Should I start my own business? 15 questions you should ask yourself before starting out on
It’s tempting, isn’t it? You’ve had a rubbish day at work, you don’t get on with your boss, you feel underpaid and you don’t spend enough time with your family. The obvious temptation is to strike out on your own and start your own business.
Although there are many benefits of being your own boss and running your own business, it is not a decision to be taken lightly and there are many considerations you should take into account before taking the plunge.
Here are 15 questions that you should ask yourself before announcing to the world that you will soon be working for yourself.
- Is there a viable market for your business?
Although you may be highly skilled and competent in your own field, you have to assess whether there is a viable market for your skills as a sole trader or as a small company.
How many other people out there are already offering services or products to those that you intend to sell, and how many are already selling into the geographical area that you planning to operate in?
Just because others are already doing something that is similar to what you intend to do should not deter you from setting up on your own (far from it; it shows that there is a demand for such services or products), but it will impact on how you will present your new business to the outside world. In short, what are you going to offer that others don’t? What is it that is going to make people choose you over your would-be competitors? Many in business will refer to this as your USP; your Unique Selling Point.
Underpinning your assessment of whether your intended business is viable would be a detailed and comprehensive business plan. This would cover all aspects of your business, whether that be projected outgoings and income or the various structures and processes that will need to be put in place.
Without a business plan, you will find it difficult to convince others of its viability, which is crucial if you are looking for external help to get going. Many of the following questions will need to be addressed within a business plan. - Where will you be positioning yourself within your market?
Unless you have come up with a particularly innovative or unique product or service, the chances are that there will already be people offering similar things for sale in your intended marketplace.
As we have already touched on, you will need to decide what you are going to do to differentiate yourself from your competition. However, you will also need to decide where you are going to be placed within an established market. Are your products or services going to be expensive, high quality, luxurious and ‘high end’? Or are your products or services going to be ‘cost-effective’ (cheap!), not particularly complicated or advanced, and ‘low end’? The answer to this conundrum is key, as it will determine your running costs, your customers’ expectations and, ultimately, your profitability. It will also determine how you will market yourself at the point of launch.
If you do not know how you’re going to position yourself within your intended market, there is a high chance that your new business will fail, for you have not identified where you fit in and what customers will come to expect from you. - Are you going to work as a Sole Trader or as a Limited Company?
There are many different pros and cons for being set up as a Sole Trader or a Limited Company, which we will cover in more detail in a future blog. Broadly, the main differences are as follows:
trading as a limited company can be more tax efficient but it requires more administration.
trading as a sole trader requires less administration but can be less tax efficient. - Will you need to employ others or sub-contract work out to operate your company?
Whether you plan to be a sole trader or a limited company, the chances are that you will need others to help you run your business. This might be sub-contracting out your marketing orbookkeeping, or directly employing someone to help you with the day-to-day running of the business.
Sub-contracting work out or hiring someone will incur additional costs (overheads) for running your business, and these should be factored into your start-up and running costs. Also, if you are employing someone, employment legislation will apply to you and you will be expected to pay additional tax (such as National Insurance contributions) as an employer. - What will be your start-up costs?
To get going in business, you will probably have to pay out on quite a few different expenses well before you start having money coming in.
Figure out, realistically and honestly, what your start-up costs are likely to be, and then you can prepare yourself financially for starting out on your own. In addition, there are many funds (both public and private) out there which you may be eligible to access that can help you meet the costs of setting up a new business. - What will be your ongoing operational costs?
Many make the mistake in thinking that most of their outgoings will be tied up in getting the business up and running but, while this can be expensive and fairly comprehensive, there are still likely to be substantial ongoing costs that will need to be covered on a monthly or annual basis.
When putting together your business plan, you must include the likely ongoing costs as this will affect the forecast of your profitability. - Can you start up and run your business alongside your current employment?
Wanting to start up on your own doesn’t necessarily mean that you have to storm out of your current job to do so.
Depending on what precisely you are planning to offer, it might be feasible for you to run your new business alongside your existing professional commitments.
Obviously this is a step that will need to be discussed with your current employers, who are likely to be concerned about any professional conflict of interest (are you going to end up working indirectly for their competitors? Is your new business going to take away from their own business?) and also whether you taking on a new business could affect your performance at work (Are you going to be too tired to do your existing job effectively? Will your running another business affect your availability?).
If your new business is small scale and not trading in the same sector as your current employers, the chances are that they will not object to you setting up a new venture. Be mindful, however, that this could be interpreted as a lack of commitment to your current employer and could jeopardise your promotional chances within the organisation. However, your new business may prove such a success that it may turn out that it is you who will be giving your employers notice in due course. - Have you made financial allowances to protect your lifestyle while your business is getting started?
