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Entrepreneurs -- Are You Really Ready to Start a New Organization, Product or Service?

© Copyright Carter McNamara, MBA, PhD, Authenticity Consulting, LLC.
AField Guide to Nonprofit Program Design, Marketing and Evaluation.

Nonprofit-specific and for-profit-specific items, below, are noted as such. The following quote is relevant regardless of what type of organization you're starting.

"New businesses fail usually due to poor management, not because of the idea for the business."
-- Peter Drucker, internationally renowned management expert

How to Use This "Manual"

Far too often, people are so eager to start a new organization, product, service or program that they end up skipping some very important considerations. This is very likely one of the major reasons that so many new organizations fail within the first five years. This manual will help you ensure that you're really ready to start your new venture.

The first section of this manual is "Considerations About You". Carefully answer each of the questions in this section. The second section is "Considerations to Address About Your Idea for a New Organization". In this section, you don't need to answer the questions in detail -- but you should be aware of how you plan to answer the questions once you've started your new venture.

Near the end of the manual, you're referred to other sites that can help you officially register your new organization once you've considered the questions -- and resources to help you answer them -- in this manual.

Considerations About You

Are You Really an Entrepreneur?
Have You Considered Alternatives to Starting an Organization, Product or Service?
Are Your Personal Finances in Shape?
How Will You Manage the Stresses Involved?

Initial Considerations to Address About Your Idea for a New Organization or Product

Is There Really a Need for the Product or Service in Your Organization?
What Type of New Organization, Product or Service Will You Be Starting?
What Are the Risks Involved?
What Planning and Financial Skills Do You Need?
What Are Your Initial Plans?
What Human Resources Will Your New Organization, Product or Service Need?
What Facilities and Equipment Will You Need?
How Much Money Will You Need?
Write a Strategic Plan or Business Plan Document?
If You're Still Going to Start a New Organization, Product or Service ...

General Resources

Numerous Sources of Additional Assistance for Startups

Also see
Related Library Topics

Are You Really an Entrepreneur?

What is an Entrepreneur?

It often takes a certain kind of person to be an entrepreneur. The following articles might help to give you some sense of the typical nature of an entrepreneur, that is, someone who starts a new venture (organization, program, product line, etc.).
What Makes an Entrepreneur? (Part 1)
What Makes an Entrepreneur? (Part 2)
Expert Advice for Every Online Business - CEO's, CMO's and Best Selling Authors Share Their Expertise
The Mercenary vs. Missionary Entrepreneur
Fitness Tips for Entrepreneurs

Another approach to understanding the nature of entrepreneurs is to interview entrepreneurs in your community. The links Networking and Interviewing for a Job might help you.

Are You an Entrepreneur? (articles to help you reflect about this question)

The following article "Are You An Entrepreneur?" helps you to get started thinking about your own nature as an entrepreneur. The article references the notion of starting a home business, but applies even if you're planning start another kind of organization. If you're planning to start a nonprofit, then you might substitute the focus on money in the following article for a focus on community service -- otherwise, the article is still relevant to your situation.
The Right Stuff
10 Things to Do Before You Start Your Start-Up
Open Letter to Entrepreneurs: You Don't Hold a Monopoly on the Right Answers
Six Personality Traits Every Small-Business Owner Should Have
How to Prepare Your Family for Entrepreneurship
Great Entrepreneurial Fallacies

Are You an Entrepreneur? (self-tests to help you decide if you're an entrepreneur)

The following self-tests might help you to think about your nature and how you'll handle the risks and stresses of starting a new organization. These tests are not comprehensive and scientifically validated. But they do pose useful questions to think about now.
Self-Taking Personal Flexibility Assessment (includes self-scoring)
Measure Your Entrepreneurial Quotient
Entrepreneurial Test
Don't Melt Down

Additional reading, if you prefer
Why People Start Companies

Also consider these library topics:

The topic Personal Development includes many more self-assessments.

Have You Considered Alternatives to Starting an Organization, Product or Service?

Sometimes people try start their own organization (for-profit or nonprofit) because they're frustrated with their lives or current jobs. These are valid reasons. But starting an organization can cause even more frustration! There are alternatives that should be considered before you start a new organization.

NOTE: In the next section, titled "Resources to Help You Explore Alternatives Other Than Starting an Organization or Product", there are resources that can help you answer each of the following questions.)

1. How about working to improve your attitude toward your life or work?
The frustrations of starting a new organization might make your attitude even worse for you -- and those around you.

2. How about working to get promoted in your current job?
This option lets you work from current strengths to shore up areas where you might need growth, and you can usually keep your current benefits and level of income, as well.

