Many successful entrepreneurs will testify that getting into business is tough. It is often a hard, rocky road with many challenges and the possibility of failure always lurking. The difference between success and failure is often paper thin.
During due diligence, the financier or investor will always consider two critical issues: the business concept and the strength of the entrepreneur.
When it comes to evaluating the entrepreneur, the process is far more complex than evaluating the business. Here the human element comes into play. The figures of a business tell a story and a conclusion can be made. Evaluating an entrepreneur on the other hand, is an intricate process.
An entrepreneur requires both business and 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, the ability to sell the product or service as well as managing people.
The evaluation of the “doing skills” focuses on the entrepreneur’s technical competencies and experience relating to the business in question. The experience of the entrepreneur is vital to ensure that these skills are in place.
Is the one set of skills superior to the other? Not at all. It is not about the one or the other, but rather a combination of both. Does it mean that entrepreneurs without these skills should not be in business? This depends on how critical these skills are to ensure success in the particular business. For instance, some industries, such as a good franchise, offer a tried and tested business concept and training.
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 experience serious difficulties 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 unsuccessful, but it also had a detrimental effect on the contracting business.
Without the “doing skills”, mistakes are eminent. It is a matter of whether the business will survive and manage the effect of the mistakes. There is no substitute for experience. You can not buy it and you need time to gain it. The best advice anyone can offer a potential entrepreneur is to gain skills and technical experience before venturing into any business.
Copyright © 2016 Business Partners Ltd. All rights reserved.