Thinking of Starting a Business? Are you an Entrepreneur? - Take Stock
Deciding Whether Entrepreneurship is Right for You
From Tapping Your Inner Entrepreneur, by Diane Sears, in NAWBO's Entrepreneurship Trilogy
Why do women start businesses? What motivates anyone to dive into entrepreneurship with her heart and soul? How do you know whether business ownership is right for you?
The answers to these questions are as varied as the 10.6 million privately held businesses in the United States that are at least 50 percent woman-owned. These businesses generate $2.5 trillion in sales and employ 19.1 million people, according to the Center for Women's Business Research in Washington, D.C., founded as the National Foundation for Women Business Owners. And each woman business owner has her own story.
Tracie lost her job in a dot-com layoff. She started her business almost by accident when a partnership with her sister fell through and she was left as sole proprietor. She struggled for a few years. Then she found her groove in the industry.
Lisa and her boyfriend decided in college that they'd like to own a business someday. So they got married, graduated, and went to work for other people, saving his salary and living on hers. Several years later, with their start-up capital and a business plan in hand, they opened a restaurant.
Laura and two friends put their heads together for more than a year to draft a business plan for an imaginary company. One day they asked themselves whether they were doing it just for fun or really serious. They said goodbye to their corporate jobs and started a financial consulting firm as partners.
Janie quit selling petroleum for someone else's company because she knew she could do it better on her own. Her corporate experience had given her a well-rounded education of the industry, as well as skills she needed to operate a successful business.
Sheila had moved up the corporate ladder as far as she wanted to go, and one day she knew it was time to quit and start her own business. Today she's taking her company to new levels that challenge all of her skills.
Jacqueline entered entrepreneurship when her youngest child started school. As a partner at a prestigious law firm, she represented several major corporations. One of them made her an offer too good to refuse and she returned to corporate life as vice president of a worldwide franchise company.
What will your story be? If you're thinking of starting your own business, you're in for a journey of self-exploration. The good news is that many, many people before you have tested the waters, and you can learn from their experience.
You'll find some of their stories outlined in this book, along with statistical information, expert advice and checklists to use as guidelines as you explore a possible new career.
Entrepreneurship in the United States is so widespread today that it's "as common as getting married or the birth of a baby," according to the Ewing Marion Kauffman Foundation in Kansas City, Missouri.
Actually it's more common. About 10.1 million U.S. adults are trying to start a business at any given time. Some are working in teams, so the number of businesses in formation is about 5.6 million, the Kauffman organization found in its 2002 report "The Entrepreneur Next Door: Panel Study of Entrepreneurial Dynamics," published online at www.kauffman.org. By comparison, at the time of the study, the nation annually recorded about 3.9 million births and 2.4 million marriages.
You're just as likely to start a business when you're in your late 20s as you are in your 30s, 40s or early 50s, the study shows. If you're involved in starting a business right now, you're among about 4.5 in every 100 women in the United States. That compares with 8.1 in every 100 men - or an average of 6.2 in every 100 adults.
The West and the Mid-Atlantic have higher ratios of women-owned businesses than the South, the Plains and the Midwest.
California, New York, Texas, Florida and Illinois together account for 38 percent of all firms owned by women nationwide.
States with the highest percentage of women owned businesses are the District of Columbia, New Mexico, Maryland, Colorado and Oregon. Those with the lowest: Mississippi, Wyoming, North Dakota, Arkansas and South Dakota.
Why Women Start Businesses?
If you're working for someone else right now, how does that figure into your decision? Let's look at why other women in the United States leave their workplaces to start businesses.
It's not necessarily because they lost their jobs and can't find employment. Business owners are more likely to spring from the ranks of those who are working full time or part time for someone else. The Kauffman study, which included both genders and all ethnic backgrounds, shows 8 percent of full-time workers and 7 percent of part-time employees start businesses, compared with 5 percent of people who are not working for someone else, including the unemployed, students and homemakers. The rate drops to 1 percent for retirees over age 65.
But what about women in particular? According to the Center for Women's Business Research, an overwhelming majority of women who start businesses - 45 percent - say they're seeking independence. They want to be their own boss.
- 22 percent believe they can fill a need in their industry;
- 19 percent want to earn more money to support their families;
- 16 percent inherit a business;
- 14 percent are seeking personal growth;
- 12 percent start by collaborating with a relative or friend;
- 10 percent capitalize on an opportunity; and
- 8 percent say they need more flexibility.
- Only 7 percent are trying to replace a job they lost.
The truth is, many factors go into a woman's decision to start a business, our experts say. In an economy dragged down by the burst of the technology bubble and then the September 11, 2001, terrorist attacks on the United States, thousands lost their jobs and vowed they'd never again depend on someone else for their financial security.
Others simply have taken advantage of advances in technology. Going into business for yourself was more complicated before the 1980s. But today the Internet makes it possible to create virtual workplaces and conduct transactions all over the world. It's so easy to start a business today that more and more people are doing it.
And as more women make inroads into entrepreneurship, they pave the way for those behind them to gain easier access to bank loans, angel investments, venture capital and other sources of financing for emerging and growing businesses.
Are You Ready?
