Are You Ready to Start a Business?
As small business accountants in Melbourne who work with hundreds of small business owners, we know what it takes to successfully start a business.
Starting a business can be a very rewarding journey, when done right. It can also be a costly and stressful experience when not done right.
So what does it take to run a successful business, and how do you know if you’re ready to start a business? In our experience, it’s all about the groundwork. That is, the essential steps you need to take even before you embark on your full business plan. We call it the pre-business plan framework.
The pre-business plan framework deep dives on two key elements:
- The personal considerations of starting a small business
- The feasibility of your business idea
These two elements are critical and they’re something that must be looked at even before you start documenting your formal business plan. Why? Because, you’re going to spend a lot of time, effort and money on developing and executing your eventual business, so it’s a smart move to invest a little bit of time up-front to really test if your business idea is worthwhile pursuing in the first place.
There’s no point in going ahead and creating your full business plan until you have given some careful thought to the personal aspects of starting a business as well as having confirmed that your business idea will be viable and have a good chance of success. That way if you discover that running a business isn’t for you, or your business idea isn’t really that great after all, then you can quickly scrap it and save yourself a tonne of time, effort, money and heartache.
But if the preliminary work proves to be positive, then that is your green light to start work on your full business plan and explore your proposed business idea further.
This article covers the personal considerations of starting a small business. The second aspect of starting a business - the feasibility of your business idea - is covered here.
The Personal Considerations Of Starting A Business - The Self Analysis Exercise
Be clear about your ‘why’ - why are you wanting to start your business?
What are the reasons you want to start your business? This question might seem a little ‘fluffy’ at first. But it really is the very first step in starting a business, and the most overlooked step. You should always keep your reasons in mind when researching and investigating the feasibility of your business idea. Not only does your business idea need to be commercially feasible and viable, but it also needs to be feasible for you on a personal level.
So why do you want to start a business?
- Is it because you’re looking for freedom from the daily grind of the 9-5, or permanent night shift, or whatever work routine you’re feeling stuck in?
- Is it because you want to be your own boss and no longer want to answer to anyone or be micromanaged?
- Is it because you want greater flexibility and the ability to work on your own terms, perhaps around family commitments or a desire to travel or pursue a particular hobby or interest?
- Is it because of the potential to earn more money and create a more comfortable lifestyle for yourself or your family?
- Maybe it’s because you’re just bored of your current job or career and you’re looking for your next challenge?
- Or maybe it’s because you have a product or service that you believe there’s a really strong demand for.
Undertake some self analysis - compare your character traits to those required of a small business owner - do you have what it takes?
Starting a business demands certain personal characteristics. This part is about you as an individual. You need to give careful thought to the questions listed in this section, because in our experience as Accountants in Melbourne, there are people out there who are not suited to running a business.
Now, that’s not to say they don’t have a great idea or a fantastic skill set. It just means they lack the personal traits that are required of a business owner. For this reason, they’re probably better suited to working for an organisation as an employee.
In our experience, having the following personal attributes often makes the difference between business success and business failure. Which of these personal characteristics do you have?
- Strong work ethic
- Determination and persistent
- Ability to manage your time and be very good at planning
- Strong people skills
- Creativity and an element of innovation
- Competitive and enjoy competition
- Open minded and open to constructive feedback and criticism and open to ongoing learning
- Confident, decisive and action orientated
- Leadership skills
Some of these characteristics can be taught to some extent, such as leadership skills and time management strategies. However, the rest are quite intrinsic. If you don’t have them, you’re probably going to struggle with running a business.
For example, if you’re a true self-starter you won’t need someone on the sidelines encouraging or motivating you to start a project (or even finish one). It’s a drive and desire for success and accomplishment that simply comes from within.
Likewise, someone if you have a strong work ethic you won’t have to think twice about getting yourself to the office each day (or wherever your work location), because that drive will come from within.
But if you lack the motivation to see a project through to the end, or to show up every day to get things done - then you may need to think very carefully about starting your own business. Small business success relies heavily on you, the business owner, having these characteristics.
Do you have what it takes to endure the running a business - the physical, emotional and financial strains that you will encounter as a small business owner.
