During challenging times when there are significant pressures on employees and redundancies are rife, escaping the rat race to start your own business may feel extremely appealing. Most of us would love to control our own destiny and go it alone but is that path really right for you? Have you spent time reflecting on whether you have the courage, determination and persistence to build your own business? Do you understand all the risks and the challenges? Do you know the real rewards of self-employment?
There are a myriad of elements you must consider before taking the leap into entrepreneurship and being your own boss. Starting a business takes a great deal of hard work, good planning and a much more time than most people realise.
In this article, I take you through the essential considerations to mitigate risk and ensure success. Most problems occur because a budding entrepreneur doesn’t realise what they need to know and what they don’t know.
Having coached many of my clients to transition into self-employment, here are the top 8 questions I’m asked that you must carefully consider, if you want to start your own business.
1. Am I cut out for self-employment?
Not everyone has an entrepreneurial mindset. However, with careful planning and an ‘eyes wide open’ approach, even the faint-hearted could make a go of it. Ask yourself:
- Why do I want to set up my own business? What are my motivators?
- Do I have a great enough desire and passion to do the hard work?
- What are my personal traits that demonstrate I have the resilience and resourcefulness to be successful?
- What sort of business would I love to set up?
- What skills are required for that type of business?
- What skills do I bring to my business and which skills do I lack or need to improve on?
- Who can I go to for advice, guidance and have as my Board of Advisors?
- Do I have the financial resources I need to start?
- Do I have the family support and network I need to keep me going when times get tough?
- What other are the other options I can consider and are they as appealing as self-employment or setting up a small business?
2. What type of business is best for me?
There are 4 options when setting up your own business. You can become a consultant, set up your own business, buy a business or buy into a franchise.
You could leverage your existing experience and go into consulting. Armed with a phone, a laptop and a car, it’s a matter of learning how to market your consultancy, finding your first client, setting your fees, and delivering excellence.
- Be your own boss
- Low financial outlay initially
- Flexibility and freedom to deliver the way you want
- Potential for higher earnings than as an employee
- You clients become your boss
- Personal financial risk
- Lack of a team may make you feel isolated or unmotivated
- Starting income lower than your previous income
Starting a business from scratch
You could build your own business by starting from scratch – the beauty of this is that you can set up any kind of business you like. And in light of what’s happened this year, control over remote working arrangements and flexibility is your choice. Of course, it depends on demand as to whether anyone will buy your service or product, but that’s where your research beforehand comes into play.
- Be your own boss
- Choose the business you want
- Run things your way and grow at your own pace
- No inherited problems from previous owners
- You may risk your personal finances
- No track record for funding applications
- No cash flow at the start
- It’ll take time to break even after start-up costs
Buying an existing business
If you buy an existing business it will have systems and procedures already in place, plus an existing customer base. Conversely, you may inherit problems that are not immediately obvious, so due diligence is essential.
- With a business track record, gaining financing will be easier
- Systems, policies, customers, suppliers, equipment etc. already in place
- Revenue from the get-go
- The cost of buying the business may be high
- You may lose customers if they were loyal to the previous owner
- Inheriting problems that costs money to fix
Buying into a franchise
Franchisees gain the benefit of a well-known brand, systems and procedures that works; however you won’t have the creative freedom of a business that you set up on your own. Plus, franchise fees can be pretty hefty.
- A well-known name and a formula that works
- Training is provided, assistance with marketing, advertising
- Generating a return may be achieved earlier than if starting your own business
- Proven systems and processes
- High start-up cost and potential to lose franchise if rules are not adhered to
- A percentage of profits go to the franchisor
- Little room for creativity as you must be consistent with all other outlets
- Need to keep franchisor, customers and employees happy
3. Do I need to have a business plan?
A business plan will help you organise your strategy over the short and long-term. You don’t have to stick to it religiously, but the more comprehensive and set out your plan is, the more prepared you’ll be. With a comprehensive business plan in place, use it to approach banks, angel investors or venture capitalists for funding.
4. What about my business name, registration and domain name?
You must register a business name if you are conducting business under a name other than your own personal name or if you are setting up a Pty Ltd company. If you decide to become a sole trader and run your business under your own name, you don’t need to register for a business name. But you need an Australian Business Number (ABN) in order to invoice clients and customers.
However, as a sole trader, if a customer makes a legal claim against you, you have no financial protection so you must ensure you have adequate insurance cover.
Setting up as a Pty Ltd company will protect your personal assets from most claims as the liability is limited to the business as a separate entity. Talk to your tax accountant for advice on the structure that will work best for you and your business. Your accountant will also advise you when you need to register for GST.
For information on business registration, business structures, business grants and more visit the Australian Government’s resource for businesses.
5. What about business insurance?
You must speak with an insurance broker in your field to ensure that you are adequately covered. Depending on the business you’re in, there may be specific insurances on top of professional indemnity and public liability insurance.
6. Do I need a website?
Some businesses run on Facebook or Instagram and do very well. The danger of relying on a third-party platform for your business is that you do not own the site. If Facebook or Instagram decide to shut you down for whatever reason, it’s their decision.
Having a website that is your own domain and under your control is a better option. WordPress is a popular platform to use and have many beautiful templates. You may wish to hire a web designer to create your website if you are not up to speed with web design yourself.
You can also explore templated platforms such as Shopify (for e-commerce), Square Space, Wix or Simplero.
7. What if I don’t have a lot of money to invest in the business?
Most businesses start off running on a whiff of an oily rag. Without customers, you have no business. Invest your limited funds on what will best attract customers to your business. Your brand will either attract or repel so spend time on how you want to be viewed as a brand.
A well-designed website that loads quickly is essential, as first impressions count. Most people will check out your website before they interact with you and you need a way to capture your audience into a mailing list so you can regularly send information with value to nurture the relationship.
Your ongoing reputation is important so ensure you get the best suppliers for your products or services possible. Create a strong service level agreement so suppliers are accountable to deliver quality.
8. Should I quit my current job to work on my business?
If you are still employed, ask yourself these questions before you quit your job:
- Have I done enough research and tested the market sufficiently to know that I have a pipeline of customers and my business is viable?
- Have I created a budget and know that I can survive for at least 6-12 months on a fraction of my current salary?
- If I work on my new business full time, will it really make it grow faster?
- Do I have access to additional funds should I need it to grow the business? If not, how will I get it?
- After all considerations, would I be better off to create a ‘side hustle’ and stay in my current role?
- If I’m currently unemployed, will I take the plunge 100% or look for a part-time role, or contract position to earn some income while setting up my business?
Owning a business takes hard work and determination. If you have the courage and persistence to build your own business, understand the ongoing risks and the challenges, then self-employment can be an exciting and rewarding new direction.
Jane Jackson is a Career Management Coach and author of Navigating Career Crossroads.
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