3. How about finding a new job?
This can be much easier than starting a new organization. You might even consider getting a part-time job to phase yourself into the full-time role of running your new organization. Sometimes just the activity of interviewing with other companies can remind you of your value, and improve your attitude in your current job.

4. (For those of you who are thinking about starting a new for-profit organization) How about buying an existing organization?
An existing organization already has products/services, customers and a financial track record.

Resources to Help You Explore Alternatives Other Than Starting an Organization or Product

1. Personal Development -- This topics includes assessments to help you identify areas where you might want to grow. The topic also has materials to help you set goals and reach them, as well, including by going back to school.

2. Personal Productivity -- This topic includes materials to help you become more effective in your life and work.

3. Personal Wellness -- Materials in this topic can help you to focus more attention on your attitude, personal motivation and overall sense of well being.

4. Employee Performance Management - Materials in this topic can help you identify performance goals and get help from your supervisor to reach those goals.

5. For-Profit and Nonprofit Jobs -- There are vast number of online resources to help you think about, prepare for and find a new job. Consider working from home.

6. Buying a Business -- This topic will be useful for those of you who are considering buying a current for-profit organization.

Are Your Personal Finances in Shape?

It's likely that your personal income will be affected if you start a new organization, particularly if you have to invest any of your personal finances in your new organization. You should consider where your money will come from while you're getting your new organization off the ground. Where will you get benefits, such as health insurance, auto insurance, life insurance, etc?

You should take stock of your finances. Potential funders may want to understand your personal financial situation -- and will be impressed if you've done thorough planning and documentation.

The topic Introduction to Personal Financial Planning includes references to a variety useful materials about Basics of Personal Financial Planning, Budgeting, Insurance Planning, Savings, Consumer Credit and Debts, Investing, Tax Planning, Retirement Planning, Estate Planning and Estimating Your Net Worth.

How Will You Manage the Stresses Involved?

Most people assume that there are many stresses involved in getting a new venture off the ground. Few people really prepare for them. They're too eager to get the new organization going. You very likely won't be able successfully to manage the new organization for the long term if you can't successfully manage yourself as well.

What Are Your Stress Levels Now?

Take the following tests to discern how stressed you might be now.
Stress Self-Evaluation
Stress Test

Consider some of the materials in the following key topics.

Staying Motivated and Keeping a Good Attitude (to avoid Burnout and Cynicism)

Stress Management (including Physical Fitness) -- There are several basic things you can do that go a long way toward managing yourself. The following articles provide a variety of perspectives and advice.

Time management -- Managing cash is usually the biggest challenge in running a small for-profit organization. Getting funding is usually one of the biggest challenges in a small nonprofit. Time management is usually one of the biggest challenges in managing yourself!

Mentoring -- Find someone who is willing to help you with ongoing advice. You're not the first person to start a new venture.

Work-Life Balance -- The best way to manage time and stress is to have a life other than just your new venture.

Managing Interpersonal Conflicts and Handling Difficult People -- If you're stressed out, it'll seem like everyone else is, too.

Resources for Nonprofits or Resources for For-Profits -- There are plenty of sources of free help. It's amazing how we fail to take advantage of resources unless we have to pay for them!

Fitness Tips for Entrepreneurs

Small Business Owners Conundrum

Basics for New Managers and Supervisors to Manage Themselves

Basics for New Managers and Supervisors to Manage Themselves
At this point, you need not have detailed answers to the following questions. But you should be thinking about how you will get answers to them.

Is There Really a Need for the Product or Service in Your Organization?

Whether you're starting a new product, service or organization, there needs to be a strong market for it -- whether it's for a nonprofit or for-profit. If you're starting a new organization, then you are also thinking about the new product or service that the new organization will be providing. Sometimes people get so excited about their idea for a new product or service, that they almost become obsessed with the idea of starting their own new organization -- without really verifying if there really is a market for their new product or service in the first place!

Some basic planning can go a long way toward verifying if there's a market for a product or service, and whether you're really committed to starting it. If you don't have the commitment to do some basic planning, then you might be fooling yourself about whether you have the commitment to start and run an organization. Do some up-front, basic planning! The following basic questions address many of the critical considerations when starting a new organization. Next to each question is a recommended topic from the Free Management Library.

NOTE: If you'll need funding to start your new for-profit or nonprofit organization, investors or funders are much more likely to provide money to you if they see that you've done some planning.

NOTE: In each topic are links to related topics as well.

