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RSS feedsLast month we started to look at setting up your own business,our own business. considered the various legal forms it might take and detailed several practical aspects of setting up a company. But before you plunge enthusiastically onwards, have you given due thought to some even more fundamental issues, such as the effects that starting your own business might have on your domestic and social life?
Running your own business can be satisfying and profitable, but it can also make great demands on you, your family and friends. A survey conducted by Barclays Bank estimated that only one in four sole traders regularly got a full night's sleep, and that a third worked more than 11 hours a day. When you're working for yourself, taking holidays can mean losing earnings, and so the self-employed typically have fewer vacations, too.
So are you the right type? For example, can you cope with every decision being down to you? Do you have the self-discipline and motivation to stick at a job until it's done?
And what about the skills and experience necessary? While you may have the proven salesmanship or specialised know-how that prompted your decision to go it alone, are these complemented by minimal skills in other areas that you'll need? For instance, can you keep a set of books? Do you know how to go about organising credit arrangements with your suppliers? Can you prepare invoices, statements and reminder letters, if your business will need them? In short, you need to ask these and many similarly hard-nosed questions and come up with satisfactory answers to most of them.
Turning to the basic business issues, your starting point will obviously depend on many factors. However, a key one is the size of your new company, so we'd better make an assumption here, to focus our scope. Let's assume your start-up venture is as small as it can get: just you. You'll be in good company, so to speak, as there are over 2.5 million other one-person businesses in the UK. These represent by far the largest category, as the next group, as defined by the Department of Trade and Industry (DTI), is the 1-4 employee category, of which there are around 820,000.
So, you're a sole trader (or perhaps a limited company), with all the right personal qualities. Have you identified your potential customers?
Of course, you might be in the fortunate position of already having a committed base of promised business at the outset - perhaps clients from the company you're leaving. But assuming you're starting essentially from scratch, do people exist out there who you are confident will buy your product or service? This begs a lot of questions.
Firstly, these prospective customers probably don't know what you're offering, even if they know who you are. For now, we'll postpone the issues that this raises, such as advertising, promotion and perhaps public relations. Conversely, do you know who they are? That takes us into the area of market research - another subject in its own right. Even for a sole trader, some investment in market research can be crucial, and the PC and Web can be superb tools for it.
Clearly, there are many issues to consider when you're starting a business.
Next month we'll be looking at one of the most important of all: preparing a formal business plan. Happily though, there's no shortage of useful reading material on all these topics. One good source is the DTI, which publishes a range of free publications (which you can order by phoning 0171 510 0169). Particularly useful is A Guide to Help for Small Firms, which in turn contains dozens of other contacts for further information on a wide variety of subjects.
Another DTI freebie is a chart called Setting up in Business, a guide to official requirements across such areas as VAT registration, health and safety, environmental issues, licences, fire certificates - and all the other formalities that could come with running your own business.
What's that - you're thinking of staying an employee after all?
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