The Fundamental Four
Fundamental Four In Business checklist for newbies thinking of starting a business.
The Fundamental Four In Business Checklist can have a massive impact on whether business ownership is right for you.
We’ve called them the ‘fundamental four’ because, if you aren’t on top of these before you start a business, they are likely to cause you some grief down the track.
The Fundamental Four are based upon the actions, traits or characteristics that, have the potential to completely “de-rail” your business future.
We won’t go as far as saying that if you’re not entirely on top of them, you are guaranteed to fail, but your journey will be harder than it needs to be.
These four are some of the hidden causes of business failures.
You will notice that the Fundamental Four have nothing to do with your business idea but everything to do with You.
This article is about the personality and mindset of a business owner.
#1 Home budget planning comes before business planning
Before you start a business, it’s fundamental to work out how much money you need to support yourself and your family.
If you’ve got financial responsibilities, work out how much they all are.
You might have kids, a mortgage or car loans that all need to be funded.
How quickly do you need your business to provide a sustainable income?
Start by determining how much money you need to live and how quickly your business needs to provide that.
Businesses often grow slower than owners think.
This is fundamental as running out of money is a common cause of business failure and it can impact your family relationships too.
“In my case, I didn’t start taking what I’d call a basic wage from my business back in the late 90s for about 18 months after I started it. Fortunately, I didn’t have a lot of financial commitments back then. I had a little bit of cash in reserve, but it was bloody tough going. It wasn’t that the business wasn’t growing, quite the opposite. We needed to keep topping up the working capital to fund the growth, meaning that there was little left for me!”
We’ve both seen similar situations where the owner was feeling stressed. They were becoming unable to meet their financial responsibilities outside of the business, and that’s a tough situation. It’s far better to understand and plan for those things upfront rather than getting into strife down the track.
So, in practical terms, you’re going to need to do a household budget that lists out all of your expenses and makes some allowance for unexpected costs.
Use a home budget planner.
There is a great simple budget planning tool from MoneySmart.gov.au
We suggest you brutally assess what you need in your budget instead of just what you are used to spending.
This exercise will prove invaluable when assessing your business idea and understanding the cash flow you need to live.
If you find the thought of slogging through personal finances and bills to get an accurate weekly, monthly and annual budget too hard- how do you expect to build a business that depends on budgets and plans?
A home budget is a crucial step in avoiding a financial problem, so do it. Avoid this at your peril.
#2 Your money management skills and attitude?
- Are you the kind of person who is always wondering where your money has gone?
- Do you go on spending binges?
- Are you terrible with home budgeting?
If you answer yes to one or more of these questions, you’ll need to think very carefully about whether business ownership is right for you. At the least, in your business planning, make allowance to have someone you trust help you with the financial side of things. Lack of cash flow will kill your business faster than you can imagine. If you are running out of funds in your private life, you can often just push through to the next payday. In business, you’ll likely have responsibilities like staff to pay, rent, suppliers to pay who usually aren’t too fond of waiting!
Even if you intend to minimise your expenses by working from home, business growth almost always generates an additional drain on working capital at some stage. And if managing money is a foreign concept to you, the risks of failure will rise as money is fundamental in business. Your attitude to money can make or break your business no matter how good you idea is.
It’s a great idea to have someone on your support team whom you trust to help you.
We don’t consider this topic as a negotiable item.
If you’re not good with money and don’t seek support in this area, your chances of success will significantly reduce.
#3 Making many decisions
We touched on procrastination in Episode 5 How to you use excitement, as making decisions can make some people very uncomfortable. Remember, you must be honest with yourself. If you are a procrastinator, you are by no means alone. Professor Joe Ferrari from DePaul University in Chicago has done a fascinating piece of research into procrastination. He discovered that while almost everybody procrastinates from time to time, around 20% of the adult population are chronic procrastinators. If you are one of them – you’re going to need to address your behaviour before starting a business.
The word “chronic” suggests that people in this group don’t just put things off occasionally but have an ingrained habit. The Professor points out that telling yourself or others when you’re suffering from chronic procrastination to “Just Do it” does not work.
There is a great saying about procrastination.
“Procrastination and success in business ARE mutually exclusive”.
Just think about that for a second because it is really powerful. If you are a chronic procrastinator and don’t take steps to do something about it, your chances of succeeding in business drastically reduce.
The most powerful word in business is also the smallest, “DO”.
We should also point out that people who make decisions regularly also accept that they will not always make the right decisions.
# 4 Personal resilience is a fundamental business requirement.
Resilience is a characteristic that can be hard to quantify at times, but it is so crucial to success in business. Stuff will go wrong, and how you handle it will go a long way to determining whether you will ultimately succeed or fail. When things do go wrong or don’t work out as you’d hoped, it’s how quickly you can bounce back that counts.
We’d put resilience right up there as amongst the essential traits required for success. This article explains why business owners need resilience.
Geoff’s personal experience
“As I look back over my journey, it’s probably the area that gives me the most pride. Plenty of stuff went wrong over the years, and it would have been pretty easy to quit. But, when we as a business were challenged, I am happy to say we got back up and pushed on.
In my case, one of the biggest challenges I ever faced in my business life was nothing to do with business. It was when my Dad passed away unexpectedly. We were about eight years into the business, and we were growing really fast. When he died, though, it really knocked me around, and in turn, the company certainly suffered.
The people around me acted differently. I wasn’t as driven, and there were plenty of times where my motivation just completely evaporated. For me, I stumbled across a service that offered downloadable hypnosis sessions. I did for a while, and they helped me to turn the corner, get back on my feet and start to re-engage in the business.”
Consider these four fundamentals on your journey to business ownership.
So “the fundamental four” are key things to consider when thinking about whether business ownership is for you or not. Think of them as like the first rung on a ladder or a checkpoint of sorts.
If you’re sitting there listening to this and thinking to yourself, “well, I am the world’s biggest procrastinator, so, if I hear you right, going into business is not for me” – not so fast.
The key lesson here is that if you can honestly appraise your strengths and weaknesses in these areas, you can plan to compensate for them.
If you know that you are a procrastinator, what can you do to improve? Can you put some systems in place to ensure that the important stuff gets done?
Can you set minimal goals to hit each day?
There is plenty of material around to help you learn how to avoid procrastination. The one thing you cannot do is ignore the fact that you are a procrastinator and push on regardless.
Here is a great article about avoiding procrastination and improving your decision-making process.Making decisions is fundamental in running any business.
Likewise, if you have concerns about your money management, get some help.
Here’s an episode about building your support team.
For example, if you only have enough funds to sustain your lifestyle for six months, you need to determine if the business will be able to provide you with sufficient income in that time. If the answer is no, then thinking about sources of finance might be a good idea before you take the plunge.
Fundamental Four In Business Checklist Summary
- Produce thorough home budget so you know how income you need to live.
- Appraise how good your attitude to money is.
- Make sure you are no a procrastinator as businesses are built on decisions-lots of them.
- Consider if you have strong personal resilience and stamina because you will need both.
Take our Entrepreneur Personality Quiz to see how well prepared you are for business ownership.
The information contained in this podcast is general and does not take into account your situation. The content does not constitute legal or financial advice and should not be used as such. You should consider whether the information is appropriate to your needs, and where applicable, seek professional advice from a financial adviser or lawyer in your jurisdiction. To find out more,