Exploring Self-Employment The Broad Definition of Entrepreneurship. Exploring Self-Employment The Broad Definition of Entrepreneurship.

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1 Exploring Self-Employment The Broad Definition of Entrepreneurship Business Planning Reasons to Prepare a Business Plan Format of a Business Plan Topic Six Exploring Self-Employment The Broad Definition of Entrepreneurship Business Planning Reasons to Prepare a Business Plan Format of a Business Plan

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3 Exploring Self-Employment The Broad Definition of Entrepreneurship Business Planning Reasons to Prepare a Business Plan Format of a Business Plan Topic Six Exploring Self-Employment The Broad Definition of Entrepreneurship Business Planning Reasons to Prepare a Business Plan Format of a Business Plan

4 This document is available on the Internet at For further information about Creating Opportunities Through Self-Employment, please contact: Acadia Centre for Small Business and Entrepreneurship The Gateway Plaza, Suite 108, 215 Dominion Street Bridgewater, Nova Scotia Canada B4V 2K7 Telephone: (902) Fax: (902) Written by Elly Danica. Edited by Amie Haughn and Tara Wittchen. Copyright 2005 Acadia Centre for Small Business and Entrepreneurship Designed and published by Communications Nova Scotia. ISBN:

5 Table of Contents Exploring Self-Employment...1 The Broad Definition of Entrepreneurship Business Planning Reasons to Prepare a Business Plan Format of a Business Plan Other Publications in This Series... 36

6 Topic Six Creating Opportunities Through Self-Employment Exploring Self-Employment What we re talking about Self-employment means starting and running your own business. Self-employment requires you to carefully examine your work and lifestyle skills. You will have to decide whether or not working for yourself is a practical solution at this stage of your work life. Self-employment is a way to use your passion, skills, and experience to create a job or business. After years of working for others, Older Workers may find they enjoy using their experience to create a business for themselves. 1

7 Creating Opportunities Through Self-Employment Topic Six 2 How this applies to you Exploring self-employment means examining your needs (for income, work style, etc.) as well as how pursuing self-employment might affect all areas of your life. To succeed in self-employment, you will need to decide what you are comfortable doing. Can you handle setting your own schedules, working on your own, making sales calls, doing the accounting for your business, and many of the other tasks involved in being in business for yourself? There are advantages, challenges, and risks involved in self-employment. You should have a clear understanding of them before deciding to start a business. Self-employment requires a significant time commitment. You will need to decide if you are willing to make it.

8 Topic Six Creating Opportunities Through Self-Employment Many Older Workers who are looking for work come to realize that starting a business is another option. As an Older Worker, you may have long hoped to start your own business someday. You may be thinking I want to be my own boss, It s time I started making money for myself instead of for someone else, or There are no jobs out there that will allow me to do what I want. You have a lifetime of experience and skills to draw from. You also have the potential to generate business ideas based on personal interests and hobbies. Once you have an idea, you will need to test it. Does it have the right stuff to become a successful enterprise? Will this enterprise give you enough income either as a full-time or part-time business? 3

9 Creating Opportunities Through Self-Employment Topic Six 4 Some Advantages of self-employment 1 Community members see Older Workers as credible and responsible. This is important when you are seeking funding or support. 2 You will generally have a wide variety of contacts and acquaintances thanks to your past work and life experiences. 3 As an Older Worker, you bring a wealth of knowledge from both professional and private experiences. 4 It may be easier for you to obtain financing because of existing relationships with a bank or credit union. You may already have assets that could be used in forming a business (e.g., land, buildings, vehicles). 5 Your potential income is only limited by your energy, management skills, and good judgment.

10 Topic Six Creating Opportunities Through Self-Employment 6 You have the opportunity to satisfy your creative drive. 7 You can t be laid off. In that sense, you have job security as long as your business is successful. 8 You have definite tax advantages over people who are not self-employed. Some Challenges of self-employment 1 Your income may be irregular depending on the nature of the business, economy, competition, and other variables. 2 Starting a business is generally very time-consuming, especially during the start-up years. This can result in reducing or curtailing other needs such as time for friends, family, and recreation. 5

11 Creating Opportunities Through Self-Employment Topic Six 3 You will face pressure to succeed from family, friends, investors, and creditors because you have invested so much time, energy, and money. 4 In most cases, you must commit considerable financial resources towards running your business. This could vary, depending on partnership or investor involvement, or bank financing. Note that home-based businesses tend to require very little start-up capital. 5 You risk losing all of your money in the business venture. Problems with health, family, marriage, partnerships, or competition may not always be within your control. 6 To maintain proper control over the business, especially in the early stages, you have to learn how to deal effectively with various management issues and to assume different roles. 6

