Running a Small Business: What Entrepreneurs Need to Know
Small businesses are the backbone of our economy, with small and medium-sized enterprises (SMEs) accounting for 99.9% (per cent) of all private-sector business in the UK according to the Federation for Small Business. The reasons for starting a small business vary from person to person; many people choose self-employment out of a desire to put skills acquired through years of traditional employment to work on their own terms, while other successful businesses form as the result of a job loss or other unexpected life event which necessitates getting back on one’s feet quickly and with as much flexibility as possible with regard to work-life balance. If you are thinking about starting a SME, you will need to bear the following in mind no matter what type of business you wish to start and for whatever reason you wish to start it.
Starting a business
The obvious starting point is to have an idea and a business plan. Sample business plans of successful entrepreneurs are widely available on the Internet. One thing that holds back many potential entrepreneurs from starting their own business is the notion that their business must be unique. Nothing could be further from the truth! Anyone who regularly goes into a salon or has her car serviced is well aware of the choice she is making about this versus that hairdresser or auto repair shop. Competition is good for business because it proves that, in terms of supply and demand, there is room for one more. The entrepreneur’s goal upon starting the business, then, is to build it up by attracting clients through a successful marketing strategy.
Sole trader v. Ltd
A sole trader company, or sole proprietorship, is the simplest option for many home-based businesses, freelancers and other independent contractors. Although many sole traders work alone, one can still have employees and be considered a sole trader. The difference between a sole trader company and a limited company is that the sole trader is personally responsible to report profits and losses and to pay taxes accordingly as personal income. A limited company is a separate legal entity from any one person; however, the limited company’s director is responsible for following the company rules laid out in its articles of association and may be dismissed for failing to do so. Both entities are required to register for Self-Assessment and to file a Self-Assessment return each year. New entrepreneurs must register their business with the county clerk and also check with the county clerk about taxes and other reporting requirements.
Among the many aspects of running a small business that entrepreneurs must consider are any factors which might cause it to fail. One of the biggest mistakes an entrepreneur can make is not to have a backup plan for anything which might go wrong. All entrepreneurs need to bear in mind that “anything that can go wrong will go wrong” and consider worst-case scenarios before, for example, applying for a business loan using one’s home as collateral, so as to avoid a financial disaster. What if you plan for the business to turn a profit in two years’ time but it takes three or four years to happen? If you are renting office or shop space for your brick-and-mortar business, what if you run into problems with the building itself which may have a negative impact on your business (such as plumbing, climate control or mould growth) and the landlord isn’t willing to assist in remedying those problems? If you find yourself having to physically relocate your business and temporarily halt operations, you will also be faced with a loss of income. Plan, plan, plan for every contingency and insure the business against any material losses.
Another mistake that many entrepreneurs make in the early stages is spending too much time on the core business and devoting too little time to other aspects of business operations, particularly developing and implementing a marketing strategy. Without clients, there is no business. Thankfully for entrepreneurs with limited marketing resources, the Internet provides countless free and low-cost options for promoting a small business, including social media networks such as Facebook and Twitter, professional networking opportunities through LinkedIn and online adverts through the likes of Google Ad Words. The successful entrepreneur will exhaust such resources before investing in more traditional – and typically more costly – television and radio advertisements which may or may not be relevant.
Benefits of self-employment
While the realities of running a small business can be overwhelming – particularly in the start-up stage – many entrepreneurs are quick to point out the benefits of being one’s own boss. For most businesses run entirely online and via telephone, the work hours are a great deal more flexible than in any traditional employment situation, and any entrepreneur will find this agreeable if he is “not a morning person.” The home-based entrepreneur is also spared the obligations of professional attire and a regular commute as well as the pressure to conform to an office culture. And while a steep learning curve comes into play for many entrepreneurs where managing day-to-day operations, record keeping and finances are concerned, it can also be very satisfying from a professional standpoint to be entirely in control of these aspects of the business as opposed to being a traditional employee whose employment status depends largely on how successfully those operations are carried out by the organisation’s top management.
With SMEs accounting for so much of the UK’s economic viability, one certainly has a lot to gain from starting and running a small business. If you are ready to take the giant leap from traditional employment to entrepreneurship, thorough planning will prepare you well for the challenges – and triumphs, if all goes well – which lie ahead.