| Is Business Ownership For You? |
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If you plan to start a business in Wisconsin, the first thing you want to do is to understand how it might influence your lifestyle. There are many advantages and disadvantages of business ownership. Each person will need to weigh the pros and cons carefully before plunging ahead.
Ask yourself some questions:
- Do you have an entrepreneurial personality?
- Are you willing to work 60 to 70 hours per week?
- Do you enjoy managing other people?
For more on this, check:
Experience and Industry Contacts
It helps if you have work experience in the industry in which your business will operate. If you feel you lack some experience, consider obtaining work experience in your targeted industry.
Develop your network to find business associations that might provide employment or apprenticeship leads.
An entrepreneur starting a business in a familiar industry will have a major advantage.
The learning curve for entrepreneurs who are unfamiliar with the business' industry may be too steep, and they may make costly mistakes in pricing, sourcing, and fulfillment. Conversely, a person who is savvy in an industry
will know who to call for what they need, and they will make better decisions that will positively affect their bottomline.
Managerial Skills
More businesses fail due to poor management than any other singular reason. In today's business, human capital is
the most crucial resource, and management is all about finding, developing, and retaining the individuals who can contribute the most added value
to your business. Today's manager of a growing business must understand marketing, finance, and technology as well as the basic operational
facets of their particular business. If you feel that you lack some of the basic education to operate your business successfully, explore small business development
Workshops & Programs at the Small Business Development Center (SBDC). For courses and workshops on accounting, marketing, and other business topics, check out what
Small Business Development Center (SBDC) offers in your area.
Credit Worthiness
Access to credit is one of the most important assets of a growing business. This is because most growing businesses require more cash to meet expenses
than can be initially generated through business sales. Whether your business is incorporated or not, the assessment of credit worthiness begins with
an evaluation of the entrepreneur's own credit standing. Although a new business does not have a standing or track record to prove its ability or history
of payment, the entrepreneur must be as responsible for debts as if the business were established.
- You may get a FREE credit report if recently you have been denied
credit; contact the institution that rejected your credit request.
- Get your credit report
- More on financial education
Lenders generally divide their evaluation into three categories called three C's of credit when determining credit worthiness. These categories
are Character, Credit History and Capacity. The character assessment will take a look at the applicant's employment history and personal background.
Your credit history will reveal the amount of credit you currently have available, your track record in repaying past and current debt, and whether
you have any past-due debt, liens or financial judgements against you. To determine your capacity to repay debt, the lender will evaluate
your business idea and your personal net worth statement: your current income and how much debt you already have outstanding.
Personal Net Worth
Net worth is a calculation of a person's assets minus their liabilities. This is one of the first things that a lender will want to know about
a potential borrower. Higher net-worth individuals will have the potential to fund more of the cost of their business start-up from their own personal
assets. This is a great advantage because it reduces or eliminates the cost of capital for a start-up business. Remember, as your business matures,
the net worth of your business should increase over time. If your household and business net worth are not increasing each year, take a very close
look at your revenues and expenses to determine what you can do to develop a consistently increasing trend of net worth.
Some money managers use the following formula to calculate a net-worth benchmark for a household:
( your age x gross income of your household) / 10
For a more ambitious benchmark, multiply your answer from the above formula by two.
Support of Friends and Family
The support of family and friends can be crucial to the success or failure of a new business. Family members, especially one's spouse, ought to be
supportive and encouraging of the entrepreneur's business aspirations, even to the point of assisting in some ways, such as covering household
bills during the lean financial times of a start-up business. Other family members and friends can be important sources of low-cost professional
advice, customer referrals, supplier sources or even financial support. Plan your business with your family, spouse, or significant other even if they
are not working directly in the business. Make a list of the family members and friends, and identify how each one could contribute to your success!
Personal Track Record
Many good business ideas are an outgrowth of an idea or a success that one has had from a previous job or endeavor. Where did your business
idea come from? Was it a natural outgrowth of your previous experience? As the owner of a new business, it is likely that you will need to
build a supportive network for your business. You may benefit from a track record of initiative and success, especially if your track record shows
a natural and logical path to your current business endeavor.
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