Complete the following checklist and determine whether you are suited or prepared for the challenge of starting a new business. Answer honestly – there is no point in deceiving yourself about your business prospects.
Commitment and Passion
- Do you have a real passion for what you want to do? (It will be difficult to maintain your interest or sell products or services to others unless you are enthusiastic about what you do.) Yes / No
- Is the business in an industry you enjoy and can perform well in? (You may like the thought of owning a restaurant, tourism business or retail shop, but do you know what’s involved in running these businesses?) Yes / No
- Do you have the drive and persistence to overcome obstacles and keep going? (Persistence is a key to success.) Yes / No
- Are they aware of the time and effort you will have to commit to the business to get it going? Yes / No
- Are you prepared for the impact buying a business is likely to have on your personal and family life? (You might have to work long hours at first.) Yes / No
- Do you have the support and understanding of your family and partner? Yes / No
- Have you talked to experienced business people (not just friends and family) about your business idea? Yes / No
- Do they think it is a good idea? Yes / No
- Has your idea worked before (for example, in other countries or regions)? Yes / No
- Is your idea sustainable? Yes / No
- Do you think your idea is better than any potential competition? Yes / No
- Can you protect your idea, trademark or brand from copying? Yes / No
- Have you checked if you need resource consent? Yes / No
Experience and skills
- Do you have experience in the activity or industry you wish to enter? Yes / No
- Do you have any small business experience or skills (for example, financial, marketing, sales or management skills)? Yes / No
- Are you willing to gain business skills before you start your business? Yes / No
Business planning and research
- Have you completed a business plan? Yes / No
- Have you done any formal market research to test the feasibility of your business plan? Yes / No
- Have you test marketed your product/service to see if there is demand for it? Yes / No
- Do you know who the competition is? Yes / No
- Is the business able to compete effectively against the competition? Yes / No
- What opportunities exist for growth? Yes / No
- Do you currently have an income from your idea or existing customer(s)? (For example, from a hobby you believe can be scaled up to a business?) Yes / No
- Do you have a marketing plan to put into operation? Yes / No
- Do you have a back-up plan if anything goes wrong? Yes / No
Funding the business
- Have you prepared a budget for the start-up costs of the business? Yes / No
- Have you discussed with your accountant and business advisers the start-up costs of the business? Yes / No
- Can you raise enough money or back-up funding to support you until the business starts producing a profit? Yes / No
- Can you access extra funds for unforeseen circumstances and crises? (Things always cost more than you anticipate.) Yes / No
- Are you sure that you will not be taking on more debt than the business will be able to repay? Yes / No
For every ‘yes’ answer, give yourself one point and add up your total. Ideally you want to be able to answer ‘yes’ to each question. In practice, this is unlikely to happen because, for example, you might have strong skills in making your product, but lack business experience. However, you can improve your score by improving your skills.
How to improve your score
Keep working and building your skills to achieve a higher score. For example:
Find out about protecting your idea and if you need resource consent. Make sure you research your rights regarding new inventions and processes, original designs for manufactured items, trademarks, and copyright.
If you lack experience in the industry you wish to enter, think about working for someone else in that industry. For example, if you love cooking you may want to open a restaurant so try working in a restaurant (if necessary volunteer your services) for a few months. Or ask if you can observe the business for a few days. You may discover that the reality differs from what you imagined. You will certainly get to know the challenges of the restaurant business.
Note: You may be sold a business on the basis that ‘you don’t need any experience in the industry’ but this is seldom completely true. Every industry requires some specialised knowledge.
If you lack certain business skills then register for training. There are a multitude of courses available online or at your local training institute. Contact your local government and find out what they offer. Also talk to those who are already running a successful business. Meet with a mentor once a week or fortnight, and make the most of their experience and knowledge – it’s a lot easier (and cheaper) to learn from their mistakes!
If you need to complete a business plan there are a number of publications that can help you.
Market research is a critical and technical step. The more thoroughly you research the feasibility of your business idea the better. Do not rely on your friends and family telling you it’s a ‘great idea’ because they may be trying to encourage you.
If possible test market your idea, product or service to establish demand. It is important to ensure your business idea will work. Think about engaging a professional company to conduct the market research or get help to complete a formal market research process yourself.
Research who your competition will be and the current market value of similar businesses. To research the market and industry use industry organisations, the library, the internet, and Statistics New Zealand. Statistics New Zealand provides information on industries, visitor numbers, household incomes, growth industries.
Funding the business
If you lack capital to start a business, consider working for another year to accumulate more savings so you are not as dependent on lenders (or have to pay high interest costs). The extra finance may tip the balance between failure and success. (Many business ventures fail because they are undercapitalised and rely heavily on debt.)
Discuss with your accountant and business advisers the start-up costs of the business, as they are best placed to tell you if your plans are realistic. Also discuss with your advisers if you will be taking on more debt than the business will be able to repay.
© 2006 New Zealand Trade and Enterprise
Reprinted with permission.