Money - Jeremy Tauri: Starting a business needs careful planning

Jeremy Tauri.

There has been a lot of talk recently about starting a business. National has proposed allowing people who are unemployed to withdraw $20,000 from their KiwiSaver accounts to start up a new enterprise.

It's a worthy aim — it would be great if people who were out of work were able to start successful new ventures. But entrepreneurship is not a magic bullet solution. Here are a few things to watch for if you're wondering whether self-employment is your future.

• •Understand your market: It's important to understand the market you're launching into with a new business. Will you have competitors, who will they be, and are you going to outperform them in price or service? You don't have to be the cheapest on the block but you will need to have a reason why you're more expensive. Who will your customers be and how will you find them?
• •Know your skills: It's not a good idea to launch into owning your own restaurant, say, if you've spent all your life so far working in a bank and never had anything to do with the hospitality industry.li>

• •If you're considering a new business in a new industry, it's a great idea to get some work experience first so you can understand what you're really in for as opposed to learning by mistakes on the way.li>

• •Will it pay you? How much can you actually hope to earn from your business? Lots of small business owners will forget to pay themselves when forecasting planning to live on whatever might be left over after paying the bills.li>

• •What resources do you have: National has talked about $20,000 to start a business but in reality that wouldn't go far in many industries.li>

• •What do you want to achieve: The idea of being your own boss is sometimes pretty tempting but it doesn't always live up to the daydreams. Have a clear idea of why you want to start your business and what you want to do with it.

Jeremy Tauri Jeremy Tauri is an associate at Plus Chartered Accountants.