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Congratulations: You've been bitten by the entrepreneurial bug. The way you see it, it's time to reap the rewards of running your own show.
Sounds like a good plan, but are you sure you're emotionally, mentally and financially ready for what lies ahead? If not, your dream business could quickly become your worst nightmare.
Just like people who take up a fitness program of stomach crunches and jogging to get into better shape, you'll have to figure out where you need to shape up as an entrepreneur. Where are you strong and where are you weak? And how will you work on your weak spots?
Think of this article as your personal fitness trainer--for becoming an entrepreneur, that is. We're going to help you measure your entrepreneurial fitness so you can get into tiptop emotional, mental and financial shape before you open for business.
1. Getting Emotionally Fit
Starting a business is like riding an emotional roller coaster with a loose seat belt. You'll wonder if you've made the right decision the moment it really hits home that you're generating your own paychecks now. You'll second-guess yourself every day. You'll ping-pong between feeling up and feeling down, sometimes within the same hour.
But the psychological baggage you'll carry around all day is only half the story: Friends and family will react to your decision to become an entrepreneur by dropping their emotional Samsonites on your doorstep, too. Maybe you're the first person they know who's brave enough to reject the W-2 lifestyle, and suddenly, they don't understand you anymore. Some people might refuse to see your new venture as a real job, feel jealous that you're willing to take a big risk when they're not, or delight in sharing horror stories of companies that went out of business. If they failed, you probably will too, right? Then there's the first time you'll hear your confused parents explaining your new life to others--or trying their best to explain it, anyway.
As a new entrepreneur, you could be "cutting yourself off from the family values you were raised with," says Ben Leichtling, founder of Leichtling and Associates LLC, a Denver management consulting firm. "You'll [hear] everything from 'I wish I had the courage to do that' to 'Have you seen a shrink?'"
The reactions of others will make you question both your business model and your sanity. On the one hand, you'll have to navigate the psychological undercurrents swirling around you. On the other, you'll have to get comfortable being the oddball in the family. Take an honest look at yourself. Is your self-confidence shaky? Develop a strategy for handling the criticism that will be heaped on top of your own insecurities, and think about how you'll stay positive about your business. It might be best to distance yourself from the pessimists in your life and lean on supportive people--other entrepreneurs who understand, for example--until you feel comfortable in your new role, Leichtling says.
Wondering if now's the right time to take the entrepreneurial plunge? We asked Cheryl Thompson, the author of Fire Your Boss! The 19 Secrets of Entrepreneurial Success to share her tips.
What if your spouse doesn't want you to quit your day job? In this case, it's hard to distance yourself. You'll have to pinpoint the fear--which might be anxiety about how you'll pay the bills, concern that you'll be spending less time at home or something else. Spouses on the outside looking in "aren't in touch with the upside, the dream or how there's risk to being a [full-time] employee today," says Paul Rich, a strategic business advisor in the Seigel Rich division of accounting firm Rothstein, Kass & Co. PC in New York City. Talk about your business plan so your spouse can respect your decision and see the positives, not just the negatives.
Next, envision everyday life as an entrepreneur: You'll be the only one at the water cooler. How will you confront feelings of isolation, uncertainty and trepidation in planning a whole day on your own? "It's difficult going from a paycheck to a project-based mentality," says Judith Dacey, CPA and owner of Small Business Resources Inc., an accounting firm in Orlando, Florida, that works with start-ups. "The hardest person to manage is yourself."
Block out a whole work week on paper, just for practice. For example, you might allot two hours every day for marketing, another few hours for sales calls, a lunch break and so on. Before you know it, you'll find structure to your day, and becoming a full-time entrepreneur won't be such an emotional shock. Diving into a swimming pool is a lot less painful when there's water in it. "Being an entrepreneur is the hardest job there is in life," Rich says. "You want to go positively to where you're going."Emotional Fitness Checklist
To be emotionally fit as a new entrepreneur, you should be able to answer yes to these 10 statements:
- I can bounce back from failure and disappointment.
- I'm a self-starter who can work alone.
- I'm comfortable with uncertainty and risk.
- I complete every project I choose to take on.
- I come through for people without failing them.
- I'm able to hold my ground without caving in to pressure.
- I can confront and resolve problems.
- I can make final decisions amid uncertainty and conflicting advice.
- My family understands my decision to start a business. They also realize that they will be a part of the business.
- I can remain confident when others don't understand me or my vision for the business.
2. Getting Mentally Fit
Unfortunately, it's not enough to feel good about yourself. To succeed as an entrepreneur, you also have to know your stuff. While nothing equals work experience in the industry you're entering, getting book smart--reading books and articles and taking seminars--can help you mentally prepare for the challenges ahead. "Take as many seminars as you can," says Kenneth Goldberg, director of the Center for Entrepreneurship at National University in San Diego. "What you don't know can hurt you."
