I have run a number of businesses in my time, large and small, successful and unsuccessful, and though I wouldn’t dream to pretend that I know all there is to know about running a business, I have learned quite a few things.
Many people do dream of being self-employed and running their own business, and for very good reasons too. You are your own boss, you can decide when you work and when you don’t and, of course, there is the satisfaction that you get from creating something, out of nothing.
While all those things are great reasons to start your own business, you should be aware of some of the drawbacks as well. I would never go back to being an employee again, but here are twelve of the drawbacks and pitfalls that come with being self-employed and running your own business.
1. You have to run it like a business, not a pet project
The first thing that you have to be aware of is that this is a business, not a hobby, or a part time pet project. You can’t afford to be sentimental about your business; its purpose is to make you money, not to keep you occupied. That means that you have to be disciplined about how you spread your time around. If you were a self-employed landscape gardener, for example, then you would probably prefer to be out in the fresh air doing what you love. The reality, however, is that you also have to spend time cooped up indoors doing the books, chasing debt and working on the marketing of your business.
|Know your numbers|
2. You do need to know your numbers
You don’t need to be a qualified accountant to run a successful business but, you will need to have a basic understanding of accounts so that you keep an eye on how your business is doing. Don’t think that just because you are busy, you are making money. It can be easy to fall into the trap of thinking that you can judge how your business is going by looking at what invoices you raised today. What you really need to know is how much net profit you made today.
3. Customers can be painful
Running a business would be easy, if you never had to deal with customers! Customers can be very awkward sometimes and some can be downright irrational! You will need a lot of patience to be able with some types of customers and sometimes you will need to take a firm hand with them too. When you deal with a customer, you are dealing with a person who has either spent their own hard earned money, or they have put their job on the line by spending their employer’s money. That means that some will expect the earth for peanuts and some will do, all they possibly can do, not to pay at all!
4. You can’t avoid the tax man
You can run, but, you can’t hide from the tax man. Always put a percentage of whatever you earn in a separate bank account so you know you will have the funds to pay for future taxes that will become due. You can gamble and assume that you will earn enough later on to pay the tax, but, in a small business, that can’t always be guaranteed. Remember the old saying; prudence is the accountant’s best friend!
5. Don’t borrow, if you don’t need to and don’t borrow out of desperation
Credit is harder to get these days, but even so, you shouldn't borrow unless you really need to. Borrowing money will put you at the beck and call of someone else and it will create repayments, which just have to be made. If you do borrow, then make sure that your business can easily afford the repayments, even if business drops off. Also, don’t ever borrow to try and keep a sinking ship afloat. All that will do is delay the inevitable.
6. You will be on duty 24/7
Unless you are really lucky, the idea of being able to work fewer hours when you are self-employed probably won’t come to fruition. When you are running your own business, there is always something that you could be doing and you will probably find yourself thinking about business, even in your free time. That’s why it’s important that you do make clear cut boundaries between work time and free time, to make sure that you don’t neglect your family and your social life.
|Staff can be a headache|
7. Employing staff brings a whole new set of headaches
OK, so your business is doing well and you are so busy that it’s time to take on some help. Think very carefully, before you take this step, because it’s a biggie! When you take on staff, you also take on a heap of legal responsibilities. In the UK, you will need employer’s liability insurance, you will need to do PAYE, staff will go sick and they could ask for maternity leave. The other thing to remember about employees is that they will have different priorities to you. For them it is just a job, so they will leave a job unfinished, when it’s time to clock off, and they will want a pay rise, when you can’t really afford it. Of course, you can’t generalise about people in his way, but it is something that you should consider carefully before you employ any staff.
8. You can’t do it alone
Don’t be afraid to ask for help and always be willing to learn from others. You might think that you can do your own accounts, file the tax returns, build your website, create the advertising and marketing plans, and everything else that comes with running a business, but where are you going to find the time to make some money? Employ the services experts, as and when you need to. You can always switch them off again when you don’t need them, or you can’t afford them.
9. You will need to look at the long term
There are very few, if any, get rich quick schemes that work, so you will need to be in this for the long run. A good business is one that starts from a firm foundation and then grows steadily so don’t try and run before you can walk and don’t book that world cruise just yet either. You will need to grow a good customer base, repeat business and a reputation and it takes a heck of a long time before a business can be run on autopilot.
10. You can’t treat a business as your own overdraft facility
If the wife needs a new car then tell her to wait! Don’t be tempted to dip into the business reserves and treat it like your own personal overdraft facility. Keep the business finances completely separate from your personal finances and only take out what you know you can afford to pay yourself.
11. You will need holidays
|Take a holiday|
Even though the business may be your priority, you will work much more efficiently if you take a holiday now and then. Even if spend your time on the beach thinking about next year’s marketing plan, you should still try and get some time away from the business and have a break
12. You will need to know when it’s time to call it quits
And finally, we come full circle in that being self-employed is not a hobby so don’t become so attached to your business that you can’t let it go if it turns out not to work. Pumping more and more of your own cash into the business or taking on personal guarantees that you can’t really afford won’t change the prospects of your business working. If your business really is going downhill, then swallow that pride and call it a day.
Now go out and start your own business!
Don’t let this put you off starting your own business! I’ve made a lot of money in my time and I’ve lost a lot too, but I wouldn’t change a thing, because being self-employed has been fun. So, I never got to be a Richard Branson, or a Bill Gates, but the least I can do is to pass on some of the things that I’ve learned trying.