After several months of contemplation and indecision you’ve finally decided to hand in your notice and join the swelling ranks of the self-employed and small business owners who are the engine room of the British economy.
As you prepare for this life-changing move, have you really considered everything adequately? Read on – you may be surprised.
The first and most important question to ask yourself is why you are doing it and if you are really 100% satisfied that this is the correct move.
Common reasons for starting out on your own are making money, the need for a challenge, pressure from family members or friends, a desire for flexible working or a lack of job security. Each one may appear compelling in itself but the grass is rarely greener on the other side as the same pressures can exist in an altered format once you have crossed the great divide between employment and working for yourself.
Self-employment isn’t a nine to five routine and it can severely impact on your personal life, especially in the early years or at pivotal points in the development of the business. Sometimes the financial rewards will compensate but at other times they can cloud your judgment and blind you to the needs and concerns of your family.
When making comparisons make sure you are comparing like for like – your neighbour may have successfully struck out on his own 11 years ago when he was 32, but you are now 52 and the economy is now in reverse
Wisdom of experience
What works for one person may not work for another so once you have clearly identified the one compelling factor that is driving you to start your own business spend time making a rational analysis of your decision, preferably with help of people suitably qualified to do so, either with the wisdom of experience or in a professional capacity.
When making comparisons make sure you are comparing like for like – your neighbour may have successfully struck out on his own 11 years ago when he was 32, but you are now 52 and the economy is now in reverse.
So what about your skills and experience? You may have been a widget salesman for 22 years but how comprehensive is your knowledge of the product and the market?
Perhaps you have been in business previously but are you ready for another attempt in light of the fact there was a reason that you swapped self-employment for employee status?
Often business success or failure is determined by the personality of the entrepreneur. A well organised individual with unbounded enthusiasm, who is a seasoned networker, good with numbers, understands marketing and has excellent interpersonal skills for managing staff will undoubtedly go far very quickly.
Know your strengths
How many of these traits are you blessed with? In other words you must know your strengths and recognise your weaknesses.
Some people simply are not cut out for business and by the time they find out they are ruined financially, have isolated their family and aged 20 years in a fraction of the time.
Now that you’ve run through your checklist and everything stacks up from a personal and family aspect let’s look at some of the technical and practical considerations.
You hand in your notice and your employer expresses the appropriate sentiments and waves you on your way. Next day you receive a hand-delivered letter making it abundantly clear that you are contractually prevented from competing for a period of three months in a 25-mile radius.
Could you survive for three months with no income, especially when it’s not part of the business plan?
Sometimes the easiest way to start up is after trading 'on the side' for a period, giving you a chance to feel your way around and establish your own credentials with suppliers and customer, meaning that you are not going from a steady salary to a standing start with no income. In the long term the patience of waiting for right moment often pays off.
Understand the risks
Thinking that you understand the market does not necessarily mean that you understand the risks involved of having little or no back up if things take a turn for the worst. It is essential that your research includes awareness of all the risks involved, both inherent and external, enabling you to stress test your business model accordingly.
I always recommend a business plan, which can be anything from scribblings on the back of a beer mat to a comprehensive insight into your research and thinking that sells your story to a third party.
When outside investors are involved usually it is the latter, but where it is only you in the business risking your money it will often resemble the former. In spite of the fact that few business plans work out exactly they are an excellent basis for gathering your thoughts and checking if anything has been overlooked even if the only reader is yourself, but it is always a good idea show it to a third party who is well placed to comment on it.
Cash flow is the area where many new businesses stumble, usually within their first year. Entrepreneurs fail to understand that successful businesses fail not because they aren’t selling but because they run out of cash.
In other words they are undercapitalised – they have not had enough money invested at the outset and are constantly struggling to find working capital for daily needs. In today’s climate this is more critical than it has ever been – ask any accountant and they’ll tell you that cash is the life blood of a business.
Take professional advice
This leads me to my final point: have you taken appropriate professional advice? I am not referring to your brother-in-law who is a bookkeeper for the local newsagent but from a professionally qualified accountant who advises small businesses, in particular start-ups.
Following sound advice and using the appropriate structure for your business from the outset can avoid a host of problems at a later stage - professional advisers have a role to play in spite of the costs involved and cutting corners in false economy.
If this article hasn’t discouraged you from making the leap to self-employed status then the odds are that you’re ready for it. Good luck!