1. What is the nature of your new product or service?
Is it retail? Manufacturing? Service? Wholesaling? The answer to this question will guide you to a wide variety of helpful resources by contacting trade associations for retail, manufacturing, services or wholesaling. If your product is primarily a service to the community, then you may want to consider starting a nonprofit organization. The topic Two Basic Types of Business Organizations: For-Profit and Nonprofit and Should I Start a Nonprofit or For-Profit? will help you answer this question. (Nonprofit entrepreneurs may also benefit from the topics Social Entrepreneurship and The Unique Needs and Nature of Nonprofits.)

2. How do you know there is a need for your new product or service?
You'll have to do more than "sense that there is a need" or claim that "it's common sense that there is a need". You'll have to have enough evidence to convince an investor or funder -- and yourself. Read information at a few of the links in Marketing Research to help you. (Nonprofit entrepreneurs should strongly consider collaborating with an existing nonprofit, rather than starting a new nonprofit that might end up competing for the same funds. To see if a relevant nonprofit already exists, you might contact your local office of the National Council of Nonprofit Associations or use the GuideStar.
Start a Business - How Do You Know If You Should Start a Business
Nine Ways to Test an Entrepreneurial Idea

3. Who are your competitors? What makes your new product/service any different or more needed by customers?
The links Competitive Analysis and Positioning will help you.

Also see
Matching Personal Interests With Marketplace Needs

What Type of New Organization, Product or Service Will You Be Starting?

If You're Starting a New Organization

1. What is the basic purpose of your organization? (This is your mission statement.)
You will need to specify this mission statement to investors or funders, to register your legal form, to provide continued guidance to major decisions, etc. The topic Developing/Updating a Mission Statement will help you answer this question.

2. What type of organization will your new organization be? For-profit? Nonprofit?
The topic Two Basic Types of Business Organizations: For-Profit and Nonprofit will help you answer this question. Nonprofit entrepreneurs may also benefit from the topics Social Entrepreneurship and The Unique Needs and Nature of Nonprofits.

3. What will be the legal description of your organization?
For example, unincorporated (sole proprietorship or partnership)? Corporation (S, C) or Limited Liability Company? Another type (nonprofit, cooperative, association, franchise, etc.)? See
Enterprise Law

4. What will you name your new organization, or new product/services?
The links Naming and Branding and Intellectual Property Law (about trademarks, copyright and patents) can help you.

5. Might you carry out your organization primarily over the Internet? Might you carry out your organization primarily by working from home?
The link Introduction and Basic Overview of E-Commerce will be helpful to you.

6. Do you have an overall approach for how you will organize your organization?
The following links might be useful.
Organization Charts as a Management Tool
Basic Principles of Organizational Design -- Part 1 of 2
Basic Principles of Organizational Design -- Part 2 of 2

If You're Starting a New Product

What Are the Risks Involved?

Questions -- What Risks Do You Face? (your risk management plan)

1. What can go wrong that would really hurt you and the new organization?
The topic Risk Management will help you.

2. What insurance coverage do you need?
What coverage do you have? Is it enough? The topic Insurance (Business)will help you.

3. How can you minimize the likelihood of employee litigation against you?
You will soon need to implement a set of personnel policies and ensure they are followed by your staff (to minimize the chance of litigation). The topic Policies (Personnel) will help you.

What Kills Startups?

What Planning and Financial Skills Do You Need?

There are many skills required to successfully start and operate a successful organization. The following questions are about some of the most important skills -- planning and finances.

Questions About Skills in Planning

1. Do you know how to plan -- to identify top-level priorities and then to associate more detailed priorities to achieve the top-level priorities?
See Basic Guidelines for Successful Planning Process

2. Do you know the basics about strategic planning? (A strategic plan is very useful, especially when starting a new organization.)
See Basic Description of Strategic Planning and What is Strategic Planning? (read "Introduction -- What is Strategic Planning?" and some of the links in that section)

3. Do you know the difference between a strategic plan and a business plan? (A bushiness plan is very useful, especially when starting a new product or service.)
See Strategic Planning or Business Planning?

4. Do you know the basics about business planning?
See Why Do a Business Plan? and Typical Contents of Business Plan

Questions About Financial Management

1.How will you manage your finances?
How will you monitor and record your income and expenses? Do you know how to prepare and manage a budget? Cash flow statement? Balance sheet? The following links will be helpful.
Basics of Financial Management in U.S. Small For-Profit Businesses
or
Basic Overview of U.S. Nonprofit Financial Management

Free Introductory Accounting and Bookkeeping Tutorial
Barton's Tutorial

2. What system will you use for bookkeeping and accounting -- cash or accrual?
The above links will help you answer this question.