12 Topic Six Creating Opportunities Through Self-Employment Is my business idea a good fit for me? Is this idea consistent with my dreams? Does it suit my temperament? Does it call upon my talents and skills? Will it allow me to use my life experience? Will it keep me motivated and hold my interest? Does it energize and fulfill me? Does it fit with my desired lifestyle? If you answer yes to any of these questions, you may have a business idea that has potential for you. The next step is to see if your business idea is viable. 7

13 Creating Opportunities Through Self-Employment Topic Six Things to think about Just because you know how to do something well doesn t mean you will love doing it every day. Just because someone else has success with a business idea doesn t mean that the same idea is a good fit for you. A business idea that reflects your interests offers the best chance for a satisfying self-employment venture. A business idea always needs to be tested to see if it has the potential to be successful. Your assessment should include interest, market, and ability. 8

14 Topic Six Creating Opportunities Through Self-Employment Things to do 1 Make a list of hobbies, interests, and things you ve always thought you d like to do someday. 2 Working with a friend, brainstorm business ideas for each item on your list. 3 Look at each idea in terms of the questions listed in the previous section in this booklet called Is my business idea a good fit for me? 4 Now, spend some time thinking about whether you have a genuine interest in the idea, whether there is a market to buy your product or service, and whether you have the skills and abilities to produce or provide the product or service. 9

15 Creating Opportunities Through Self-Employment Topic Six The Broad Definition of Entrepreneurship What we re talking about You may find that you already have many of the characteristics of an entrepreneur. The current definition of entrepreneurship is quite broad. Your chance for success and identifying new opportunities increase when you have a clear understanding of how to use the Entrepreneurial Decision-Making Cycle. 10

16 Topic Six Creating Opportunities Through Self-Employment How this applies to you As an Older Worker, you have many years of life and work experience to your credit. Chances are that you have also acquired many of the following entrepreneurial skills and attributes: creativity and innovation ability to make decisions ability to communicate with others focused motivated and persistent ability to adapt well to change can set goals and make action plans a spirit of adventure self-confidence a positive attitude willingness to take initiative a strong sense of commitment a need to achieve a strong work ethic and commitment 11

17 Creating Opportunities Through Self-Employment Topic Six 12 Often an Older Worker will think that an entrepreneur is someone else. They may not recognize the entrepreneurial characteristics they possess. All entrepreneurs have a passion for what they do and certain skill sets that help take their ideas from vision to reality. In the past, many people and organizations have defined an entrepreneur as someone who owns a business. The Oxford English Dictionary defines an entrepreneur as a person who starts or organizes a commercial enterprise, especially one involving financial risk. Entrepreneurship actually has a much broader definition that can be applied to all aspects of your life. An entrepreneur may be defined as one who has the ability to make an informed decision and take responsibility for the consequences of the action emanating from that decision (risk taking). You do not have to own a small

18 Topic Six Creating Opportunities Through Self-Employment business to have any or all of these characteristics. They could be demonstrated in your job search, your educational training, career decision making and in your personal life. You can be entrepreneurial in everything that you do. We can all take an entrepreneurial approach to our careers, businesses, and lives. Older Workers can incorporate their personal vision into business decision-making by using the Entrepreneurial Decision-Making Cycle process. To make a decision about starting a business, you need to consider a number of different areas and go through several steps. These steps are outlined below. Step 1: Know Yourself Personal vision refers to your interests, values, and beliefs. Things like wanting to have freedom, wanting to make lots of money, or wanting to be able to maintain a certain lifestyle come into play in the context of starting a 13

19 Creating Opportunities Through Self-Employment Topic Six business. There is no right or wrong answer when it comes to personal vision. Your vision is your vision. When you base business decisions on your personal vision, you will likely find more enjoyment and fulfillment. If you can do something that reflects your interests and values, the idea of doing this for a living becomes exciting and motivating. This approach also lets you define business success in your own terms and context. Step 2: Business Vision This refers to the business idea you want to pursue. It can also refer to the idea generation stage. This is when you know you want to start a business but you re unsure about what type of business you want. By making sure that aspects of your personal vision mesh with your business vision, you start to look at how your interests, values, and beliefs might be manifested in a business. 14

