Running your own business - Part 1
So you are thinking about setting up your own business? Many people do at some stage in life. This could be a new enterprise or buying into an established business. Before you jump in though, it is important to consider the pros and cons. Every small business operator expects to succeed, but sadly most do not last more than five years.
The process of setting up a business in Australia can be relatively easy. Apply online for an ABN and have a bank account and away you go. But is it that simple?
Being self-employed brings a lot of advantages –
You are the boss - You have control over your work output, your income goals and your working conditions. You have freedom to choose which services and products you offer and how you will structure the business. You have the potential to gain more control over your life and your destiny.
The prospect of financial rewards - If all goes well, you have the potential to increase your income significantly as the owner, rather than an employee, of the business.
Personal fulfilment – You have the opportunity to choose a business where you can do the work you really love. You also have potential to grow and expand, and achieve many personal goals. You can choose to have more time for yourself and your family and do the things that are really important to you.
All good reasons to move forward…
But you need to be prepared for the cons –
- Administration – business requires record keeping, bookkeeping, invoicing, ATO lodgements, insurances, planning, marketing and many other tasks apart from the core business. Unless you can afford to outsource this to an employee, another firm or a loving partner, you are going to be spending many of your 'after work' hours doing administration.
- Cashflow – you will rarely have consistent income in business and may need to accept long periods with little or even negative cashflow. This is a reality of business and can be managed if the business is viable, but you need to assess your own attitude to living 'on the knife edge' and whether you are prepared for the lifestyle change.
- Pressure – business brings the advantage of being your own boss, but the reality is that you can have many bosses (sometimes hundreds or thousands). These are clients and they (rightly) expect and deserve to be treated well and equally. For the small business operator, this can mean juggling what to do, when to do it, and how to do it at the best price for each and every client. There can be a lot of stress in this process and you need to be prepared to work hard to satisfy each client.
- Risk - Arguably the biggest factor you need to consider before launching a business is your attitude to risk. This needs to be more than just a cursory or passing thought. Think about how you would react if you had to take out extra debt (sometimes many thousands of dollars), or lose your investment savings if a business goes 'bad'. These are real considerations, not necessarily because you are a bad business person. Bad things can happen to good operators simple through pressure of the market, the economy, technology change, the climate or old-fashioned bad luck. If you really don't want to 'look this risk in the eye', then starting your own business is not for you.
On the whole, running a business can be extremely rewarding, but not without risk (and often many more hours of work than the average employee). Work through the above points in your own mind, talk with family and weigh up whether you (and your family) are prepared to accept and live with the risks if things don't work out. If you decide this is for you, look out for the next blog in the series on how to set up your business for success.