So, you’re ready to become a small business owner and show the world what you’re made off. Congratulations 🙂
Let me give you some essential advice on how to avoid the most common pitfalls when starting a new business. Especially when this is your first time. There are quite a few things to think about and getting those wrong could mean a quick end to your adventure.
First of all, I assume that you know what your business will be about and that you have spent some time defining your Business Model Canvas.
I also assume that you’re good at what you’re going to do and offer to your potential clients. I do hope you have tested your field of expertise and you know in which areas you will have to improve and advance your skills. There are always areas, so don’t kid yourself.
In most parts of the world, you’re required to register a business if you want to charge anyone for your services or products. Make sure you understand how this works and what business options are available to you. This usually starts with a sole-trader business, goes on to partnerships or limited companies. Make sure you understand the difference and what that entails in your country.
Another significant aspect is the taxes and social security you will need to provide for. Again this varies depending on your country of registration. If you have been employed in the past, your employer will have dealt with this and whatever was left was transferred to your account for you to spent as you wish. As a company, you are in charge of making these contributions, so make sure to plan for this. I’ve made this mistake before and spent all the money back into the business and after a year was presented with a bill of over 25.000 Euro for unpaid taxes. This is not a nice place to be, so be aware and plan accordingly.
In some countries, you’ll also have to deal with Value Added Tax, which is often managed on a quarterly basis. This might vary depending on the location of the business. Make sure to find out how this works for you.
Generally speaking, it is often best to pay an accountant or bookkeeper to manage this part of your business, but make sure you understand how it works.
Knowing all aspects of your business is vital for any business owner. It doesn’t mean you have to do it yourself, but you should know about it.
When starting, most of us are happy for any customer that comes our way. Be careful with this. In the end, you’ll have to deliver. There is nothing worse than taking on a job for a client who is continually changing his mind and keeps you working for far longer than you calculated, losing money on the way. Be clear about the things you offer and for who your products and services are made. I know it can be hard if only the wrong customers are in front of you. We all went through this. As clearer, you are about your target market and the problems you solve as more you will attract the right customers. Trust in your business model and your abilities.
Running the Business
As a new business owner, there are lots of things you’ll have to take care of. Many of those cost money or time. Be aware of it! This is part of running a business. After a while, you’ll see which parts are easy for you and which are more outside of your comfort zone. You can always outsource some of it. But if possible, I would advise starting all the tasks required by your business yourself. This experience will help you later to choose the right people for the job when you’re ready.
Depending on your type of business, you might have to employ staff. This is a tricky area for most of us. Even seasoned businesses get that often wrong. Understand employment laws and requirements in your country very well. Make sure you know what you expect from each employee and that you can communicate this. I often advise hiring freelancers to start and to gather experience in working with others. You’ll most likely need to learn to become an employer as well. With staff comes responsibility.
In my experience, 50% of a small business owner’s time is spent doing the actual job, and the rest is spent on running the business side of it. Of course, this might vary. For consultants who work on regular contracts, the business side might take less time. For most others, a lot of time is spent on accounting, marketing invoicing, etc. This is the price to pay for the freedom of running your own business. However, as your business develops, you will be able to outsource or employ staff for a lot of the work.
As you’ve might gather, running a business is a process of constant growth. Make sure you grow with it. Keep developing your skills and learn new ones as they are required. This will never stop, and it is vital if you want to ensure the long-term success of your business.
Running a business is an extraordinary journey. It is the most fantastic thing I’ve ever done, and I enjoy almost every minute of it.
If you want to learn more about starting a business, check out our website.
Are you ready for your adventure?