Are you prepared for the fact that running your own business can be much more time intensive than the 9-5 or ‘fixed hours’ job you may be accustomed to?
As a business owner, you could end up working 12-16 hour days and working 6 or even 7 days a week. You could also find yourself working on public holidays or during times of the year that are usually a holiday period for others.
Do you have the physical, mental and emotional strength to withstand the pressure and stress that can be part of running a business?
This one is actually a very serious consideration because in our role as accountants and business advisors we see first hand the stress that some business owners try to deal with and the impact that it can sometimes have on an individual’s mental wellbeing.
It’s a very real and prevalent issue, so much so that we attended a full-day workshop run by the Institute of Public Accountants dedicated to the topic of mental health and wellbeing. This workshop gave us, as the advisor, the tools to better support our clients who may be dealing with mental health problems or even a mental health crisis, possibly brought about by stressful matters going on within their businesses.
We’ll actually be covering this topic in more detail in an upcoming episode of the Small Business All Figured Out podcast.
Are you prepared, if needed, to temporarily lower your standard of living until your business is more established?
Running your own business doesn’t necessarily translate to a better income. During the start-up phase, and sometimes even beyond that, you may be earning an income that is much less than you’ve earned in other employment.
You’ll need to be prepared for this and budget accordingly. Also, when you run a business, you may find that you simply don't have the time or the money to meet your personal goals. Booking that dream holiday, paying off the mortgage and spending more time with children and grandchildren are all personal goals that you may have to postpone as you work towards achieving your business goals. You need to decide if you can handle that.
And on the topic of family...
Will your family be prepared for the strain that they may experience in the startup - or other - phases of your business?
There can be a big difference between working as an employee for someone else and running your own business. You may feel that you need to spend as much time working on your business as possible.
If you do not have set hours and you cannot afford to take annual leave, this can decrease the amount and quality of time you spend with your family.
What are you prepared to lose in the event that your business doesn’t succeed?
Ideally you don’t want this business venture costing you your life savings or leaving you with debt that will take years to pay off. You also don’t want it to cause issues with your spouse, family and friendship circles, so be mindful of these considerations as well.
Business skills - do you have the necessary skills to run a business or are you prepared to learn them?
Certain skills and experience will be essential to the success of your business - and it’s very unlikely that any one person is going to have all of the skills necessary to running a business. This means you’re going to have to do any - or all - of these things:
- Spend some time gaining some of the skills that will be needed to run your business successfully.
- Outsource certain tasks to a professional or expert
- Hire staff who can assist you or bring a skillset to your business that you don’t have.
Take a moment to assess your skill set from the perspective of running a business. This is basically an analysis of your strengths and weaknesses. It’s really important for you to be aware of what they are, and to be realistic about it too. It’s unlikely that you’ll be able to do everything within your business yourself. Sometimes it’s not even about a lack of skill or knowledge, but more about a lack of time. An example of this may be that you could learn to do the bookkeeping for your business, but the reality is you may not be able to find the time. Meeting BAS deadlines and other business tax compliance deadlines will become stressful with everything else going on, and you just won’t be as efficient as an experienced bookkeeper would be.
As a business owner, you will end up wearing many different ‘hats’ within your business and taking on a range of responsibilities. Relevant skills you’ll need include:
- The skills required to do what your business actually does - if you’re a tradesperson you’ll have that skill-set; if you’re a physiotherapist you’ll have that professional skill-set.
If you realise that you don’t have all the skills you need to start your business and you know that there are some that you just can’t outsource right now, it’s a good idea to start learning these skills ahead of time if you can.
You’ll be off to a better - and a somewhat easier start - if you can overcome any skill deficit before your business starts. Because once your business does get going, you might find that you’re too busy, too tired or too overwhelmed to factor business education into your schedule.
Over to you
Once you’ve gone through this entire self-analysis exercise, really reflect on what comes out of it for you.
Do any areas of concern or red flags pop up? Are there any significant misalignments between the kind of person you are and the type of business you’re thinking of getting into? How will you overcome this?
Do you need professional assistance to ensure your startup business is a success? We're experienced Small Business Accountants in Melton, Melbourne who specialise in Startup Business Accounting. Contact us on (03) 9746 6479 or online here.