Why Do You Want a Business

Why do you want a business?

SME – Small and Medium Enterprises. A great acronym that makes it seemingly easy to discuss, as the name implies that being small makes it easy. It provides very little insight into the practicalities and realities of running a small business, nor the actual skills you will need to do so.

It is made more confusing by the fact that practically every country has a different definition as to what an SME is. Some also use different acronyms – SME, SMME, SMB and MSME. The country definitions can include sector, turnover, employee numbers and other factors. It can consequently be difficult to understand the impact of the vast array of variables on your decisions.

This document will help you to focus on the real issues and ignore all these acronyms and their variables. What is real and applicable to you irrespective of the local laws in your country? To start with, businesses can be owned by an individual, a group of people, other businesses or a combination of these. There are decisions you need to make and then assess in the context of local law to ensure you are legally compliant. Never ignore or break the law as that is a recipe for disaster. What we need to understand is why people start their own businesses. When questioned there are generally two responses we receive: - I hate working for a boss; - To make money. The problem is that these are both extremely bad answers. Why? Boss problems arise for many of us because we are difficult, we dislike the boss, we are disliked by the boss, think differently to the boss, or because we have a bad boss. But that is a poor reason to start a business. Rather find a new job. The “make money” answer is just as bad. Why? Because it is completely meaningless. What does “make money” mean? What is needed to “make money”? How much “money” is to be made?

If we are starting a business because we are truly entrepreneurial and want to do things our own way, then it could be a better reason. Remember however, every business requires certain skills, and each skill may be more or less important another.

What skills do we need to run a business successfully: - Strategy - Management - Sales - Marketing - Financial - Technical. This means that we need to plan ahead, understand the skills we need, the skills we have, understand where we will get the skills we need, how much will they cost us and how will we pay for them. Will we find partners, employees or suppliers with these skills?

The original term used for a business owner was entrepreneur and was first used in the 1700s. The first time the SME acronym appeared was in 1996. Entrepreneur means to take the risks associated with running a business to create wealth. Remember in the 1700s most people were workers in agriculture. Entrepreneurship is not as easy as it seems and can be quite difficult. Today this original meaning has been lost and is seldom used correctly, as most people think owning a business is only about creating an income.

What is the correct answer to why you are starting a business as an entrepreneur?

“I want to create $XXX wealth within Y years”.

That is the true purpose of starting a business. To create wealth. Why take the risk of creating and running a business just for a salary? It makes no sense. However, there are times when you have no choice, and you have to start a business. But this does not make you an entrepreneur. This is important as it guides you on what type of business to start which we will discuss later in another training course. The amount should be calculated on what you need for your retirement. If you are further down the road with your plans, and this is the last business before retirement, then you need to be working to achieve the final retirement contribution. When doing the numbers remember capital gains tax may be applicable on the business sale value. Do you know the number you are working towards? Will you achieve it with the next business you create and sell? Have you already achieved it?

The next question to address is how to calculate the magic number! We have a form you can complete which will calculate your retirement amount and send you a report. You can then understand what amount you are aiming for. This will be based upon your input data, so be realistic in your demands, without short-changing yourself.