SelfInformed

July 2016


Guide For Blooming Entrepreneurs:

Wednesday, July 27, 2016

How to Avoid Wilting in the Heat


If you are reading this article you probably already recognize some of the advantages of owning a small business or micro business or being self-employed. Entrepreneurship is by no means easy and it’s not for everyone; but it has some tangible and intangible benefits for those with the right mindset and something good to bring to the marketplace.

In this article, we will discuss some of the motivations that drive people into starting a business. We will also discuss ways in which you can continue building a business into the long-term success that all entrepreneurs hope for. At The National Association for the Self-Employed, we know that knowledge in the hands of small business owners is a powerful tool for both the business community our economy.

And we are not just saying that to promote our own agenda, the data from the US Census Bureau backs it up!  The number of self-employed and small businesses is growing steadily.  Over the last ten years, self-employed individuals has grown 2.36%. Over that same time, small businesses with fewer than 10 employees has grown 0.09%.  Though the growth is certainly smaller, it is still positive growth; whereas small business with 10 to 99 employees has shown a negative growth rate.

Since the boom years and the early days of the subsequent recession beginning around 2006/2007, only two segments have shown to expand.  The most recent data suggests that the self-employed and businesses with over 500 employees have greater numbers now.  Small businesses with between 1 and 499 employees all had peak numbers in 2006/2007.

While you may hear anecdotally that being self-employed is great, we can confidently say that the data confirms just how many people are transitioning to self-employment.

WHY START YOUR OWN BUSINESS?
There are so many good reasons for starting a business. In a June 2014 article, Mike Templeman in Entrepreneur offered 20 Reasons to Start Your Own Business. While the author noted that financial independence may be the most widely-held reason for starting a business, he also noted some other reasons that are equally important. 
One reason noted for building a business was to develop new skills. This is often unintentional. Imagine something challenging that you’ve learned in life—like driving a car or working with new software. When you first started using them were you really good at it? Honestly? With time we improve at driving or running that application. It’s the same with building and growing a business. You learn new skills all the time and you just get better and better as you perfect those new skills; and you and the business become more valuable in the marketplace.

The other standout reason from the Templeman article was what he called “doing good.” Templeman noted, “While this isn’t exclusive to entrepreneurs, it’s definitely a perk. You control where your company profits go and if you choose, you can give [or] allocate your financial gains to others. You can sponsor a charity, a non-profit or just personally give back to the community. This is quite honestly one of the best parts of being an entrepreneur.”

GOOD PRODUCTS AND SERVICES MAKE GOOD BUSINESSES
From the operational and financial perspectives there are some other very good reasons for starting a business that go directly to your bottom line.

Not only are these three good reasons for starting a business, but these items should also be addressed in your business plan to ensure the success of your venture:

Demand – You have a product or service that the customer needs; or a market can be easily created. There is a desire for and a social benefit to something you have 
to offer.

An efficient marketplace – For your specific product or service, there are usable mechanisms in place in which to promote, market, sell, deliver and track sales in a cost effective manner.

Revenue Over Cost – There is a high potential that once up and running, the business can generate revenue and manage its costs in a way that creates adequate margin and total profit. Selling product isn’t enough; you have to make money at the end of the day.

THE FIVE-YEAR WALL
Even the most successful entrepreneurs will tell you that they are not immune from business failures. The reality is that all businesses need to plan for the short- and long-term; and managing your way beyond the first five-years in business takes a good amount of skill, tons of hard work, and a bit of luck.

Developing a good initial business plan and your ability to adjust to challenges and adversity will prove essential. As previously mentioned, being a small business owner is not for everyone.

However, survivability rates for new businesses are better than some would imagine. According to the US Small Business Administration (SBA), “About half of all new establishments survive five years or more and about one-third survive 10 years or more. As one would expect, the probability of survival increases with a firm’s age. Survival rates have changed little over time.”

The charts below are from the SBA’s FAQs:

FRANCHISES AND THE MOM AND POPS
While the old-fashioned “mom and pop” business might be a vestige of the past, it may not be as bad as it seems. As it turns out, mom and pop were self-employed entrepreneurs all along.

Not only do family businesses still thrive as stand-alone entities today, but many franchises are also owned by family partnerships.

Franchises are also a viable option for micro business owners, investment consortium and other partnership structures as well as family businesses. The SBA estimates that there are more than 600,000 franchises operating in the US, many owned by small business people.

The US Federal Trade Commission (FTC) has an excellent webpage and documentation that anyone considering a franchise opportunity should check out. Information covered includes the franchise business model, selecting a franchise, franchise documentation and things you should know before you sign a franchise agreement.

RESOURCES & INFORMATION
While it can be tedious and hard to quantify, research and information will certainly become part of the backbone of your business if it is to last beyond five years. From daily news and other journalism, academic research, government data, to what you learn from colleagues and even your competition, it all contributes to your ability to succeed as a small business owner.

Check out these useful web resources to help you acquire greater knowledge and the confidence to start, build and grow your own small business:

The Small Business Administration’s Starting & Managing a Business Website offers data, information, news and research for those starting and operating a small business.

The SBA’s Loans and Grants page provides information and links to public financing opportunities for small businesses.

The US Office of the Controller of the Currency (OCC) provides access to more than a dozen resources for small business owners:

The disability.gov website has resources to assist those with disabilities start their own business; and the information is good for anyone interested in starting a business.

The US Federal Trade Commission (FTC) Franchise Website: A Consumer’s Guide to Buying a Franchise.

The US Census Bureau Newsroom offers archived and current economic and business news from a research and data-driven perspective.

The Internal Revenue Service Small Business and Self-Employed Tax Center provides valuable information for both new and established business owners.

4 Comments

  1. 4 Kevin Camden 01 Aug
    I want to have my own business. 
  2. 3 Zachary Cole 08 Aug
    I am an avid reader who likes engaging content. That's why I am here. Your original views on this topic are refreshing and interesting. You've done a great job of expressing your views. Thank you.
  3. 2 David 22 Aug
    This article was very inspiring to readers. 
  4. 1 sarahedward 21 Sep
    Awesome.  Thanks much!

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