It seems like everyone wants to be an entrepreneur these days. Starting Your Business is seen as a sexy, glamorous lifestyle that presents the ultimate freedom when it comes to the choice of profession. Television portrays entrepreneurship as the road to riches. Blogs and websites seem to cover the successful entrepreneurs, whose lifestyle you envy. The radio has commercials speaking about programs and training focused on entrepreneurial training. Therefore, you want to become an entrepreneur.
Before prematurely jumping into entrepreneurship, though you need to ask yourself the right questions to ensure that being an entrepreneur is the right choice of lifestyle for you. There is no 9-5 work schedule involved in entrepreneurship — it is more like 16-20 hours with entrepreneurship. You are responsible for being in charge of yourself — there is no one telling you what needs to be done.
Being an entrepreneur is a lot of responsibility to take on. Are you ready to invest into entrepreneurship?
If you answered yes, then further answer the following questions so that you understand the full scope of what you are getting yourself into.
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1) Why am I Starting a Business?
Do not start a business for the wrong reasons. Doing so can cause you to get into something that is way above your head. It might seem easy you think about it, but when forced to build a business from scratch, things can become overwhelming very quickly.
You might be starting a business because you are tired of being an employee and want to be your own boss. Maybe you want the ability to earn an unlimited amount of money instead of having a set wage. Whatever your reason maybe, it is important that you understand the difference between wanting to be seen as an entrepreneur, and actually operating as an entrepreneur.
Related read: 8 Reasons to Incorporate a Singapore Company
2) What kind of Business do I Want?
Now it is time to start thinking about the business you plan to operate. Determine where a need or high demand exist and create a business that serves those consumers. This is not about you and what you like. You cannot make money if you are starting a business to boost your ego. Until you build a successful business, customers do not care about you — only about how your business effectively serves their needs.
Think about your skill sets. Will these skills help the business operation you have chosen succeed? Also, determine if you need to bring in a partner who possesses the skill sets you do not have. You want to be sure that your business has a high chance of succeeding, due to you being capable of effectively handling your customer’s demands.
3) Who is my ideal customer?
Never make the mistake of believing that everybody is your customer. That is not true at all. An entrepreneur that believes this will build a business that is guaranteed to fail. All businesses must be developed to serve a specific customer base who have specific needs and wants.
Determine if you will be serving people who are more focused on pricing or people who are more focused on value and experience. Knowing this information will help you design a marketing strategy that works to attract your preferred target customer. This way you are not wasting time on those people who will not purchase your products or services.
4) What products or services will my business provide?
You must do the proper research of your customers to understand how to best serve their needs and wants. It is frustrating to develop products or services that your target customers do not buy, because you thought about you would like, instead of what your customers actually wanted.
It is best to ask your target market directly what type of products or services they would purchase. Knowing this information allows you to create a product or service that has a high chance of repeatedly being purchased. Also, you can enhance the products or services of your competitors, and sell the improved versions through your business.
5) Am I prepared to spend the time and money needed to get my business started?
A business does not build itself. You will need to put in a lot of time to build your business from the ground up. This means sometimes you will get very little sleep if any at all. All of your personal free time will no longer be available.
Your business will also require you to invest money for its development. You will have to spend money on incorporating your business, purchasing marketing materials, sales expenses, and other costs of doing business. Personal sacrifices will have to be made in order for you to bootstrap your business and grow it.
6) What differentiates my business idea and the products or services I will provide from others in the market?
The competition is immense as an entrepreneur. There are many other businesses that provide products or services similar to the ones you offer. This makes it hard for consumers to differentiate between what businesses actually offers the best value if that information is not being effectively communicated.
It is important that you determine how your products or services set you apart from the competition. You must identify what your products or services do better, the quality of your products or services, and the value that will be provided. This allows the consumers to better understand what is being offered by each provider — making it easier for them to decide what is their best option.
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7) Where will my business be located?
Your business’s location is a very important factor to the success of your business. Your location will portray the value of your business to consumers. If you are in a bad location, consumers will believe that your business provides low quality. If your business is in a good area, consumers will believe that your business provides high quality. Therefore, the perception provided by the location you operate in is very critical to how consumers view your business.
If you cannot afford to be in a good area, place your business wherever you can afford. Your customers do not necessarily have to come to your location. If meeting about services, you can meet them at a different location, such as their office or at a coffee shop. If they need to purchase products, you can do the same thing or you can offer online options, such as an e-commerce website.Take advantage of consumers wanting convenient options to choose from. This will actually help your business in the long-run as you are building towards growth.
8) How many employees will I need?
As you are just starting out, the money will most likely be an issue that has to be worked around. Therefore, you will not be able to afford the help that you would like. This means that getting everything done will be your responsibility starting out. The key is to plan for growth. Already have in mind the type of employee that will be needed when you reach a certain level.
The objective is to determine how many employees will be needed in the future. If possible, hire people part-time until your business grows enough for them to be employed full time. You can also offer commission-based pay. People will only be willing to opt into this pay structure if you have a product or service they can sell very easily.
9) What types of suppliers do I need?
Operating a business is a cooperation of mutual interest. This means that you will need the participation of other businesses in order for your business to operate successfully. Therefore, you must determine the type of services that you will need to outsource to other businesses so that you can have the necessary tools and resources to fully serve the needs of your customers.
Your suppliers can be anyone from office equipment to tasks that you cannot service yourself. While you will have to pay these suppliers, doing so allows you to focus on your core functions that produce money for your business. Contact your required suppliers to understand their terms, and see if you can negotiate terms that work best for both parties.
10) How much money do I need to get started?
Money is the most important factor for all businesses. The amount of money your business is able to generate determines the growth and longevity of your business.This is why you must determine the amount of money you will have to invest into your business to get it up and running.
