What then are the characteristics of a person that would make them a good entrepreneur? Let's explore some of the most obvious:
Passion - Without passion for your idea, it is virtually impossible to be successful in the marketplace. As many leading books and articles on marketing have indicated any new idea must have a CHAMPION who has such passion for the product or service that they will sacrifice almost anything to make it work.
Energy - One of the great myths of prospective entrepreneurs is that they will be able to work their own hours and take time off for recreation or to be with family. WRONG! Any successful entrepreneur would tell you that the exact opposite is the case. Starting a new business requires an extraordinary amount energy, and a willingness to commit to a 24/7 work schedule in order to make the business successful.
Risk-taking Personality - It would be very difficult for a risk averse person to be successful as an entrepreneur. The nature of this type of effort almost always involves significant financial risk, as one develops funding to pay for the start up of the business. Further there is the personal risk of failure that one must be able to accept if they want to start a business. The type of person who is accustomed to a regular weekly or monthly paycheck, and counts on that to live probably would not be a good candidate for an entrepreneurial venture. As a business owner you are the last person in the chain to be paid. You could even have a successful business, but due to cash flow implications would not be able to pay yourself this month!
Knowledge of the Business/Category - One of the major reasons that new businesses fail is the lack of knowledge of the owner in the business category they will be entering. For example, just because you love to cook, and have significant prowess in this area, does not make you an excellent candidate to start a restaurant. There are many things that one must know when running a restaurant that have nothing to do with cooking, and they can be the decisive elements in determining whether the venture is successful for not. A few examples would be ordering food, controlling slippage -food walking out the back door, traffic flow, hiring and managing employees etc. At SCORE we tell people who have a desire to run a restaurant to work in one for a few years so they can learn about the operational elements of this business before opening one for themselves.
Understanding of the Marketing Elements Associated with the Business - This involves a very in depth understanding of what it takes to successfully market your business, so you can generate the awareness needed to obtain customers, and the trial required to get them to purchase your product or service. While it is possible to learn some of this area ‘on the fly’; it can be a very expensive lesson that could threaten the entire venture. I had a SCORE client that was trying to market a home care business with no prior knowledge of this category. Before he came he spent virtually all of his money advertising in local newspapers and on radio stations seeking clients. This was a complete bust as he only got one client from this effort. The secret was not to direct marketing funds at the end user of this service, but rather that the entities that recommended his type of service to the clients. The net result was this person ran out of money and aborted the venture. He is now an automobile salesman! The lesson here is obvious on hindsight, but we strongly recommend doing the work up-front to understand how your potential business operates before trying to build your own company.
A Funding Source to Get You Started - It is almost impossible to begin a business without money. While there are stories of people starting a venture on a few hundred dollars, at SCORE I have not see any successful efforts that have begun without a meaningful source of funds. We have clients coming in all the time wanting to start a business, thinking they can get money from SBA loans (something that does not exist), grants, unsecured loans, investors that will believe in their terrific idea, but this is basically a fantasy and not reality. In general, traditional funding sources such as banks and credit unions will not lend money to start up ventures. While there are exceptions to every rule, an entrepreneur should not count on banks to lend them money, and it is almost impossible to get a grant.
An Advisory Group that can Guide You through the Process - A final key to succeeding as an entrepreneur is to have an advisory group to help you through the process. This could be friends, family or an organization like SCORE, who have the objective of guiding you and providing you with a sounding board on decisions that need to be made. The key is to find people with useful business experience who want to help you succeed without having any personal vested interest in your venture.
CHAPTER TWO - The Key Ingredient to Entrepreneurial Success - The Idea
There are two very important rules relative to entrepreneurial success. The first is to have a great idea, and the second is that if you don't have a great idea, keep working until you can identify one.
A significant number of clients come into SCORE seeking to start a business, but they have no concept of what the idea will be that can make their business a success. Some have decided to start a consulting business; others have a customer service concept and a third group wants to begin an e-commerce website. Typically the problem with each of these ideas is that they have not figured out why a customer would want to buy from them. The world does not need another ‘me too’ product or service. On the other hand a completely new idea that is revolutionary in a product category (i.e., Facebook, Evian, iPad) requires a major emotional and financial commitment in order to be successful, something most small business entrepreneurs do not have.
What then are the criteria for an idea that would suggest that it is one that is worth pursuing as a prospective new business? It is important to recognize that the criteria for a good business idea are the same whether the business is in the service sector (i.e., home care, interior design), retail business (shoe store, clothing store, e-commerce website), product category (soap, cosmetics, hair dryer) or business to business (computer consulting, marketing services, architecture). Let's look at the criteria for a good idea:
It is Unique to the Business Category - For example, it represents something that none of the other entries in the category offer at the current time. This is often referred to as the UNIQUE SELLING PROPOSITION (USP). In the ideal situation it is something that only you can say about your product or service and will be the basis for your positioning (to be covered in a later chapter). A USP can be product oriented (i.e., a longer life battery), service oriented (i.e., home care providers available within 1 hour), or emotional (you will look or feel better). The key is that it is sufficiently different from others with whom you will compete so that you will have a platform that sets you apart from the competition.
Is Meaningful to your Target Audience - A great idea is only good IF it is something that is unique as just discussed, but also represents something to which your target audience (to be covered in a later chapter) can relate as being important. For example, most people love the taste of cola drinks. Recently Coke came out with a product that had a citrus additive in the cola. This probably evolved from their research that indicated a large percentage of their users order Coke with lemon or lime. Therefore they developed a Coke with this flavor recognizing that it was something that was of interest to the target customer.
Had Coke come out with an apple flavored cola beverage it probably would not be successful. While the idea clearly is unique to the brand and the category, it most likely is not something to which the users of Coke or Pepsi could relate as being a desirable flavor.