An MBA will teach you how to be a CEO, but it might not teach you everything you need to know about the start-up phase. To fill in your knowledge gaps, check with your local chamber of commerce, SBA office and Small Business Development Center (SBDC) for free or low-cost seminars aimed at start-ups. Don't forget community colleges and universities, which are a great and sometimes underused resource offering networking opportunities, seminars and guest lectures that explore business trends and issues.
A big part of getting mentally fit will revolve around your business plan, a research tool that makes you think about your business concept in-depth, from your product and service to your customer and sales projections. As you write it, you'll dig deep to discover your competitive advantage, your competition, barriers to entry and the customer base you're targeting. Your business plan "should be a compelling discussion," Rich says. "It's a sign to see if you've done all your homework." Not to mention a confidence-builder.
If you don't have a mentor, find one. It's important to have a seasoned pro in the wings who will take an interest in your idea and be there to listen and offer advice. A good mentor will evaluate your business plan and act as your coach during the start-up phase. "Next to evaluating your business plan, a mentor is probably the most important thing," Goldberg says. Your business mentor might be a professor, someone at the SBDC, someone with the Service Corps of Retired Executives (SCORE) or a successful entrepreneur. "Most successful entrepreneurs want to share their knowledge with people," Goldberg says. "It may lead to new business for them, too."
Finally, take the time to learn the lifestyle of your chosen industry, not just the business, says Mel Chasen, an entrepreneur and the author of Entrepreneurship Made E-Z (Made E-Z Products). Make lunch appointments with five successful entrepreneurs in the industry you're pursuing to learn what they went through during the start-up phase. What was a typical day like during their first year in business? How many hours did they put in, and how did they stay motivated? What mistakes did they make that you can learn from? How did they adapt early on to changes in the market?
"You're making a transition. You know the field and the industry, but you don't really know the lifestyle, the downtimes, the depression," Chasen says. "[By learning this], you'll start with a whole plan for how to do things and avoid the mistakes."
|Mental Fitness Checklist|
|If you can't answer yes to
these 10 statements, you will need to boost your mental fitness:
3. Getting Financially Fit
Getting in shape financially is easier said than done: A Nationwide Financial/TechnoMetrica survey of 501 small-business owners conducted in February 2003 found that only one-third felt they had been prepared financially to start a business. You don't want to become a statistic, and you don't want to be turned down for financing because you look too risky to investors. So how do you get financially fit to be an entrepreneur?
It starts with a look at your personal finances. Sit down and estimate the impact of the business on your family's personal finances for the next three years, then work out a new household budget. Make sure your family understands how they will need to sacrifice for a few years as the business grows. Do this now, not after you start your business. "Cut your personal expenses down to the bone," Chasen says. "Be prepared to take as little out of the business as you possibly can so you allow it to flourish."
Credit card debt makes you look like a risk, so get rid of it or at least minimize it, says Mike Sherman, an SBA loan officer with CornerstoneBank in Atlanta. Credit card debt "is just that much more money taken out of the business to sustain a lifestyle," he says. "It looks better when [a start-up] comes in to borrow money and they have no personal debt." If you're overextended on your credit cards, consider consolidating all this debt, possibly into a mortgage on your home. "Get that monthly payment as low as possible," Sherman suggests.
The majority of start-ups Sherman lends to are franchise operations, which are safe bets from a banker's perspective. But the few non-franchised start-ups he's funded over the years have a few things in common. First, these entrepreneurs have good, in-depth business plans and solid presentation skills. Second, they have attractive equity--a good home and so on--and bring their own cash to the table, anywhere between $10,000 and $20,000 to secure a $100,000 bank loan, for example. "If they're serious about getting into business, they have to make sure they have cash available to put into the business," Sherman says.
Lenders will run your credit report before you've warmed the chair across from them, so having a good credit score is essential. Get a copy of your credit report before you approach lenders. That way, you can anticipate questions they'll have about late payments, collections, judgments and so on. If you have a business partner, answer the hard questions--who will be majority stockholder, for example--before you seek funding. Professional advice from an attorney or a CPA looks good to bankers, too. "It makes me think [the entrepreneurs] know what they're doing," Sherman says. "All these things should be worked out between two parties before they come to the table."
Taking the time now to assess your emotional, mental and financial fitness will make you stronger for what lies ahead. With a little bit of thought and planning, you'll find that your dream business can turn out exactly as you dreamed.
|Financial Fitness Checklist|
|If you can't answer yes to
these 10 statements, you will have to work on your financial