The great thing about business today is that the internet allows you to operate a very lean business, which is ideal for entrepreneurs who are just starting out. The basic things that you will need to invest in your marketing and product or service development. You want to start making money immediately so that you can invest in the growth of your business. Do not budget for a fancy office and things that are not immediately needed. You need to solely focus on investing your money to generate more money. Anything else is obsolete in the beginning stages of your business.
11) Will I need to get a loan?
Getting a loan will be based on the investment needs that will be required to develop your products or services, and to keep your business afloat until you secure paying customers that support your business operations. This is why many people choose service businesses to start because they tend to require little investment and the overhead costs are low. Investment within a product based business is higher, and overhead since a product has to be produced and stored.
Try to seek investment from family or friends before seeking a loan. A loan will be harder to secure and you will need to put up personal assets as collateral since your new business has no assets itself. If a loan is required, only get as much is needed, and be sure you have a strategy developed that works towards paying the loan back in full within the stated time period.
12) How soon will it take before my products or services are available?
Do not believe that you have to wait for your products or services to be available before you start marketing your business. You want to get a head start and have customers in place before your business is started, rather than having to desperately chase after customers when you are officially open for business.
Communicate to your prospects that your products and services will be available at a certain date. This allows you to plan with your vendors your supplying needs that will have to be satisfied in order to meet your customers demands. Preselling allows for you to have the money in place to pay for product materials or further develop your services.
13) How long do I have until I start making a profit?
You must know the difference between profit and revenue. Many entrepreneurs confuse revenue with profit, which is why they are confused when they learn that their business is not actually making money, even though it is bringing in money.
Profit is the money left over after all businesses expenses are paid. Therefore, if your business’s expenses are very high, you will have very little profit and most likely be operating in a deficit. Cost can also be an inhibitor of profit. If you offer your products or services at a very low price, you will need to sell in huge quantities in order to just break-even, and narrowly squeeze out a profit.
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14) Who is my competition?
Never make the mistake of saying you have no competition. This is a statement of an arrogance of ignorance. Both will cause your business to fail before it even starts. All businesses have competition, both direct and indirect. Direct competition are those who operate the same exact business as yours. Indirect competition are those who operate a business that is not similar to yours but serves the same customers as your business.
You must determine who is your competition, and the level of threat that they pose. It is wise for you to determine the strengths and weaknesses of your competitors and how they compare to your own. This allows you to focus on what you do best, instead of trying to beat your competition at something they are far more superior at doing.
15) How will I price my product compared to my competition?
Product pricing is important because it develops the perception consumers have about your products. Many entrepreneurs try to undercut their competition with low pricing, which tends to backfire on them. Low pricing means you tend to get stuck in that price model, if you adjust your pricing higher, those customers will leave your business because they were loyal to your prices, not your business.
It is best to base your product on either quality or quantity. If you are focused on selling at a high price point to people who purchase based on value, then your pricing should be based on quality. If you are selling at a low price point to people who focus on the best price, then your pricing should be based on quantity.
16) How will I set up the legal structure of my business?
Your business must be incorporated in order for it to be recognized as a legally operating business. Doing so not only provides legal protection for your business, but also legal protection for you as the business owner. The business taxes you pay are also based on the type of legal structure that you choose.
The type of legal structures you can choose include Sole Proprietorship, Partnership, LLC, and a Corporation. There are pros and cons to each structure, so choose the one that best fits the scope of your operations. Word of advice. You do not want to provide products that can possibly cause harm to the customer and operate as a Sole Proprietor.
17) What taxes do I need to pay?
The taxes you pay will be based on the legal structure that you choose, where your business is located, and the profit and expenses incurred during the year. It is important that you keep a record of all your business transactions. You definitely do not want to have a lien placed on your business because of unpaid taxes.
If you cannot afford an accountant starting out, invest in accounting software. You want to cover yourself from any possibility of being accused of tax fraud. As your operations grow and become more complex, you definitely will need to hire an accountant.
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18) What kind of Insurance do I need?
All businesses need insurance to protect against any unforeseen circumstances that can occur. You will need to have insurance for yourself, insurance for your employees, insurance on your products, and insurance on any vehicles used by your company.
Having insurance coverage can be the difference between your business staying in business or being forced out of business. Do not look at insurance as an unnecessary expense, but more as an important invest for protection.
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19) How will I manage my business?
It is important that you understand the difference between working on your business and working in your business. The two differences will determine the growth trajectory of your business. As you are starting out, you will have to both work in and on your business. But as you grow, working in your business can stifle further growth.
As your business grows, you will need to become an actual business owner and not a manager. An owner sets the vision for their managers to develop goals and initiatives around. Managers are focused on getting tasks done and the owner is focused on expanding their business.
20) How will I advertise my business?
Your business will not be discovered by clients just because you have a great product or service. There are too many competitors in the marketplace that are battling for the attention of consumers. Therefore, you need to have an effective strategy that brings the necessary attention to your business.
Effective advertising will depend on a strategy of various actions. You will need to do both online and offline advertising. Invest in Facebook and Google ads for your online advertising. Invest in direct mailing and networking and trade shows for your offline advertising. Doing a mixture of both allows your business to reach as many people as possible.
Now that you have answered these questions, do you believe you have what it takes to become an entrepreneur? As you can see, owning a business is a lot of hard work. Before you even start your business you will need to do a lot of work to ensure that your business is developed to be successful. If you believe that you are ready to move your business idea forward, then be prepared to work very hard to build a successful business.
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Eric comes from banking background. He provides consultancy to local and foreign entities on the ideal market-entry strategies for setting up or expanding operations in Southeast Asia.
Eric also provides advisory to fund managers and family offices on structuring as well as applicable tax incentives. He has also set up many VCC structures for licensed fund managers.