Many people, both in Hong Kong and around the world, dream of starting a business. But not everyone is cut out to do so. We talked to Melinda Emerson, known as SmallBizLady and author of Become Your Own Boss in 12 Months, about what it takes to successfully start a business.
Small Business Center: In your book, you spend some time urging readers to truly determine if they’re cut out for entrepreneurship. Are there people who don’t make good entrepreneurs? What qualities do they have or lack?
Melinda Emerson: Not everyone is cut out to be an entrepreneur. Some people need more structure and only one job to focus on. Small-business owners crave and need control, freedom, or to feel creative. They see a better way to do things, and tend to not be satisfied with the status quo.
If someone doesn’t have 12 months to start a business, what are your top three recommendations to fast-track the process?
Look at what you know that you can sell. Invest your initial marketing money in a great website and blog. Focus on using just one social media site to drive traffic back to your website.
What if the thing that someone is passionate about isn’t a moneymaker? In other words, is building a business around your passion always a good idea?
No, passion is an overused word in business today. You must make sure your business is solving a problem people are willing to pay you to solve. In other words, make sure your passion has a profit center before you turn it into a business. If you bake great cakes, that does not mean you know how to run a bakery. You need to make sure you know you can charge enough to make a profit. Otherwise, it might just be a great side business at holiday time for some extra shopping money.
What are the top questions people should ask themselves before starting a business? What do they need to sort out before diving in?
Do I have a solid business idea with a paying customer? You must make sure there is a marketplace for your business. Do I have the energy and discipline to launch my business? In the early years of a small business, workdays can easily be 12- to 14-hour days. Examine your work habits. Your first office will probably be in your spare bedroom. Can you handle working from home? Your new business will consume all your spare time. Do I have any competing priorities such as young children or aging parents? Do I have enough savings to leave my job to start a business? The money to start your business will come from your personal cash reserves.
What are a few of the pitfalls you’ve seen entrepreneurs make when first starting a business?
There are five reasons why small businesses fail:
- New entrepreneurs don’t have a realistic plan for how hard it is to run a small business startup.
- They don’t have a strong personal network to get referrals, which is key since people do business with people they like, know, and trust.
- They don’t save enough money before they launch, which causes constant cash flow issues.
- They chase anyone they think has money instead of focusing on a niche target customer
- They do not know their finances, utilize a budget, or exercise fiscal discipline.
You put a lot of emphasis on business owners defining their niche early, but what if entrepreneurs aren’t sure what their niche should be?
If everyone can use your product or service, no one will. You need to pick a niche customer, because you have limited time and limited resources as a startup. You need to spend your marketing budget wisely by picking a customer target you can actually hit. So if you want to start a graphic design firm, drill that down to say, for example, “We specialize in developing graphics for educational materials.”