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The following post is by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has a background in both accounting and the mortgage industry.
At one time or another, nearly everyone entertains the idea of having their own business. Sometimes, it’s motivated by dissatisfaction at work, the loss of a job, the lack of opportunity in your field, or maybe by a slick TV infomercial—you know—the ones that promise easy riches without having to do a whole lot of work?
Any of these can be the spark that ignites the flame of desire to be an entrepreneur, but is desire enough to guarantee self-employment success?
I think desire is an important motivator—you have to want something badly to make the wholesale changes that self-employment will bring. But, desire alone won’t make a business a success. There are certain skills and personal qualities needed not only to make a business profitable, but also to sustain it over a lifetime.
What are those skills and personal qualities?
You have the ability to deliver the promised products or services
One of the biggest reasons so many new businesses fail so early on is because the would-be entrepreneur knew close to nothing about the business he or she got into. They may have bought into a franchise, acquired a business they knew nothing about, or took a flyer on something totally new.
What ever business you go into, you’ll need to have expert status or something very close to it. That’s the only reason anyone will do business with you at all.
Competition is heavy in nearly all businesses today—you won’t make it as a trainee.
Make sure the business you choose is one where you have strong knowledge and solid skills. You’ll have to be able to convey confidence in what ever it is you’re offering. If you feel you’re lacking in this area, take courses and/or get a part-time job in the field and get the necessary training and experience before you strike out on your own.
You have a high risk tolerance
When you work for someone else, there are two risks you never face, and they’re huge. One is that as long as you work, you’ll get paid. The other is that you don’t have to invest capital into your employer in order to earn your living. It’s literally a cash-and-carry arrangement.
When you’re in business for yourself, neither of those conditions exist. You’ll almost certainly have to invest upfront money in the business, and it may be many months of hard work before you turn your first profit. Should the business fail you’ll lose both your invested capital and the time you put into the business. And it doesn’t stop once the business is up and running.
You may have to invest more money in order to grow the business, consider entering into partnerships with others, or hiring people and trust them to run parts of your business. There are risks in all of that, and you have to be prepared to take them and live with the consequences.
You’re a certified self-starter
When you work from someone else, you typically have a job description. Each day you know roughly what it is you’re supposed to do, and if you don’t, your boss is there to remind you. When you work for yourself, there’s no job description, and no boss. Each day is an open schedule that you need to fill with productive activities. In order to do that you have to be a self-starter—a person who doesn’t need to be told what needs to be done.
You’re a natural at multi-tasking
Entrepreneurs tend to wear the “chief-cook-and-bottle-washer” label, at least when the business is in its early stages. Since cash flow will be slim, you probably won’t be able to hire others to share the workload with. You’ll handle everything from sending correspondence to making sales presentations to troubleshooting business transactions that go sour. You need to be able to balance it all with some level of ease.
You have sales skills or marketing skills
Earlier, we covered the need to be able to deliver on your products and services, and as important as that is, equally important is your ability to market those products and services.
While we often think of sales and marketing as one-in-the same, they’re actually different functions. Marketing is getting exposure for your products and services. It can include the ability to market through the Internet, direct advertising or affiliate selling. It’s the process of getting customers to come to your business, website, email or telephone.
Sales can be thought of as a combination of face-to-face marketing—a skill not everyone has—and the ability to close a sale to a customer that your marketing campaign brought in. When you’re self-employed, it’s best to have both marketing and sales skills.
You have above average money management skills
One thing you won’t have when you’re self-employed is a steady paycheck, at least not at the beginning. You have to be able to survive without it, in addition to the ability to come up with cash for both contingencies and business expansion. To do that, you’ll have to be able to get the most out of a little bit of money. This will be true even if you have considerable upfront capital. You’re ability to stretch your money will be one of the most critical skills as a business owner.
You’re a strong negotiator
You’ve heard the term “buy low, sell high”? That’s the fundamental job of every business owner. Whether you’re selling your products and services to customers, or buying supplies and services from vendors, you’ll have to have strong negotiating skills to maximize your income.
When you work for someone else and it comes to money, as the saying goes, “it is what it is”. When you work for yourself, it is what ever you can negotiate. The better you are at negotiating, the higher your profits will be.
If you’re thinking of starting your own business, think hard about your ability to handle the skills above—you’ll need them all. Or you might decide that working for someone else isn’t so bad after all!
How about you all? What other skills do you think are important in order to be self-employed? Which skill is THE MOST important of all the rest?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/shimelle/877913815/sizes/o/in/photostream/