Are you considering starting your own business?
There are a few things you need to know before taking that initial leap. I call them the 4 prerequisites to a successful business:
1. Skills & Experience
Before starting a business, you need to ask yourself, “Do I have the skill set and experience necessary to operate in the industry in which I am choosing to open my business in?”
Your knowledge of a particular market is directly proportional to your success in that market. If, for instance, you want to go into the restaurant industry, you must have the necessary knowledge required to run that restaurant well. If you have a simple passion for hospitality and no prior experience with running or managing a restaurant, the chance of success is quite low, compared to playing to the strengths and expertise you would have gained over the years.
2. Financial Capacity
You would be surprised as to how many individuals begin their business venture without considering their ability to fund it – they either do not have the capital required to start the business or have the cash flow necessary to keep the business running.
A very tempting but incredibly dangerous trap business owners tend to fall into is entrenching themselves in enormous amounts of debt when starting a business. In that case, the chances of being successful in running that business are far lower than if you were to run a business based on your ability to finance the business up to the point that would allow you to break even within a reasonable amount of time.
3. Growth Capability
Is there continuous growth in the market they want to enter? In any business venture, one needs to assess the probability of success against the growth possibilities in the market. If you are to go into the DVD renting market, the possibility of growth is not likely, because of the advanced streaming platforms such as Netflix, Disney+ and the like.
When assessing the success in a market, you need to look for continuous growth or if the market is likely to experience another hockey-stick growth even if it is at the height of its growth curve.
4. Personal Resilience
A fourth and final component that is a crucial prerequisite to starting a successful business is understanding the immense amount of resilience you will need to have moving forward. During the initial phase of starting your business, there will be setbacks and obstacles that may hinder your motivation to continue. That said, you can have all the previously stated prerequisites, but if you are not resilient enough to push through those difficult phases, your chances of success will dwindle.
In Conclusion
If you are interested in not only starting your business but running a successful one, you need to have all four of these prerequisites to give yourself at least an 80% chance of success. Meeting just one or two of these criteria is what has caused the failure of 95% of businesses within the first 5 years and a further 80% after that initial 5-year period.
Business ownership is not an easy feat. However, you have to give yourself at least an 80% chance of success by meeting all three of these criteria. It is the wiser and more responsible way to ensure your long-term success.
