People sometimes go into business for themselves without being fully aware of what is involved. Sometimes, they are lucky and succeed. More often, they fail because they do not consider one or more of the ingredients required for business success.
Here are questions to consider. Answer by a simple “yes” or “no.” More “yes” responses give positive indications of your readiness to engage in business.
I Are you the type?
- Have you rated your personal traits such as leadership, organizing ability, risk-taking, persistence, self-confidence, and physical energy?
- Have you considered partnering with an associate whose strong points will compensate for your weak traits?
II What are your chances for success?
- Have you obtained some basic management experience working for someone else?
- Have you analyzed business conditions in the city and neighborhood where you want to locate?
- Have you analyzed conditions in the line of business you are planning?
- Have you determined what size of business you plan to establish (sales per year)?
- Have you built up a detailed set of figures on how much capital you will need to launch the business?
- Have you figured how much time you will need until the business income equals the expense?
- Have you planned what net profit you believe you should earn?
- Will the net profit divided by the investment result in a rate of return which compares favorably with the rate you can earn from other investment opportunities, including employment?
III How much capital will you need?
- Have you worked out how much income from sales of products or services you can reasonably expect in the first six months? The first year? The second year?
- Do you know how much net profit you can expect on these volumes?
- Have you made a conservative forecast of expenses including a regular salary for yourself?
- Are you willing to risk uncertain or irregular income for the next year?
- Have you compared the estimated income with what you could make working for someone else?
- Have you estimated how much actual money you have to invest in your business?
- Do you have other assets which you could sell or on which you could borrow?
- Do you have a financial reserve for your unexpected needs?
IV Where should you locate
- Do you know how much space you will need?
- Do you know what type of building you will need?
- Do you know of any special features you require in lighting, heating, ventilating, air-conditioning?
- Have you listed the tools and equipments you need?
V Are you qualified to supervise buying and selling?
- Have you estimated your total stock requirements?
- Do you know in what quantities users buy your products or services?
- Have you checked whether it will be cheaper to buy large quantities infrequently or in small quantities frequently?
- Have you weighed price differentials for large orders against capital and space tied up?
- Will you make your account more valuable to your suppliers by concentrating your buying with only a few of them?
VI How will you price your products and services?
- Have you determined what prices you will charge to cover your costs and earn profit?
- Do these prices compare favorably with prices of competitors?
VII What selling methods will you use?
- Have you studied the sales promotional methods used by competitors?
- Have you outlined your own sales promotion policy?
- Have you studied why customers buy or will buy your products? (E.g. superior quality, reasonable price, reliable service, distinctive styling, others.)
- Will you put your own physical store?
- Have you considered online marketing?
- Will you advertise in the newspapers?
- Will you use posters and handbills?
- Will you promote and communicate with your customers through online social media tools?
VIII How will you manage personnel?
- Will you be able to hire satisfactory personnel locally?
- Have you checked the prevailing wage scales for your type of industry?
- Have you considered hiring someone now working for a competitor?
- Have you checked on the pros and cons of doing so?
- Have you planned your training procedures?
IX What records will you keep?
- Have you a suitable bookkeeping system ready to operate?
- Have you planned an inventory control system?
- Have you a system to use in keeping a check on cost?
- Do you need any special forms?
- Do you plan to hire a bookkeeper or an accountant?
X What laws will affect you?
- Have you checked what if any, licenses are necessary for you to do business?
- Have you checked health regulations?
- Have you checked zoning ordinances in your place of business?
- Have you checked environmental regulations that might affect your business?
- Have you checked if you need to register with a government agency mandated to supervise your type of product or business? (E.g. Food and Drug Administration for food and medicinal products)
XI What other problems will you face?
- Have you arranged for insurance coverage?
- Have you worked out a system for handling your tax requirements
- Does your family agree that your proposed venture is sound?
- Will you sell on credit?
- Have you worked out a policy on returned goods?
- Have you made a work plan for yourself
XII Will you keep up to date?
- Have you a plan for keeping up with new developments in your line of business?
- Have you a small group of qualified advisers from whom you can get help in solving new problems?
And before everything else — in cause you overlooked this foremost question, have you identified what type of business you will go into?
Adapted /updated from the checklist of the National Development and Management Foundation of South Africa, as reprinted in the Small Business Management Guides, published by SERDEF, Development Bank of the Philippines and UP ISSI.
Photo: “<a href=”http://www.flickr.com/photos/11121568@N06/4439276736″>Checklist</a>” by <a href=”http://www.flickr.com/photos/11121568@N06/”>Alan Cleaver</a>, c/o Flickr. <a href=”http://creativecommons.org/licenses/by/2.0/”>Some Rights Reserved</a>