The grass is always greener on the other side of the fence. Many employees envy self-employed people, believing that when you run your own business, you can earn more money. Although earning a livelihood is certainly the primary reason for starting and running a business, most small business owners also have personal reasons for choosing the self-employment option.

 Attracted by the benefits that they see arising from eventually being on their own, many people start a business as a hobby; others make a part-time commitment to their own business. In both cases, they continue to rely on the regular income of their full-time employment.

 Realistically, not everyone can succeed in running a business. Before starting your own business, it is important to identify what results you hope to achieve. It is also important to assess your entrepreneurial orientation and decide if running your own business is really the best thing for you.

 

You Need to Earn a Living

 Businesses, large or small, exist to generate a profit for their owners. Business owners— whether shareholders in the case of large incorporated ventures (see Chapter 5 for a discussion of incorporation) or owner-operators in the case of small businesses—use these profits as a means of supporting themselves and others for whom they are responsible. Thus, the primary raison d’être for all businesses is to earn a livelihood for their respective owners.

 If you already do, or think you would like to, run your own small business, you may have various reasons for choosing self-employment as a strategy for earning a living. Maybe you lost your job as a result of downsizing, reorganization, or merger, and chose running your own business as the best choice for generating an income. Perhaps you find it too confining being an employee in an organization whose way of doing things is inconsistent and even irreconcilable with yours. More independence? Higher earning capability? Whatever. Regardless of an individual’s stated reason for choosing to run a small business, the bottom line is always the same: Small businesses exist primarily to allow their owners to earn a living.

 There Are Also Personal Reasons

 Even though all businesses, large and small, exist for the same reason, all businesses are not alike. Small businesses are not miniature versions of their big business cousins. There are many differences, the main one being who actually owns the company.

 As noted above, virtually all large businesses are incorporated, which means they are actually owned by their shareholders. In companies with a large number of shareholders, the ownership and management functions are separated. Most shareholders are more than willing to delegate responsibility for actually running or operating the business to paid managers, who may or may not be shareholders. It is the managers who set the direction for the business and look after its day-to-day operations. In discharging these responsibilities, the managers try to do what’s best for the shareholders. For shareholders as owners, their primary interest in the business is their only interest: generating income. Thus, what’s best for the shareholders is, purely and simply, higher profits.

 There is no comparable separation of ownership and management in small businesses. In most cases, the owners do it all, from long-term planning to day-to-day management. In discharging these responsibilities, instead of being guided by what is best for third-party shareholders, the owners are influenced by what is best for them. And what is best for owners of small businesses is not always higher profits.

 Small businesses can be—and usually are—vehicles by which their owners can experience satisfaction, recognition, and joy, things that we all need if we are to live healthy lives.

In practice, this means that as well as existing to allow their owners to earn a living, small businesses also help their owners achieve personal, nonfinancial goals. Essentially these goals represent results or desired outcomes that the individual owners would like to achieve. Examples of goals that can be achieved through running one’s own business include the following:

•  Earning specific awards or peer recognition; Showcasing your abilities;
• Doing what you love doing;
•  Making a difference in the community;
•  Maintaining an enriching relationship with spouse and family;
•  Meeting new people;
•  Improving the quality of service to clients; Developing new ways of doing things.

If you currently run your own business, think about why you started it. If you are thinking about starting your own business, what goals do you hope to achieve?

 

Many people are attracted to the idea of running their own business. They like the idea of doing their own thing, a term left over from the ’60s, which generally means being one’s own boss. Instead of choosing to run a business as a strategy for earning a living, they start businesses primarily for other goal-oriented reasons, some of which are listed above.

 The Problem with Business-Hobbyists

Much like a hobby generates pleasure and satisfaction for the person doing it, so does playing business. In most cases, playing business is a harmless activity. There are, management skills, don’t start your own business just to make money. Get a job that pays you well, and invest your money wisely. This approach will ultimately allow you to generate more wealth.

 

At least superficially, the business hobbyist has an unfair advantage over the competition. Unencumbered by the normal economic constraints of running a business, the business-hobbyist is free to do work for no or low cost to customers. For these people, simply doing the work is more important than getting paid for doing it. If they don’t have to support themselves and their families from business activities, there is no urgency in getting paid the market rate for the services

 

Providing services at a cost significantly lower than the competition has two problematic side effects. First, it brings into question the cost and value of comparable services provided by other businesses that must build overhead and livelihood expectations into their pricing. Clients are generally more concerned with what something costs them, than with what it costs the supplier to produce it. Thus, when they see one supplier providing a specific service at a price significantly lower than the competition, they assume that the competitors must be overcharging. Based on a totally erroneous interpretation of the data, they develop unwarranted negative perceptions of the business.

  Further, in order to stay competitive and protect their market share, the competition might be forced to lower its prices to match those of the business-hobbyist. Although this may be a good thing for customers, price competition by hobbyists seldom benefits suppliers. When prices are cut, profits and customer service also decline. More than one business has been forced to close its doors as a victim of price-cutting wars. Obviously, the presence of a few business-hobbyists in a market segment is unlikely to affect the price of the services of established competitors. However, the appearance of many business-hobbyists will probably reduce the prices, profitability, and service of full-time businesses providing comparable services.