What does it take to be an entrepreneur? As assistant state director of Maine's eight Small Business Development Centers, John Entwistle at the University of Maine has addressed this question quite a bit in recent years because of layoffs in the thousands at paper mills and high-tech firms. With no real employment opportunities in sight, hundreds of unemployed workers have come to SBDC offices to explore the idea of starting their own businesses.
"What I look for initially," Entwistle says, "and what I consider a primary indicator of success in starting a new business, is that people start off in an arena they're familiar with. That means it has something to do with their prior work experience."
For instance, if you worked in a billing department before, it may make sense for you to start a billing company. If you worked in a marketing department, it would be logical for you to start a marketing consulting firm.
"Having worked in that arena and had that experience, they're more likely to be able to identify opportunities that might exist and may know better how to take advantage of those opportunities. They also know the structure of the industry, who the players are, what the costs of operation are, who the suppliers are. That's very important."
If that's not an option, Entwistle says, then look for an industry that sparks your interest.
"With all the effort and sacrifice required in starting a business, people are unlikely to stick with it unless they have a passion for what they're doing," he says. "We look for that fire in the belly, that thing that is going to carry them through the difficult times they're bound to encounter."
Difficult times? Yes, Entwistle says. Make sure you enter entrepreneurship with realistic expectations. Don't consider self-employment as a last resort because you've been laid off. You won't be happy unless you go into business ownership for positive reasons.
"People come in with a few goals in mind," he says. "They want to be their own boss, they don't want to work for somebody else. They want to have control over the hours they spend. They want to have the upside of the lack of a ceiling in terms of compensation. I counter those thoughts by pointing out that you may be exchanging one boss for many bosses in that your customers, your vendors, your suppliers all become people who demand things from you.
"Typically the hours an individual puts in are 20 or 30 percent more than one might work in a 40-hour-a-week job. People who are self-employed generally put in 50, 60 and sometimes 70 hours a week. There is the downside of often not being able to pay yourself at the rate you're accustomed to being paid, not being able to take advantage of fringe benefits and health insurance. Often there's no safety net of unemployment insurance because you're not paying into the system if you're working for yourself. The downside is substantial.
"What I do look for people to say is, 'Well, this is something I've always wanted to do,'" Entwistle says. "Those words suggest the fire in the belly."
Not everyone is cut out for operating a business. How do you know whether you are? The U.S. Small Business Administration offers these questions for helping you evaluate your strengths and weaknesses when it comes to entrepreneurship:
- Are you a self-starter?
- Are you willing to invest 50 to 70 hours to run a business?
- How good are you at making decisions?
- How well do you plan and organize?
- Do you have the stamina to run a business?
- Do you have a product or service that is in demand?
- Will your business offer an advantage similar businesses do not?
- Who are your competitors?
- Are you willing to risk your life savings on your business?
- How will the business affect your family?
- Do you have a source of financing, either from your own money or from family members, friends and associates?
- How well do you get along with different personalities?
SBA counselors say you should be able to give positive answers to most of these questions. If not, then reconsider whether you really ought to go into business for yourself. You can find more information online at www.sba.gov under the "Starting Your Business" section or in the SBA's free Small Business Resource Guide publication for your region, available through your area SBA office.
The Georgia State SBDC also offers an Entrepreneur Risk Assessment Quiz online at the SBDCnet Small Business Development Center National Information Clearinghouse, http://sbdcnet.utsa.edu, under the "Getting Started" section.
Before you invest major time, money or effort into any business idea, the experts suggest you take some preliminary research steps and think about these areas:
Business criteria - What kind of income could you earn from this business? Would you be a working owner or absentee? Does this business sound fun and interesting to you? If you did start it, could the business be easily duplicated if it were successful, giving you room for expansion? Can the business be branded? Can it be systemized? Are there ways you could eventually produce other streams of revenue by branching out from the core part of your business?
History - Is someone else already doing what you want to do? If not, there's probably a reason. Is there no market for it? Is the timing wrong?
Finances - Do you have resources for funding the start-up phase of your business? If so, how long will those resources last? If you don't have the money in your bank account, do you have access to a second mortgage? Family backing? A line of credit? If you haven't even thought about this, you could be in trouble already.
After the initial research, it's time to take more concrete steps: choose an industry and a niche; write a business plan that includes a marketing plan; put together an action plan and a flowchart; and make sure you're financially prepared for your new venture. These will be discussed in Chapters 2, 3 and 4.
For more information about starting a business, read Taking an Idea to Market: How to Turn Your Vision Into a Successful Business Venture by Molly Tschida Brennan, published by NAWBO in 2004.
- Start saving your ideas in a notebook where you can keep track of your work, to make sure you don't forget any flashes of brilliance or skip an important part of the process.
- Examine your reason for starting your business. Are you genuinely excited about entrepreneurship? Or are you running from something or someone at your job?
- Quiz yourself with the questions recommended by the U.S. Small Business Administration. Did you answer a majority of them positively, indicating you may indeed be cut out for owning a business?
- Visit the SBA's website at www.sba.gov and read the information about starting a business. Take the quizzes under the "Are You Ready?" section of the "Startup Basics" area.