Setting up a new business can be an expensive process, so make sure you have sufficient financial reserves so that by doing so you are not jeopardising your current lifestyle and that you can meet all your existing financial commitments.
Before setting up, you should look to save money in a dedicated fund to support your business and your lifestyle and you should also consider getting initial finance from others sources.
You may also want to look at cutting back on your current outgoings before going solo, and there are many blogs and books (such as Tim Ferriss’ 4 Hour Working Week) that offer some good advice on how you can lower your financial overheads without compromising your standard of living. - Have you talked to an accountant about your new business?
As you can already see, the biggest questions you face about setting up a new business are financial and legal. You are therefore probably best of talking to a qualified accountant who can advise you on the best options for your business before setting up.
Not only will an accountant ensure that you are legally compliant when it comes to tax and your accounts, they can also offer advice on how your business should be constituted (i.e. whether you should be a sole trader or a limited company) and what funds are available to help new businesses. - Have you investigated government or other support for your new business?
Government and the private sector recognise the importance of new businesses for a growing economy and, as a result, there is plenty of advice and some financial support available to those who are looking to set one up.
Here in Wales, Business Wales will offer new business owners advice on how to get going. In Bridgend (where Prelude Accounts is based), Business in Focus offers advice and premises to those who are starting out. - How will you handle the branding and marketing of your new business?
Just because you may know a lot about the product or service that you intended to offer, it doesn’t necessarily follow that you will know all about all the other skills that you will need to successfully set up and run a business.
Just as it is advisable to seek out an accountant for financial guidance, it is also probably wise totalk to a professional marketer or marketing agency about how to go about your initial branding and marketing.
Branding is crucial for a business for helps attract customers and set their expectations for the business, while ongoing effective marketing is needed to maintain awareness of your business and its services. - Who will manage your day-to-day accounts and paperwork for your business?
On a similar note, you may have only given consideration about how you supply your services or the manufacture of your products without fully grasping the need to fulfill all the other essential functions needed to keep a business going.
– Who is going to maintain your accounting books and records?
– Who is going to chase up late payments from customers?
– Who is going to sell or market your new business to potential customers?
It is easy for new business owners to say that they’ll do this is in their spare time, but this can often be to the detriment of both the new business owner and the business itself.
Give serious consideration as to all the necessary functions that must be fulfilled for the business to operate efficiently and legally, and ensure that you have allocated sufficient resources (whether it be financial or human) to meet those needs from the outset. - What insurance cover will you need for your new business?
Whatever your business, you will need some form of insurance to cover your business and its assets. At the very minimum, you will need some form of Public Liability Insurance to cover your staff when they are working outside your office premises and some kind of Professional Indemnity Insurance is also advisable if you are a service provider for other businesses.
A qualified business adviser or an appropriate government agency will be best placed to advise you as to what you will need in this regard. - Will you need new premises for your new business or can you work from home?
A new business needs to be based somewhere, even if you are intending your business to be mobile in nature. Give serious thought as to whether you want your home address publicly identified as the business address, as you may not want customers coming to your home and it may also act as a negative in the perception of your business as well. In this instance, you may want to rent a PO Box.
If you need office space, you may want to work from home but be mindful of possible Capital Gains Tax implications if you have dedicated a part of your house for business purposes. If you intend to employ anyone else who may work from your home, you may also want to seek guidance on whether any health and safety regulations may apply to that space as well.
Alternatively, you may want to rent small premises from which to run your business or you may want to explore ‘hot-desking’ models that are proving to be increasingly popular. Here in South Wales, the Indycube network is a popular example of hot-desking although there are also other networks available. - Have you considered the impact of running a new business could have on your personal life and your finances?
The final question you should honestly ask of yourself is whether you are prepared in your personal life to run a new business.
Although in the longer term you should find more liberty in how you manage your own time in comparison to working for someone else, in the short to medium term, a new business will require a lot of your own time and attention to get it established and to make it a success.
This will involve working in your ‘spare time’ (evenings and weekends), and you have to be prepared to put in long hours and to be readily available to all potential new customers. In other words, you will effectively be ‘on call’ 24 hours a day, seven days a week for as long as it takes to establish your business, and others in your personal life have to understand and accept that this new lifestyle is necessary if your business is to be a success.
Make sure that partners, family and friends are understanding of your new professional lifestyle choice and what it will entail, and be prepared to make tough judgement calls when it comes to competing demands from your business and your own home life.