The second area of difficulty involves the liability of the business-hobbyist. Once you start a business, especially providing services, you hold yourself out to the public as having specific skills. In delivering these skills, you are expected to meet the standards of other businesses offering the same skills. If a failure to meet these standards results in a customer suffering loss or damage, you are responsible for the loss or damage. You cannot escape this liability by saying that what you called a business was not really a business but was more like a hobby.

Assume, for example, that a business-hobbyist is approached by the owner of Wayne’s Widgets, who would like a Web site designed to facilitate sales over the Internet. After the site is up and running and widgets have been shipped, several purchasers report that their credit card numbers have been misused and the common factor appears to be that they all purchased widgets through Wayne’s Internet Web site. Investigation indicates that a hacker gained access to Wayne’s Web site and located the database where customer information, including their credit card numbers, was stored. Further investigation indicated that in designing the Web site, the business-hobbyist had neglected to block access to a key directory as instructed in the manual. commit to a part-time business whatever resources—time, energy, money, etc.—that you have available and that are necessary to get the business up and running. 

Even though you are running a business on a part-time basis, make sure that the rates you charge for your goods and services are comparable to those of your competitors. There are several reasons for this.

 The quality of these goods and services are at least as good as or even better than your competitors’. If they weren’t, you wouldn’t even consider offering them for sale, would you? Since they are comparable, why should they be offered at a lower cost? To offer them at a lower cost might suggest that you and your business are not quite as good as the competition. Running a part-time business is a no-lose scenario. If you start the business on a part-time basis and it becomes successful enough that you are prepared to operate it full time...congratulations! You are off and rolling. If, however, you gave it your best shot and found out it’s not what you want to do, no problem— you still have your regular job to fall back on. following self-assessment can help you determine your entrepreneurial orientation.

Entrepreneurial  Assessment

 The following questions deal with your personal background, behavioral characteristics, and lifestyle patterns. Answer the questions by marking the response that most accurately reflects your attitude. Answer every question as honestly as you can.

Part 1: Attitudes Toward Risk Taking

	Definitely Yes	Probably Yes	Probably No	Definitely No
1. I am prepared to make sacrifices in my family life and to take a cut in pay to succeed in my own business.	________	________	________	________
2. I take risks for the thrill of it.	________	________	________	________
3. I enjoy doing something just to prove that I can.	________	________	________	________
4. I enjoy tackling a task without knowing all the potential problems.	________	________	________	________
Part 2: Personal Initiative and Discipline
	Definitely Yes	Probably Yes	Probably No	Definitely No
5. Once I decide to do something, I will do it and nothing can stop me.	_______	_______	_______	_______
6. When I begin a task, I set clear goals and objectives for myself.	_______	_______	_______	_______
7. After a severe setback in a project, I am able to pick up the pieces and start over again.	_______	_______	_______	_______
8. I am usually able to come up with more than one way to solve a problem.	_______	_______	_______	_______
9. I believe in organizing my tasks before getting started.	_______	_______	_______	_______
10. I find myself constantly thinking up new ideas.	_______	_______	________	________
11. I can concentrate on one subject for extended periods of time.	________	________	________	________
12. I find unexpected energy resources as I tackle things I like.	________	________	________	________
13. I am likely to work long hours to accomplish a goal.	________	________	________	________
Part 3: General Attitudes
14. When I do a good job, I am satisfied in knowing personally that the job has been well done.	________	________	________	________
15. I like the feeling of being in charge.	________	________	________	________
16. When I think of the future, I envision myself running my own business.	________	________	________	________
17. I try to do a better job than is expected of me.	________	________	________	________
18. Personal satisfaction means more to me than having money to spend on myself.	________	________	________	________
19. I try to find the benefits in a bad situation.	________	________	________	________
20. I persist when others tell me it can’t be done.	________	________	________	________
21. I enjoy being able to make my own decisions on the job.	________	________	________	________
22. I can accept failure without admitting defeat.	________	________	________	________
23. I strive to use past mistakes as learning processes.	________	________	________	________
24. I find that answers to problems come out of nowhere.	________	________	________	________
25. I prefer to make final decisions on my own.	________	________	________	________
Scoring: 4 points for each question answered “Definitely yes” 3 points for each question answered “Probably yes” 2 points for each question answered “Probably no” 1 point for each question answered “Definitely no” Interpretation of your score: Above 75 Definitely Entrepreneurial Your combination of personal background and behaviour and lifestyle patterns should give you the basis for a successful business.  50–74 Possibly Entrepreneurial You might have the basis for succeeding in your own business. The process of preparing your business plan can help clarify your entrepreneurial orientation. If the information that you gather excites you about the prospect of running your own business, you will probably do well. On the other hand, if the prospect of running your own business scares you, think carefully about whether or not to proceed. 26–49 Probably Not Entrepreneurial Other possibilities may be more suitable for you. Under 25 Definitely Not Entrepreneurial This is self-explanatory; you will probably work best as an employee.   Hot tips     Regardless of your score, discuss the results with your personal contacts, primarily your family and closest friends. They may see a side of you that you do not see. Their comments, combined with your score on the assessment, will provide you with a very good indication of success in your own business.  The Least You Need to Know The primary purpose of running your own business is to earn a living.  Personal goals can be as important as earning a living. These reasons have more to do with personal satisfaction than achieving financial goals. Playing business is not a good way to get into business. It can pose some risks for you as well as for full-time competitors in the marketplace. Running a business is a full-time commitment. Not everyone has an entrepreneurial orientation. Some people function better as employees.