to do and why do you want to do it? “Do what you love” is still sound advice; having a passion for what you do will fuel your commitment and give you the energy you need for the long haul. Thinking of starting a small business? What is your “burning desire” and how can you shape it into a reality that will provide you with both satisfaction and a profit? That’s really the only question you have to answer when starting a small business of your own.

 

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http://sbinfocanada.about.com/cs/startup/a/startownbiz_3.htm

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