20 Topic Six Creating Opportunities Through Self-Employment Step 3: Internal Analysis This is the decision-making stage that takes a look at the skill sets necessary for a given business idea and whether you possess those skills. It will help determine whether this business idea is the right fit for you and if you have the skills necessary to successfully run this business. If there are gaps, you may need to revisit the business vision or look at how to get missing skills. Step 4: External Analysis Look at the market. In the context of business, this means understanding the demand or need for your product or service. It means defining your customer and understanding the competition. Is there a need for this business? What are its possible opportunities or obstacles? Step 5: Overall Strategy You need a plan to help you see the goals you want to meet over the short and long term. This means deciding on things like the size of your business, how you will treat customers, mission statements, etc. 15

21 Creating Opportunities Through Self-Employment Topic Six 16 Step 6: Planning and Preparation Look at all of your research and decide if this idea still matches your personal vision. This stage also includes activities such as contacting suppliers, talking with possible financiers, and preparing documents like menus, price lists, etc. Step 7: Action At this stage you finalize your plans from the previous stage. This might include placing orders, moving things into your location, or setting up your home office/business. Now you can open your doors for business. Step 8: Results Once you have finished the decision-making components in the cycle and taken action, there will be a result. It is at this point that the process starts all over again. You will assess what has happened and why you have the result that you have. It is important to note that if at any point in the decision-making process your idea does not seem feasible, you can go back to your

22 Topic Six Creating Opportunities Through Self-Employment business vision to decide if it s still a good idea. Maybe you need to adjust your idea. If you do, it is important that you reflect on how this change might affect your personal vision. Your personal vision should be the foundation for your business decision. Be true to yourself and what you want out of life. Things to think about The more information you bring to your decision making, the better those decisions will fit with your values, interests, skills, and personal vision. The better the fit, the better the chances for satisfaction in life and work. Making shot-in-the-dark decisions is a high-stress, high-risk way to determine if a business idea is a good one. Making informed decisions will ultimately save you both time and money. 17

23 Creating Opportunities Through Self-Employment Topic Six Thing to do 1 Work your business idea through the stages of decision making to help you decide if the idea will be a good fit for you and your personal vision. 2 If you have several business ideas, then working through all of them will give you good information on what decisions and steps you will need to take now. 18

24 Topic Six Creating Opportunities Through Self-Employment Additional Information Acadia Centre for Small Business and Entrepreneurship Edwards, Paul and Sarah Edwards. Finding Your Perfect Work: The New Career Guide to Making a Living, Creating a Life. New York: Tarcher/Putnam, Gray, Douglas & Diana Gray. The Complete Canadian Small Business Guide. Toronto: McGraw-Hill Book Co,

25 Creating Opportunities Through Self-Employment Topic Six Business Planning What we re talking about There are some basic steps in creating a business plan. It is impossible to overstate the importance of a business plan. There are resources in your community to help you create a business plan. 20 How this applies to you Any good business has a good business plan. You need to forecast the progress of your business. Many people believe that a business plan is simply red tape and isn t necessary to get started.

26 Topic Six Creating Opportunities Through Self-Employment Banks and other lenders usually require a business plan. A business plan will help you set goals for your business. Making the decision to start a business is a big one. It s important that you have all your bases covered and research all aspects of the business. By identifying your customers, and your competition, creating a sound marketing plan and truly understanding your financial forecasts, you increase the viability of your business. In some cases, Older Workers will turn a hobby or interest into a business. They may not feel as though it is necessary to prepare a business plan. Although it is tempting to skip this step, there are many reasons to create a well thought-out plan. 21

27 Creating Opportunities Through Self-Employment Topic Six Business experts say that the most crucial step in starting a business is the planning stage. Unfortunately, this step often receives little or no attention. This can lead to disastrous outcomes such as the failure of the business, loss of an investment, or loss of personal assets. A business plan allocates resources and measures the results of your actions, helping you set realistic goals and make logical decisions. 22

28 Topic Six Creating Opportunities Through Self-Employment Reasons to Prepare a Business Plan It outlines the plans you have for your business. It gives you a path to follow. A plan with goals and action steps allows you to guide your business through turbulent, often unforeseen, economic conditions. A plan shows your banker the condition and direction of your business. It can help uncover any potential weaknesses and identify overlooked opportunities. It can help you anticipate and adapt to change. A plan can tell your sales personnel, suppliers, and others about your operations and goals. 23

