This is a Million Dollar question and indeed the search for a golden bullet to succeed continues world over.
Most people who dream of starting business are often attracted by the success stories they see around them. This becomes sometimes the motivating factor in becoming an entrepreneur. Such motivators have a very important role in preparing a potential entrepreneur to enter the arena. However this must not be the only criteria to start a business. Only because your friend, cousin or colleague whom you consider below your capabilities (your perception) has succeeded one feels you can also succeed.
The next thing such a person does is a copy paste job of any successful business he is attracted to and feels he has the capability and resources to start and succeed.
Starting your business is like perhaps setting up a garden. Your neighbors garden looks good and you feel you can do better. You establish the cost of setting up such garden and find that you have the financial, human and technical resources to set up similar garden or a better one immediately. What one forgets is that, unlike you, the neighbor did not set up the garden all at once. He or she perhaps started with a few plants and trees – some died, some flourished and grew. The garden owner then gets confidence and educates himself on an ongoing basis. Trying new plants, new earth, new method of fertilizing, caring, nurturing etc. Your neighbors garden was not built in day or in a month or perhaps not even in one year. However you want the same or better garden immediately. You do not even know when he planted his seeds – time and period matters.
So potential entrepreneur, like our gardener above, fails to take into account all these factors – and is searching for that elusive Golden Bullet to succeed.
In the book “Outliers”, author Malcolm Gladwell brings out certain interesting facts that aligns people classified into different segments, the period they were born, the period they started their business, sports or career, the area they come from etc all had commonalities. I strongly suggest prospective entrepreneurs to read this book – don’t take this as a Bible but an analytical aspect certain features which could be considered.
Yet another study that I would recommend to potential entrepreneurs is a book (Entrepreneurship) from Global Management Guru Peter Drucker. All this will give you different views so that your analysis becomes a 360 degree review of your business plan and its prospects or otherwise.
A start up person often gets carried away by his idea and forgets to do an objective SWAT analysis of the business idea and the business plan. Prior to this there is a need to conduct a market review, it’s positive and negative impact on the proposed business. Next stage should be an industry analysis of 5 top players in the market, their strength and weaknesses. Equally the entrepreneur should study lowest 5 failing or failed businesses in the same industry. These analysis will help the start up prospect to evaluate his venture, it’s potential, it’s market segment and its viability. Once this is established the business plan and budget need to be revised taking into account where the start up business would like to position itself. Funding proposal and availability must also be planned. Revenue projections must be on very conservative basis and expenses allocation must be 15 to 20 per cent above the estimates.
Based on the above a break even revenue level and time to achieve that revenue target must be established.
Many businesses fail not because the idea is bad but business gets cash strapped for the reason of shortage of working capital. Yet another failure is not preparing for worst state scenario including an exit strategy if the business fails to achieve its targets.
Last but most important aspect is to keep THE CUSTOMER at the centre of all your planning and thereafter its execution . Please do not assume customer needs, establish this through direct interface with future customers and find out if you can deliver their needs.
If all the above is done a business is unlikely to fail, but for poor handling of the employees, suppliers, vendors or anyone else who is directly or indirectly associated with the business by the entrepreneur.
I hope I have addressed in generic terms questions raised in the caption of this article. Every start up is unique and it may have its own set of challenges, but i hope this article will help the potential entrepreneur find the solutions to his challenges by himself.