Episode Summary – The fundamental four

The fundamental four are based upon the actions, traits or characteristics that, have the potential to completely “de-rail” your business future. 

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 Should I Own A Business podcast likes to approach things from a different perspective. 

That’s is why we are talking about these 4 fundamentals before you take the plunge into business ownership.

 

Links and resources

Worksheet-Critical Business Functions

Blog-Evaluating a business in 3 steps

Blog-Thinking of owning  a business-would you be successful?

Self Assess Your Readiness with our Business Readiness Test

MoneySmart.gov.au- home budget planner

Introduction

In this episode, we explain four fundamental things 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 Should I Own A Business podcast likes to approach things from a different perspective. 

That’s is why we are talking about these 4 fundamental things before you take the plunge into business ownership.

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.   

Let’s probe a little more to get you to think more deeply and engage in some self-assessment. The only real pre-requisite is to be completely open and honest with yourself, much like you were during the You-360 exercise. 

It is your life and your decision to make so honestly appraise your strengths and weaknesses.  

You then stand a much better chance of making the right decision about owning a business. 

The fundamental four questions to answer before owing a business:

#1 How much money do I need to support myself and my family while I build the business?

You’ve probably got existing financial responsibilities that, you meet by employment or living with parents or some other means. You might have kids, a mortgage, car loans that all need to be paid. 

How quickly do you need your business to provide a sustainable income? 

For now, start to determine how much money you need to live and how quickly you believe your business needs to be able to provide that.

Geoff says 

“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 to Geoff’s, 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. 

Home budget planner

This is a great simple budget planning tool from MoneySmart.gov.au

We suggest you brutally assess what’s needed in your budget as opposed to just what you are used to spending. This exercise will prove invaluable when you come to assess your business idea and understand the cash flow you need.

This is also another good test for you. 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 How am I with money? 

  •  the kind of person who is always wondering where your money has gone? 
  •  way too partial to go on spending binges? 
  •  terrible with 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. 

It’s a great idea to have someone on board whom you trust to help you. We don’t consider this topic as a negotiable item. If you’re not good with money and you don’t seek some support in this area your chances of success will be significantly reduced.

#3 Am I a procrastinator? 

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 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. He has come up with a range of things you can do, and here is a link to his work https://activegrowth.com/joe-ferrari/.

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 you don’t take steps to do something about it, your chances of succeeding in business are drastically reduced.

The most powerful word in business is also the smallest, “DO”. 

We should also point out that people who do make decisions regularly also accept they will not always make the right decisions. You must overcome the fear of making the wrong decision because nobody is foolproof. 

# 4 How resilient am I?

Again, we mentioned resilience in Episodes 2 and 5. 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. 

Geoff’s personal experience

Geoff comments “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.”

I’ll pop a link to them in the show notes for anyone interested in checking them out. 

Consider the fundamental four early

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, then 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.

Likewise, if you have concerns about the money management related issues. 

For example, if you know that 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.

To summarise some of the key points:

  • please be honest with yourself when appraising your strengths and weaknesses, 
  • work out the correct and accurate state of your finances and financial needs
  • be aware of the difficulties and realities of owning and operating your own business
  • Don’t necessarily let these stop you but make sure you have a plan in place to deal with them if you need to.

Next episode

In our next episode, we have another business owner interview with someone who started a professional service business as a business coach, and we hear about their experience. Not surprisingly, there are excellent tips for anyone who is thinking of starting a business.

Disclaimer

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, please go to www.ShouldIOwnABusiness.com