You’ve made it through the seven criteria and have selected a business that looks like a good opportunity. Congratulations! Now it’s time to evaluate your skills, risk tolerance, and commitment. Doing a self evaluation is a critical step in deciding if you should start a business. To really be successful in starting a new business, you must take a close look at what it is going to take and determine if you have the time and resources to make your business successful.
Let’s start by discussing quick thinking skills and critical thinking skills, two very different types of skills that may be needed to make the right decisions for you and your business. First, do you have quick thinking skills? Those are skills that show your ability to think on your feet when faced with an immediate decision that might have a dramatic impact on your business. Generally people are faced with making tough decisions when they are put on the spot. As a leader of your business you will be tasked with constant circumstances that require your immediate response, and you will need to be able to make logical decisions under pressure. Often these immediate responses will play critical roles in your businesses success. Some things that might affect your decisionmaking process are how you were raised, your religion, political views, education, and your core beliefs.
The next type of decision you might be faced with making is that which requires critical thinking, more in depth thought and deeper analysis. Critical thinking becomes much easier when you utilize training and other available resources to assemble relevant facts. This is one reason to keep building knowledge through reading books and articles, and also seek out knowledgeable people through relationships, organizations, professional contacts, and other business owners who can support you when you need to make a critical decision. These are just two different situations. Keep in mind that thinking ahead and anticipating problems or questions will help put you in a better position to make the right decision. In general, try to avoid making a rush decision, but also show leadership and includes the drain on financial resources, the time to make a business successful, one’s confidence in your decisions while admitting when you make a mistake. Keep in mind that sometimes you must also trust your gut instinct.
Owning and operating your own business can have the appearance of either being a stable long term opportunity or an extremely risky endeavor. Risk tolerance, which is the measure of uncertainty a person is willing to accept in respect to the perceived benefits, is why there is such a wide range of perceived risk in owning a business. The realization of owning your own business does have risks, and those risks can be mitigated by making good decisions and by being prepared. Many studies indicate that entrepreneurs have a low tolerance for risk, which can appear contradictory to most people’s perceptions. This appears to be so counterintuitive because most entrepreneurs also tend to be overconfident in their ability to be successful. This over confidence gives the entrepreneur the ability to adapt and commit to tasks that most people would consider crazy, like working eighty hour weeks for weeks on end without any form of compensation. So, if you are risk averse, owning your own business might become very stressful and unmanageable unless you also possess a great deal of confidence in the success of your endeavor. Your personality and risk can be assessed many different ways to provide a self evaluation. The assessments generally consist of a series of questions and can be done by using a reputable online source or ordering a package that allows you to take and score the test. One of the most detailed is the DiSC® Assessment, which can be reviewed and purchased online from a number of sources, like www.TheDiSCPersonalityTest.com. Another good tool to consider is a career assessment test. These also can be researched and accessed online. One to consider is the Myers Briggs test, which is a career, personality, and leadership test. The last area of test you can consider is a hiring test for yourself. These will also provide good information on your personality and goals and help direct you to your areas of strengths and weaknesses in business.
As accountants, we see many passionate people starting new businesses. Passion must be properly directed to a product or service that can produce a viable business. Many passionate people get caught up in the idea and not the truth of the idea’s ability to sustain a business. If the idea has sustainability, the commitment behind it must be unyielding. One’s commitment can be tested in many ways when you own a business and often adaptability to unexpected changes, and even trust in the business itself. Proper budgeting will help prepare a business owner for the financial commitment, but it is the unanticipated sacrifices that come with owning your own business that give the true test of one’s commitment. Seven day work weeks for months are a true possibility for some new businesses. The challenge is to find ways to avoid having your business consume you, your family, and your money. Make good decisions on what can and should be delegated to professionals and employees. If you try to do everything, you might start to fail at the one product or service that is your business. No doubt entrepreneurship is not for everyone.
Our website, www.6stepstobusiness.com, has tools and resources that you can use for further information and deeper analysis. Be sure to do a self evaluation so that you feel confident in your decision making skills, assess what you are willing to risk to make your business successful, and are able to move forward with passion and commitment.
David Lucier is a Small Business CPA in Rhode Island who has many successful clients; to learn more about David’s accounting firm click here.
Lucier CPA, Inc. 1308 Atwood Ave, Johnston, RI 02919 (401) 946-1900