Whether you're recently laid off, part of the Great Recession, staying put at work, or joining the “quiet quitter" phenomenon, one thing can be said with certainty. The nature of work as it was once known hasn't been the same since 2020. Two and a half years into this new normal brought about by COVID-19-related factors, the collective rethinking about work continues to dominate headlines and discussions. And one pathway that some are considering more than ever before is that of opening up their own business. A recent report by Digital.com found that one out of every 10 workers that went through a layoff this year planned to start their own business, proving that enthusiasm to go solo isn't waning.
Being your own boss requires discipline and calls upon skills that life as a traditional employee doesn't require. Often, there is a need to be "always on" for customers and vendors, and success relies upon outside factors such as clients or the economy. That said, many entrepreneurs cite benefits that come with being on their own, such as staying out of the traditional workforce and being in "boss of myself" mode. One major draw is being accountable to one person, or to fewer people, at work. Another is having the ability to work as little or as much as is needed, which helps strike a work/life balance that isn't available at the typical 9-to-5 job. If you're thinking about starting your own business in this uncertain landscape, read on for a few tips.
Decide what your business will be and what it won't be
It is important to be as specific as you can about your business when you sit down to start your planning processes and brainstorming sessions. These sessions about your new business opportunity should take place before making any other decisions. Some questions to consider:
- Are you looking to fulfill a niche?
- Provide a service?
- Solve a problem?
- Who, if anyone, are the outside competitors or possible collaborators for the business?
The more concrete your mission and plan, the easier it will be for you to know what work to do and what work to pass up. If you're uncertain about what kind of business you'd like to start, you can also do some homework and look for business opportunities. For instance, some entrepreneurs prefer to start up a business from scratch, such as a consulting or coaching business, while others may consider opening up a chain or a franchise. It is important to really take some time to think about the types of business opportunities that might already exist for you, or if you want to hang up a shingle and start anew.
Money, money, money
Getting a clear financial picture about business opportunities can be sobering. This is especially true for anyone just starting out, but getting that picture is a must because money is key here. Chris Russell, a certified financial planner who works with entrepreneurs at San Diego, CA-based Tempus Pecunia, suggests building and updating your business' financial projections often because circumstances change, such as during the current landscape with inflation impacting everything from housing prices to the cost of school supplies. “Understand how your business is affected by various economic conditions," he says. “Different industries respond differently to economic pressures."
In addition, he suggests having roughly six to 12 months' worth of cash on hand to support the business and understand financial projections. Know "your initial [start-up] and recurring costs," he says. "Be conservative with your expense estimates so that there's room in your budget for the unexpected costs that will inevitably pop up." Recently, the Small Business Administration (SBA) reported that microbusinesses, that is, those with one to three employees, cost an average of about $3,000 to start up while home businesses run anywhere from $2,000 to $5,000, according to the SBA.
Dealing with the details
Starting a business is an exciting thing. Less exciting, however, is the amount of details that go into structuring and setting it up properly. There is much to consider before hanging up that proverbial shingle, and a lot of it involves paperwork. One important need is to separate business and personal finances by setting up bank accounts and credit accounts that are tied directly to the business rather than your personal funds. Another is to look at the structure of the business as it pertains to taxes and liabilities. "Understand the risks that your business is exposed to and how to manage those risks through insurance or otherwise," says Russell.
Be prepared, be flexible
With the economy being as volatile as it is right now, an initial business plan could hit a speed bump. Moments like this are not ideal and no business owner wants to go through them, but they are where the advice about having ample cash reserves come in. Speed bumps also often provide business owners with an opportunity to get creative or to pivot. "Be ready to adjust prices and stay nimble as costs vacillate," suggests Russell.
One way to get a better picture about the entire venture process is to take time to work with professionals such as financial advisers, accountants, and attorneys who can help you define and structure all aspects of your business more properly. Professionals can also help you define your role and figure out your strengths, weaknesses, likes, and dislikes. "As a business owner, you wear all the hats," says Russell. "If something isn't your strength, will you do it yourself, outsource it, or hire someone internally?"