Working out your business potential
Deep down, most of us know how large we would like our business to grow. Bigger is not necessarily better – although often it is!
As you plan to turn your business idea into reality, there are two aspects of business potential you need to consider – income and value.
The starting point for most entrepreneurs is to work out how much they need to earn now and want to earn in the future. When you start your enterprise, it will take a while – perhaps months or years – before your earnings overtake the wage you’d get as an employee. Once you pass that point, your income can keep growing; something less likely to happen if you have a job!
What you need to work out is how much more you can earn working for yourself than you would if you remained employed. Even if you are not currently working – for example, because you are raising a family – entrepreneurship has to stack up financially against the alternative of getting a job.
Factors you need to consider when calculating the income potential of your new enterprise include:
• the potential market for your products or services;
• the cost and time involved in setting it up;
• how much you can do yourself and how much will require staff or subcontractors;
• how competitors will react to you entering the marketplace;
• how quickly you will find you feet and feel comfortable growing your business.
Building value into a business is where the experienced entrepreneur can score over the newcomer. Although a successful business can give you a good income and lovely lifestyle, building a business with a view to eventual sale is really the name of the game.
To think about selling your business before it has even started may seem strange. It is, however, vital to create a business that builds value and can, at the earliest possible time, continue to grow without your involvement.
Factors you need to consider when calculating the value potential of your new enterprise include:
• intellectual property such as patents and trademarks that can be protected;
• momentum created by an increasing number of customers making repeat purchases;
• opening up a new market in such a way that a large competitor chooses to buy your business rather than compete with you.
It is also important to realise that your business potential is not limited by your own skills or abilities. You simply have to be able to recruit, motivate and manage people who have the skills, abilities and perhaps contacts that your business needs. It is often said that a good entrepreneur is somebody who hires people brighter than themselves. Just because you want to start a business, it does not necessarily follow that everyone else wants to do so, too. One of the paradoxes of enterprise is that sometimes people prefer to grow a business as an employee rather than have the headache of being their own boss.
Top tip: If you want your business to grow beyond your own abilities, you have to employ people better able and perhaps even brighter than you.
Of course, it’s also important to learn what you don’t know yet. Building your skills builds the potential of your business.
Taken from 'How to Start Your Own Business; For Entrepreneurs'