“Manage Your Money… Live Your Dreams”.

What you need to know to start a business

10.OCT.08

This series of articles is published to celebrate Financial Literacy Month – October 2008. This year the theme is “Manage Your Money… Live Your Dreams”.

So you are thinking of starting a small business?

It could be one of the most important steps you’ll ever make. Before you decide to proceed, you may want to consider the pros and cons.{{more}}

Many would-be entrepreneurs are not aware of the effort involved in starting a business. Many new ventures place heavy demands on your time, your family relationships and your finances. As well, an overwhelming majority of small businesses fail within the first three years, and many require several years to return the entrepreneur’s original investment.

Do you have what it takes? Answer the following questions to help you determine your business strengths.

• Have you tried operating a small business before? If yes, did it succeed or fail?

• If it failed, why? What did you learn from the failure, and why will this venture succeed?

• Are you ready for long hours of research, planning and hard work?

• Do you have the ability to identify and solve problems? Do you see problems as opportunities?

• Are you able to set reasonable short and long-term goals and then follow through? Do you regularly set objectives and then evaluate and adjust to meet them?

• Can you identify, evaluate and manage financial and other risks involved in operating a business? Can you determine the effect of various risks on your business? Can you distinguish acceptable risk from outright gambling?

• Do you seek out and use feedback? Will you be objective about other people’s observations concerning your business?

• Will you display initiative and accept responsibility for the affairs of your business?

• Success will attract competitors. How will you deal with them?

• Can you handle uncertainty?

• Are you able to attract the right people to your business? Choosing partners and key employees is extremely important.

• Does your background (education, work experience) prepare you for your chosen field of business?

• Can you prepare or assist in preparing a business plan which details every aspect of your proposed enterprise?

• How effective are your business management skills? Do you have general knowledge of financing, customer relations, advertising, banking and loans, selling, pricing, insurance, and employee relations? What other special skills will you need?

• Do you understand the various regulations that govern your business? (Permits, licenses, zoning, labour relations, taxes, record keeping, shareholder agreements) What other legal requirements will you need to meet?

If you’ve taken the time to answer these questions, you now have a better understanding of your ability to start a successful small business. If after answering these questions you are still unsure, you should talk with a professional accountant.