When you start a business, there are no guarantees of any kind. Anything can happen. With that as a starting point, what is your tolerance for risk? There is no way to eliminate all the risks of starting a business, so trying to avoid those risks can be a big mistake; rather, you have to face them with complete resolve.
Many of the skills, traits and qualities an entrepreneur needs are no different from the ones asked for in a job interview. People skills, planning, working to targets, working under pressure and being disciplined are some of the skills an entrepreneur should build up. Here are some questions to find out whether you are an entrepreneurial person.
Are you disciplined? Can you see yourself developing a project and organising your time?
Do you have people skills? An entrepreneur has to deal with all kinds of people: suppliers, customers, employees, advisers, accountants, lawyers…
Can you negotiate? In a business, knowing how to buy is as important as knowing how to sell; in fact, you can make more money when buying than when selling.
Does your hand shake when you make decisions? Being an entrepreneur means making decisions all the time: some of them coolly, others after a thorough analysis of the situation, and others under pressure, because there is no other choice.
Are you emotionally stable? Launching your own business is exciting, and sometimes even fun when the numbers are going your way, but it is still a roller coaster with hairpin bends, steep climbs and endless ups and downs. The question is basically whether you are the kind of person who sinks when things get difficult or the kind who fights.
See also: Six beliefs of self-made millionaires
How much do you know about business, finance and so on?
This may be one of the most important points, because the first major risk factor is not being prepared to start a business: knowing absolutely nothing about finance or about running a business. As a result, an entrepreneur sometimes risks even what they don’t have in order to earn far less than they put at risk.
The good news is that, if you are enthusiastic, passionate and disciplined, any of these skills can be built up.
There is no better way to take on risk than knowing why businesses fail. Most small businesses that close within three years, or even before their first year is out, may do so because of the following factors:
- Lack of experience. Without a doubt, number one.
- Capital reserves. If you start with just enough money, expecting the business to take off in two months, and the take-off is delayed, the payments start eating you up. At other times we overinvest in fixed assets.
- Poor location and/or no advertising. You may have the best product or service in the world, but if nobody knows about it, you have nothing. And if the premises are not in a central spot (a street with plenty of passers-by), customers obviously don’t see us.
- Using the business’s money for personal spending. This is one of the most common mistakes made by Spanish entrepreneurs, who tend to mix their personal finances with the business’s. We can have a profitable business and run it into the ground by paying our personal debts or luxuries with the business’s money.
- Unexpected success. As the saying goes, “Be careful what you wish for, because you might get it.” Some entrepreneurs wish for thousands of customers to walk through the door and place hundreds of orders. The entrepreneur runs a good advertising campaign, receives hundreds of orders, and turns out not to be ready to handle this one-off demand. He lets his customers down, and word of mouth does the rest.
- Competition. Sometimes failure is very easy to explain. Our competitors were better than us: they came up with strategies we didn’t, they kept up to date, they were more innovative, and so on. We simply lost to them, which brings us to another mistake that could be included under lack of preparation.
- Not studying the market. Not drawing up a business plan and/or a market study is what makes a business doomed to fail even before it opens.
Those would be the risks. Now that we know what they are, do you think you could turn them into controlled risks?
Starting your own business also has many advantages: you are your own boss. It is true that you will sometimes have to put in more hours than usual and work without a break, especially at the beginning, but… those are hours devoted to your own company, not to someone else. And best of all, despite the risks, it can be very exciting and rewarding and, why not, sometimes it is what we need to feel fulfilled.
Further reading
- Five habits of great business leaders we can apply to our own business
- No financing? Solidarity bonds that let your customers fund your business
- Eight common mistakes in a business plan
- 23 motivational quotes for entrepreneurs
Featured image: ThrillZing, CC BY 4.0, via Wikimedia Commons.
