Many successful entrepreneurs will testify that getting into business is tough. It is often a hard, rocky road with many challenges and failure always lurking. The difference between success and failure is paper-thin.
In a due diligence study, whether to enter into a joint venture or merely offering funding, the investor will consider two critical issues: the business concept and the entrepreneur that will run the business. The evaluation of the business, especially a start-up is difficult but, with experience, a value judgement can be made.
When it comes to the entrepreneur, the process is far more complex. Here, the human element comes into play.
The figures of a business tell a story and conclusions can be made. Evaluating an entrepreneur is an intricate process and this is where mistakes are made. Besides coming to grips with the entrepreneurial flair of the entrepreneur, it is rather the skills that lead you to the answer.
The skills required are business skills and also technical skills (also referred to as the “doing skills”). The first relates to the ability to run a business successfully by applying sound business principles.
These skills range from formulating and applying a strategy, setting goals, financial acumen, ability to sell the product, to managing people.
The evaluation of the doing skills focuses on the competencies specifically relating to the business in question. The experience of the entrepreneur is vital to ensure that these skills are in place. (You can be a bright, hard-working data processor, but do you have the doing skills to run an engineering shop).
Is the one set of skills superior to the other? Not at all. It is not the one or the other, but rather a need for both. Does it mean that entrepreneurs without these skills should not be in business?
This depends on how critical these skills are to ensure the success in the particular business. For instance, some industries such as a good franchise, “plug” these shortcomings by offering a tried and tested business concept and offering training as well.
Where these skills are important, the potential entrepreneur should seriously consider alternatives or ways to complement his skills with other skills available. Partnerships, for instance is a possibility.
Many successful entrepreneurs experienced serious difficulty when they diversify their operations into areas where they do not have the skills base. An example of this is where a very successful industrial paint contractor decided to manufacture his own paint range.
Without the relevant experience (technical know-how), the business was not only successful, but it also had a detrimental effect on the contracting business.
Without the doing skills, mistakes are imminent. It is a matter of whether the business will survive and manage the effect of the mistakes.
There is no substitute for experience. You cannot buy it and you need time to gain it. Yet, it is most valuable when going into business. The best advice anyone can offer a potential entrepreneur is to gain skills before venturing into an own business.
Advisers even recommend that people join a business that they one day would like to own themselves.
Even without any remuneration, it is not the income that they are after, but gaining valuable experience. Knowledge offers power and opens doors.
Business Partners is a specialist risk finance company for formal small and medium enterprises (SMEs) in select African countries. The company actively supports entrepreneurial growth by providing financing, specialist sector knowledge and added-value services for viable small and medium business.