29 Creating Opportunities Through Self-Employment Topic Six A plan can help you develop as a manager. It can help you practise solving problems about competitive conditions, promotional opportunities, and situations that are good or bad for your business It can help you understand your competition. A sound plan tells you what to do and how to do it to achieve your goals for the business. It helps to test your commitment to the idea by having you put your plans for the business in writing. Although all plans look a bit different at first, they will generally contain similar information. All will need sections that outline things like competition, customer analysis, and positioning strategy. They most definitely all need a good financial section. 24

30 Topic Six Creating Opportunities Through Self-Employment Format of a Business Plan Most business plans require the same information. The business plan format you use may depend on whether or not you are looking for funding. A typical plan contains the following sections: Cover Page business name, address, business owner, phone number, date prepared Executive Summary Include the nature of the business, general location, financing required, market share you plan to attain, and other important information. Complete this last, but then move it to the front of the plan. 25

31 Creating Opportunities Through Self-Employment Topic Six Introduction owner s background and experience summary of the business idea Include reasons why the owner thinks that this business idea would be a good match. List any management experience, or previous work experience that would make an impact. It would be a good idea to include a résumé. 26 Mission Statement This defines the purpose of your business and directly states the main goals for opening your business. It s generally only a sentence or two in length.

32 Topic Six Creating Opportunities Through Self-Employment Business Structure sole proprietorship: owned by one person, the simplest form of organization. The business does not have a separate legal status. partnership: when two or more persons join together to start a business. The business does not have a separate legal status. corporation: a separate legal entity, which means it has to file its own tax return. Any losses are of the company and not the individual. You must also include the reasons for choosing your business structure. 27

33 Creating Opportunities Through Self-Employment Topic Six Objectives Identify goals for your business (for one year, two to five years, five+ years). Use quantitative measures such as number of employees, expected sales and income, or number of customers per day, month, or year. Trends Report any trends that may influence your business, such as things that you have noticed, read, or have heard about in your community and the world. 28

34 Topic Six Creating Opportunities Through Self-Employment Competition Research your competition and compare your business idea to them. Understand who your direct and indirect competitors are. Do a S.W.O.T. (strengths, weaknesses, opportunities, threats) analysis. Customer Analysis Define your target market (e.g., who will buy your product or service). Include demographic information (age, income, gender, etc.). 29

35 Creating Opportunities Through Self-Employment Topic Six Positioning Strategy product: detailed description of product or service price: how much you will charge and why place: location and how customers will buy from you promotion: list places you will advertise and include prices Operation Plan It should include physical location, equipment, furniture, and suppliers. This is a very detailed description of your business. 30

36 Topic Six Creating Opportunities Through Self-Employment Management List who the key people are in the business, what role you will play, and what role others will play (if you have others). Financial Plan This should include project start-up costs, projected cash flow budgets supported by assumptions that support the projection, break-even analysis, and projected income statement and balance sheet. There are many organizations in the community that can help you with your business planning; some may even be able to help from start to finish. 31

37 Creating Opportunities Through Self-Employment Topic Six Things to think about A business plan is your map. Use it to see where you are and if you are on track. A well-developed business plan is the cornerstone of any successful enterprise. No business is too small for a business plan. 32 Things to do 1 For help with the business plan process, look for business development centres in the Yellow Pages. 2 Check with banks for business services. 3 Look for local ACOA agencies, Regional Development Agencies (RDAs), and Access Nova Scotia. There may be other helpful resources unique to your community.

38 Topic Six Creating Opportunities Through Self-Employment Additional Information Internet: Canada Business Service Centre sample plans you can view Statistics Canada (free information, some costs) Industry Canada (information by sector) intellectual property to register your business Business Development Bank of Canada Black Business Initiative entrepreneurial cycle, personal vision 33

39 Creating Opportunities Through Self-Employment Topic Six Publications: Small Business Information Seminar Canada Customer and Revenue Agency T4072(E) Rev Minding Your Own Business Human Resources Development Canada LM Gray, Douglas and Diana Gray. The Complete Canadian Small Business Guide. Toronto: McGraw-Hill Book Co.,

40 Topic Six Creating Opportunities Through Self-Employment Business Plan Outlines: Canada/Nova Scotia Business Service Centre Atlantic Canada Opportunities Agency (ACOA) Business Development Bank of Canada (BDC) Community Business Development Centres (CBDC) local banks University Business Development Centres (UBDC) 35

41 Creating Opportunities Through Self-Employment Topic Six Other Publications in This Series Topic One: Overcoming Challenges Topic Two: Personal Visioning Topic Three: Making a Living in the 21st Century Topic Four: Focusing Your Job Search Topic Five: Marketing Yourself Topic Seven: Success Stories 36