Should you set up your own business?

You may have been inspired over the summer break to finally take the plunge and set up your own business. While this could be an incredibly rewarding decision, it’s important not to get carried away with the excitement. Make sure you invest time planning to increase your chances of turning your dreams into reality. Here are some basic principles to help you get started.

Do your research

If you’re in paid employment, don’t rush to give up your day job until you really have to. Use the transition time between making the decision and taking the plunge to do your research. Use your spare time to plan, research and prepare for your new venture, even if it means squeezing it into your lunch break, commute or weekends. Your research may involve discussions with contacts, market research and even some small-scale trialling. Through doing this work you may discover that your idea doesn’t have the traction you hoped for and you might need to go back to the drawing board before giving up your current position.

Structure appropriately

It’s sensible to hold off creating the legal framework of your new venture at the start. If possible, launch your business as a sole trader. This gives you the opportunity to check its viability before making a final decision. If you don’t go ahead at this point, at least you’ll have saved on the costly outlay around lodging the paperwork. But if all systems are go, make sure you get professional assistance and don’t do the structuring on the cheap. A budget job, such as you might do yourself online, could create problems that can come back to haunt you later.

Budget conservatively

Budget considerations in the pre-launch phase centre on your estimates of how much money you think you will need and on what you anticipate bringing in. Make cold, hard projections here with a conservative bias. As a rule of thumb, estimate the amount of capital you think you’ll need, then double the figure. Next, write down your anticipated profit, then halve the amount. Does that leave you enough capital to operate in a realistic way? If not, your new venture is in trouble before it even gets off the ground and you might be back in your old job sooner than you imagine.

Get networking

Developing business connections is critical for any successful new business. People that you can trust and talk to in confidence can provide the support, assistance and advice to get started and make it a success. If you are lacking in this area, get to work on it by networking, meeting, attending functions. If you take care of the network you build for your new business, it will most likely take care of you.

Final words of caution… and encouragement

Starting your own business is not for the faint-hearted. Be ready for long hours and plenty of hands-on graft to get it off the ground. Bear in mind too that there is a high failure rate for new businesses, with four out of five businesses failing in the first five years. And the attrition rate remains high for the survivors beyond that point. If you can’t cope with a degree of ongoing instability and uncertainty, then this might not be for you. Reality check aside, if you’re really up for it, then give it all you’ve got! Moving beyond the simpler functional role of being a paid employee will often bring greater personal and financial rewards. The only way to find out if you can be successful is to give it a try.