Ann Gibbard chats about becoming a business owner.
There are many reasons why people choose to run a business rather than being an employee. Some of the most common reasons are:
- To be the boss. You might think that you can do the job better than existing employees, choosing your own standards and methods of working.
- To earn a better income. You get to keep the profits made from the business.
- More flexibility or better work life balance. You get to choose when to take a day off to go fishing or to attend a school camp.
- To provide a job for themselves.
- For the excitement and challenge.
The reality of being in business can be very different from the dream when the business was started.
Too often businesses are underfunded, and business owners lack the knowledge to run a successful business. The result is a business that has cashflow problems, the owner is working more hours than they would if they were employed and is often being paid less than a full-time job. On top of that the owner carries the risks associated with running a business and is liable for the losses made.
What can you do to improve your chances of achieving what you set out to get by being a business owner?
Plan before you take the leap of faith
The benefits of a business plan cannot be underestimated. It allows you to define your vision, your target market, your point of difference, and your strategy. It allows you to define what you need to get started, how much money you are going to need to fund it, and the next steps in your growth plan.
Have enough funding
There are two parts to this. The first part is having enough money in the business to fund the day to day running costs (working capital), and to allow for investment to grow the business. Too often business owners expect to the use the profits from the business to grow the business without sufficient investment. The second part is having enough savings to live on while you grow the business to a size that it can sustain your income. If you don’t, you will be borrowing from your creditors to pay your mortgage or rent.
Define the tipping point for when it is best not to be in business
At what point do you pull the plug before your debts spiral out of control? If the business is not growing, if you are unable to differentiate yourself from your competitors, if you are unable to attract and retain staff, and your debt is getting out of control, you need to have serious look at your business model and make some changes. This may mean getting out of business.
Get external advice
This can come from many places, such as a business consultant, coach or mentor, other successful business owners or accountants. A friend or a sister-in-law is probably not going to give the best advice unless they have built successful businesses themselves. There is no need to do this on your own, but you need to find the right person you can trust with the knowledge to give you good advice.
Ann Gibbard is a Business Success Partner with Oxygen8 Consulting. For help with growing your business or improving its profitability, preparing your business for sale, or for a free Business Diagnostic, contact Ann at ann@oxygen8.co.nz or 021 682 014.