Making the decision to start your own business is a major commitment, with huge implications for skills and lifestyle. Yet there is no standardized testing or certification required or available anywhere to help you decide if you are a good fit for entrepreneurship, or founding a business is right for you. An MBA or other academic credentials just don’t do it.
Therefore, the least you can do is take advantage of some of the self-assessment tools and guides around, like the classic book “The Entrepreneur Equation,” by Carol Roth, which highlights personal characteristics and skills required. Someday, I expect there will be a more formal certification required, like lawyers and accountants have to pass, to hang out their shingle.
Until that happens, I recommend that you consider the following ten mindset checks from Carol and others on your business aspirations, before you step in so deep that it’s hard to back out:
- Critically assess your motivation. Are you bored, wanting to be free of a boss, or eager to showcase a hot technology? These are not valid reasons to start a business. But if you’re focused on solving a real problem, believe you can do it better than anyone else, and confident in wearing many hats, you have the right start-up mindset.
- Say hello to multiple new bosses. When you start your own business, you are no longer in control. You will likely not have the freedom you dreamed of. You will be controlled by your customers, investors, lenders—and you are personally responsible for answering to all of them, all of the time.
- Evaluate how well you work with others. Many people dream of opening a business as an escape from annoying coworkers and overbearing bosses. But now you have to interface with even more people, including accountants, lawyers, as well as clients and team members. You need to be comfortable with people and have sharp people skills.
- Add up your responsibilities. Owning a business is very much like raising a child. It’s a 24/7 job. If anything happens to the business (including a loss of income), how will it affect your family or home life? Remember, the buck always stops with you.
- Look at your management and industry experience. Being able to manage employees and vendors is the type of skill assumed before starting your own business. You’ll also need to know your industry inside and out. It helps to work in a similar company before you start your own.
- Take stock of whom you know. Business comes down to not what you know, but whom you know. Good connections are worth their weight in gold. They will get you interest from investors and lenders, and you will receive better financing, prices, terms, and conditions from business suppliers and professional services.
- Be honest about your relationship with money. Don’t expect your relationship with money to change just because you’ve opened a business. Opening a business requires money, as well as sound financial management. Do you panic about spending money or avoid financial risk at all costs?
- Assess your personality type. If you are a person who likes stability and control, or if you prefer when things go as planned, the roller-coaster ride of a new business may not be right for you. Every new business has highs and lows, and plenty of the unexpected.
- Examine the marketplace and your competition. To brand your business and woo investors, you’ll need to understand why and how you can outshine competitors. Both good and bad competitors will influence how successful your business will be.
- Test your scalability. Successful businesses rely on automation and delegation. Will you be able to teach other employees to do your work? If your business relies on your brain and skills alone, you might have a successful job, but not a successful business.
Please don’t take these steps as being too negative, but do remember that the risks are high. Statistics say that the failure rate for new businesses within the first 5 years is as high as 90 percent. That should indicate that a lot of entrepreneurs get more than they bargained for. Think twice before you invest your precious time, money, and energy, and then go for it!