A lot of people think that when you start a business, that you will make more money compared to working for a salary. There is also a misperception that when you work for yourself that you will eventually be playing golf at least once a week with some big shots while talking about business and making sweet deals and earn pockets full of gold. People also tend to believe that you get a lot more holiday than those 15 days of annual leave that you currently get. Unfortunately this is not the case for most businesses.
Having a business is like having a baby - it costs money and takes your sleep away. A business requires financial investment as well as a huge amount of time and energy.
The hard truth is when you work for yourself, you have no leave. No work no pay. It is as easy as that. So forget about playing golf and taking a holiday every 3 months, at least for the first year or two.
If your business is successful, it should break-even after 2 years, meaning rather than eating your time and money, your investment should, after two years of sweat and probably tears, start paying off and you should start to show profits, even if it is small at first.
In a broad spectrum, you can decide on 2 different businesses, depending on the end goal you would like to achieve:
1) In the first type of business, you probably operate as a sole proprietor or partnership and the goal of the business is simply to not be employed and work for a boss, you want independence - you are happy to make an honest living, doing your normal 8-10 hours of work a day and sustaining your lifestyle. You will only ever earn as much as your time is worth.
2) The second type of business is where your goal is not just independence and making ends meat, but to be that person playing golf on a weekday making sweet deals and earning pockets full of gold. This can be much more risky but the end result can be so much more rewarding.
There is nothing wrong with aiming for business type number 1 - in fact, a lot of entrepreneurs start their journey here. I think a lot of entrepreneurs wish they were happy with sticking to option number one as you can lose a lot of money aiming for business type number 2... Most successful entrepreneurs will probably be able to tell you about a few mistakes they made or ventures that did not take off and the thousands or millions they have lost.
If your goal is business number 2, then you need to be willing to take a few more risks. You cannot achieve the end goal with only selling your time as your time is limited and will always be limited. You must consider options where your income is not directly dependent on your time, consider the following options:
The key is to ensure your income is not dependent on your time alone. It is simple really...
When you aim for one of these types of businesses be sure to minimise your risk. You must consider the following:
We highly recommend that you consider consulting professionals to guide you in terms of these points - talk to a lawyer, ensure your contracts are legal, paying that thousand bucks for a contract can seem like a lot, but believe me you will wish you paid a professional rather than having to fund a lawsuit, future you will thank you later.
Consult an accountant. Ensure you understand when it is necessary to register for VAT and when your company requires an audit. Ensure your business is SARS compliant and plan for taxes. Understand tax laws and learn how to be smart about your taxes, SARS provides businesses with many ways to pay less taxes, but it can take a bit of work, believe me, it is worth it.
If your business is based in South Africa, make sure you know when it is necessary to be BEE compliant and the different levels of BEE.
In our blogs we try to provide as much guidance as possible, however every business is different and requires some personalisation. If you do not need assistance from our Nyfti team, we hope that we can at least guide you in asking the right questions and knowing what to consider when you are starting your business. Feel free to give our team a call for some personalised assistance.