Maybe you’ve always wanted to run your own business or possibly you’re just fed-up with working for someone else. Perhaps you’ve been made redundant or inherited some money and thought: this is it! Time to strike out by myself.
That’s great. But before you start a small business, here are six questions you should ask yourself first.
1. Can my business make a profit?
The research that should be done before you set up a business, and how you should do it, is a topic for a much longer article (and there are plenty of books on the subject too).
The point here is that this research must be done.
You need to consider supply and demand, your niche, your USP, your location, the competition, the set-up costs…
Don’t start a business until you’ve ensured it stands a fair chance of being economically viable. Remember, your wages need to come out of that profit.
2. Do I have a rainy-day fund?
In fact, forget the rainy-day fund, you need a full-on storm fund. Surveys of entrepreneurs show again and again that many encounter unexpected costs in their first year and/or fail to make a profit for the first 2 or 3 years. If this business will be your only income, that means you need to think about how you will pay the bills until you can take a wage from your business.
3. Am I prepared for the time investment?
Start-up owners who work less than a 40-hour week are rarer than hen’s teeth, and those who work less than 60 aren’t exactly numerous either. Look at the other commitments in your life, including anything else you do to earn money, family, friends, clubs etc. and ask yourself whether you have the time a start-up will demand. If you don’t, what will you sacrifice?
4. Can I work by myself?
If you’re going to be working by yourself, at least at the start, you need to consider how you’ll handle it. There are three challenges experienced by people working by themselves: motivating themselves and managing their time; loneliness; and sole responsibility.
When you work by yourself, there’s nobody there to nag you or encourage you to get the work done and you have to plan your activities to hit deadlines and move your business on. It can be lonely, too, working away in an office or workshop with no human interaction.
There’s also the pressure of being solely responsible for customer satisfaction and the success of your business – working by yourself means that all falls on your shoulders, even when you’re ill, and there are no colleagues to bounce ideas off or delegate tasks to.
And if you’re not going to work by yourself, you need to ask…
5. Can I handle employees?
Do you have any experience or training in people management? You need to understand how to handle employees to get the best from them while maintaining a good relationship. You also need to understand your legal duties to them as a boss (payroll, pensions, leave entitlement, health and safety, wellbeing).
Depending on the nature and frequency of the work you need completing, you may find it easier to hire freelancers, freeing you from employer responsibilities.
6. Have I got my head around the legalities?
Insurance, health and safety, import and export duties, finance, business loans, tax, VAT, company registration and company status… there are a lot of rules, regulations, decisions and compliance issues to get your head around when you run a business. Make sure you get sound advice right from the start so that you don’t fall foul of any regulations or get any nasty shocks, courtesy of HMRC.
It’s fine to answer ‘no’ or ‘not sure’ to some of these questions now – and you may not know if you can work by yourself until you try it!
But you need to turn those responses into ‘yes’ before you start your business. Do make sure you’re prepared for the challenges of running a small business and that you understand as much as possible about what’s involved before taking the plunge.
Find more help and support for your London-based business in our information centre.