3. How will you compute your taxes?
What taxes will you need to pay and when?
Controlling Your Taxes

What Are Your Initial Plans?

You need to think about some strategic decisions. While you may not have to know the detail to answers about the near future of your new organization, you should have some impression about the overall goals to accomplish. Knowledge of these goals will help you a great deal when thinking about what resources and skills you will need right away in your new organization. Think about your answers to the above questions so far when identifying your plans.

1. What are the major goals for your organization over the next three years?
Think about your answers to the above questions so far. Then the link Strategic Analysis will also help you -- perhaps read several of the articles in that section.

2. What do you need to do to reach those goals?
The link Setting Strategic Direction will help you, especially read links about developing mission, vision and values.

3. What objectives do you need to reach along the way to each goal?
Who needs to be doing what and by when in order to reach each objective? The link Action Planning will help you.

4. How will you know that the organization is efficiently pursuing its goals?
The link Monitoring Implementation, Evaluating Implementation -- and Deviating from Plan, If Necessary will help you.

What Human Resources Will Your New Organization, Product or Service Need?

1. What skills (and people) are needed by your organization?
The links Employee Task and Job Analysis and Job Descriptions will be helpful.

2. How will you attract and retain the best people?
The topics Recruiting, Retaining Employees and Basic Guide to Management and Supervision will help you.

3. How will you know how to organize your staff?
The links Workforce planning, Specifying Jobs and Roles and Selecting Your Organizational Design (who will work for whom, etc.) will help you. For those starting nonprofits, the links Key Roles and Structures in Nonprofits and Three Aspects of Nonprofit Structure and will help you.

4. How will you compensate employees? What benefits will you offer?
The topic Benefits and Compensation will help you.

5. How will you know what basic personnel policies you'll need?
The topic Policies (Personnel) will help you.

6. How will you know how to manage your organization?
The topic Broad List of Knowledge Areas and Skills in Management (you don't have to master all these skills to start an organization) will help you. Also consider Boards of Directors, Chief Executive Role, Basic Overview of Supervision and Management Skills Unique to Nonprofits (for nonprofits).

7. How will you ensure personnel are effectively working toward the organization's goals?
The topic Employee Performance Management will help you.

NOTE: A key resource to help you manage and supervise people is Basic Guide to Management and Supervision.

8. Do you have a banker? Financial adviser? Tax advisor? Lawyer?
The topics Getting and Using Banker, Getting and Using a Consultant, Getting and Using a Lawyer and Getting and Using an Accountant will help you.

What Facilities and Equipment Will You Need?

1. What equipment needs will you have?
(These needs depend very much on the resources needed to develop, distribute and support your product/service.) The link Facilities Management might be helpful to you.

2. What computer equipment will you need?
The link Computers, Internet & Web will help you.

How Much Money Will You Need?

What is the Cost of Needed Resources?

Consider the costs to obtain the necessary skills, facilities and equipment identified from addressing the above questions.

For nonprofit entrepreneurs, the links Designing a Budget and Fundraising (Nonprofit) will help you.

For for-profit entrepreneurs, the links Designing a Budget and Fundraising (For-Profit) will help you.

Write a Basic Strategic Plan or Business Plan Document?

If you've addressed the above questions in this manual, then you've already gone through most of the basic planning process (Congratulations!).

Write a Basic Strategic Plan? (if starting a new organization)?

Review Basic Description of Strategic Planning and Developing a Strategic Plan and Framework for a Basic Strategic Plan Document.

Write a Basic Business Plan? (if starting a new product or service?

You may not be required to develop a business plan document. Various funders (foundations, corporations, banks, etc.) require a business plan document. The document can help you immensely as means to track your plans and progress toward implementing your plans.

Consider the free online course from the Small Business Administration
How to Write a Business Plan

You'd also benefit greatly from reading more of the links at
More Basics on Business Planning

If You're Still Going to Start a New Organization, Product or Service ...

If, at this point, you have carefully answered the above critical questions, then congratulations! You are indeed very serious about starting a new organization -- and you're that much more likely to succeed! We're ready to move on.

If you're considering a for-profit organization, see
Starting a for-profit business

If you're considering a nonprofit organization, see
Starting a nonprofit organization

If you're considering a new product or service
Business Planning
Product and Service Development

Sources of Additional Assistance for Startups

Resources for For-Profits
Resources for Nonprofits

For the Category of Entrepreneurship (For-Profit):

To round out your knowledge of this Library topic, you may want to review some related topics, available from the link below. Each of the related topics includes free, online resources.

Also, scan the Recommended Books listed below. They have been selected for their relevance and highly practical nature.