Do you dread Monday mornings?
Are you fed up with all of your ideas and hard work making somebody else money rather than you?
Perhaps you hate the confines of a set schedule and wish for a more flexible way of working?
Do you dream of being your own boss?
Whichever camp you fall into, you may think that the answer to your work gripes is to set up your own business and become self-employed.
For some, this is a great option. However, it’s not for everyone.
All too often as an accountant, I’ve seen people race into self-employment without considering the impact on their families, careers or personal finances.
In the worst cases, the impact on their finances had been disastrous meaning they ended up back in a full-time job.
Not the dream result they were looking for!
So before you end up going full circle, this post will help you decide whether you are ready to start a business or if you have a few more things to figure out before taking the plunge.
Are You Ready To Start A Business?
Follow this step-by-step checklist to see if you’re ready;
You have a business idea you can’t stop thinking about
Drive and ambition are essential to starting your own business.
So if you are truly passionate about your business idea, it’ll help to give you the motivation to get your business off the ground, get through tricky times and make those all-important first sales.
Don’t confuse passion with just feeling fed up with your career or hating your boss. Be sure to take a step back and check this is something you will throw yourself into.
So, if you genuinely love and are committed to your business idea, proceed to the next stage. If not, it may be time to go back to the drawing board.
You’ve checked and are certain your business idea will work
There are many stories out there of failed small businesses that simply didn’t work out because there was no market for what they were selling. But they only found this out after they quit their job, spent thousands on set up costs or lost all their savings
If you haven’t checked, then before you launch into spending money or quitting your full-time job, make sure you have conducted comprehensive research and are confident that there is a market for your business idea.
Depending on your business idea, you could create an MVP (Minimum Viable Product) as cheaply as possible, or get started as a side hustle delivering work in your spare time.
If you do find out that your idea isn’t right then take the new knowledge you have and transform your idea into something that does work. Then test again!
You know that running a small business will take more than just “doing your job.”
Small business owners wear a lot of different hats. When you begin your business, you’ll be responsible for every decision. You have to get to grips with every part of your business; from sales and marketing to taxes and bookkeeping.
If you are used to being part of a large business, striking out on your own will mean all these things will become your responsibility, meaning you’ll have to do it yourself or pay someone (and manage them) to do it on your behalf.
So, if you haven’t, start reading up on all the different things you’ll be responsible for as a business owner. (This article can help to answer any of your burning questions).
Remember, it can be a challenge to learn all these new things, alongside delivering the work you’ve been paid to do, so time-management, planning and motivation are essential!
In the short-term, you’ll have a lot to learn, but as time goes on, you’ll soon be an expert.
You’re confident about handling your business and personal finances
If you’re employed, you’ll be used to receiving a regular paycheck with all your taxes deducted. You know exactly what you have at the end of each month to spend giving you comfort that your household bills are covered.
When you go self-employed not only is working out your taxes down to you but what happens in your business may well affect your personal financial health.
This may come as some surprise because many accountants talk about the importance of separating your business and personal finances.
But as someone who is self-employed, I can assure you that they are interlinked.
Understanding your business and personal finances
Say you don’t make the sales you expect or a customer is late paying you, the reality is you may not be able to pay yourself on time. Not having money on time may make it difficult for you to meet your personal financial obligations such as paying your mortgage or rent, car payments and household bills – not to mention all of your other expenses.
Remember that if you fail to pay your bills on time, this will affect your personal credit rating. (Find out more about how self-employment can affect your credit rating here.)
If you feel confident about handling both your business and personal finances, then you’ll be able to steer your way through these difficult times.
The first steps to doing this are to prepare a start-up budget that includes a review of your personal finances. You’ll also need to set aside a financial buffer that you can live on, in case your business cannot pay you. You’ll also need to consider pricing in a way that ensures you make enough money to pay your bills.
Find out more about price setting here.
You’re prepared for long hours
I can certainly vouch for this one, and I am sure I am not alone!
Running a small business involves a lot of time, especially in the early days when you are trying to get it up and running. Or, if you want to take on extra work because you want to earn more money.
The stories you hear of people who earn a full-time salary working 15 hours a week are rarely true. Or, if they are true, have come after years of hard work.
Your family and social life could suffer as a result of your starting a business, while you divert your energy into running it. But the rewards will come.
You’ve got the backing of your family
Unfortunately, some people find themselves in situations where their partners and family don’t support them in their desire to run a small business.
Some families find it hard to understand why anyone would want to give up job security, a well-paid job or just don’t think they are up to challenge of running a business.
That can be a tough pill to swallow. And you don’t want to find yourself in a situation where they say “I told you so”.
You’ll need the emotional support of your family and people to bounce ideas off if you are going to be working alone. So their support is essential.
If you have concerns, set out a robust plan before you talk to your family about what you have planned and then gauge their reaction. If they can see your vision and your strategy for making money, they’ll soon be on board.
You’ve set up a well thought out plan
Essentially this means setting up a business plan.
I know that sounds scary to many people, but it is actually a really powerful tool that forces you to consider things like:
- How you are going to make sales;
- Whom you are selling to;
- How you will market your product;
- How much money you need to get started;
- Your competitors and how you can differentiate yourself from them;
- Your vision for your business in the short and long term;
- Your breakeven point (the amount you need to sell to cover your costs).
Done correctly, you’ll have a plan to follow that keeps you on track and helps you hit all the things you dream about – whether that’s a business that pays you a salary or to grow your own team.
If the thought of business planning makes you shudder, then continue reading this series, and I’ll show you how to create a simple business plan.
If you still aren’t sure you feel ready to start a business, then there is so much you can do to get yourself there. I can’t promise it will guarantee success, but it will give you the confidence to get started and deal with the unexpected.
Keep reading this series of blogs to help you prepare for self-employment, manage your finances and get a plan together that will keep you in control.