BY KEISHA JOHNSON
With the tenuous nature of today’s job market and the ease of starting a business in Canada, the number of persons entering entrepreneurship remains robust with thousands of new small businesses registered annually.
Entrepreneurship is new terrain for those who have always been in someone else’s employ and often requires a different mindset, work ethic and resilience to thrive even if you were an intrapreneur in another organization.
Statistics Canada indicates that 51% of new businesses in Canada fold after five years. How do you position yourself among those who succeed?
There are many factors to consider. A timeline approach suggests, doing your due diligence at the outset, continuous assessment to keep abreast of changes in your marketplace and innovation to remain relevant to your customers and stakeholders.
Let’s explore due diligence. Abraham Lincoln said “give me six hours to chop down a tree and I will spend the first four sharpening the axe.” Preparation is key to your success, yet many new entrepreneurs in their zeal to start a new venture neglect to complete the necessary due diligence which is the foundation on which you build.
Intuit Canada’s 2015 Small Business Landscape study shows 69% of new Canadian entrepreneurs launch their business within six months, which suggests a rush to market with not much research and preparation. Additionally, 62% of small business owners started their business without a business plan. But if you fail to plan, plan to fail.
Due diligence starts with a candid assessment of yourself. As the main driver of the business, do you have what it takes to be an entrepreneur? Are you a strategic planner, focused and disciplined, creative, innovative, an effective negotiator? Do you project a positive business image? Can you rally an excellent business team? These are some of the traits of successful entrepreneurs suggests Robert Sterling a lecturer at the KCLI Business Institute.
The best advice I have heard to date is to manage yourself well first before taking on operating a business. In other words, the habits you form in managing your personal finances, time, relationships and priorities will carry over to your business. If you struggle with tardiness or indiscipline in any of these areas, it will impact your bottom line and your viability. Be honest with yourself. Know your strengths and weaknesses and where you need to improve or seek assistance.
Next have an understanding of the external environment in which you will operate, the feasibility and viability of your business proposition and the internal and external factors peculiar to you and your industry that could impact your competitive advantage in the marketplace.
Three available tools to help you make these determinations are the Political, Economic, Social and Technological (PEST) analysis, Feasibility study and SWOT analysis.
A PEST analysis tests your potential for success against the realities of the macro/global environment. The Feasibility study gauges the viability of your business proposition and whether it is worth executing. While the SWOT assesses your competitive advantage and the scope to thrive in the marketplace. Before you outlay money to start your business consider each of these in relation to your line of business.
Use the PEST analysis to verify such issues as: What is the state of the political environment and how supportive is it (policies, legislation etc.) of my business survival? How stable is the economic climate and what factors in the economy could make or break my business? What are the social trends that influence or impact my type of business? What impact does technology have on my competitive advantage and how may that affect my business success and future growth?
Secondly, since cash flow is king and turning profits is likely very necessary for growth, you need to know the likelihood of your business to generate a return on your investment and by when? Will the business provide sufficient and sustainable cash flow to cover your expenses, keep the business going and growing? A feasibility study will help you to make these determinations as well as identify the risk tolerance of your business and whether you are able to meet or surpass your intended goals. Every business encounters risks, the important thing is to mitigate these well.
Finally, conduct a SWOT analysis to identify your strengths and weaknesses and the available opportunities and looming threats in your marketplace. Strengths and weakness are internal to your organization. Your strengths are all the things you do better than your competitors. Where you can’t match or outpace the competition consider this a weakness. Threats are the external factors that could limit or retard your competitive advantage. Opportunities are favourable external conditions you could take advantage of to strengthen your competitive edge. The priority is to ensure that your strengths are more compelling than your weaknesses and that you can maximize the available opportunities and minimize or eliminate the threats.
In the final analysis, the quality of your due diligence will determine your potential for success. Therefore, match the zeal for your new venture with relevant knowledge before launching into entrepreneurship.