Self-employment carries its own risks and rewards, writes Diana Clement
Ever greater numbers of Kiwis want to hang out their own shingle and become consultants or freelancers.
One survey in May found that 63 per cent of professionals would be prepared to trade in their 9 to 5 salaries and work as self-employed contractors. And those offering advice to business
start-ups have noticed that they're becoming increasingly busy.
Working for yourself does mean freedom and you'll never face redundancy again if your business succeeds. But it requires work.
First, owning a business and being a self-employed contractor are two different things. Self-employment involves selling your own personal labour or skills _ often for an hourly rate, whereas a business is an entity that can build value and be sold.
Contracting can be a great way to get into self-employment. You will usually earn a higher hourly rate because you need to pay your own tax, holidays, ACC payments, and pension.
The risk of being a contractor - especially for just one company - is that you can be laid off more easily than a worker. It's essential, therefore, to diversify from day one if possible.
Enterprise North Shore's chief executive, Terry Hoskins, says the current "economic blip" is encouraging more people - especially senior managers who have been made redundant - to consider going into business for themselves. "We have recently noticed that approximately 20 per cent of attendees on our Starting Off Right Courses have lately been made redundant from their job."
Heather Douglas, founder of HomeBizBuzz.co.nz, a website for home business owners, says there has been a marked increase in site traffic since January - especially on pages that provide start-up information.
Many small businesses start from home, which reduces overheads. In fact some quite large ones such as Trade Me, Navman, Pumpkin Patch and Resene started from bedrooms or garages.
One of the noticeable changes in the business and self-employment start-up market recently has been the increased numbers of men and women who are either at retirement age or nearing it.
Douglas says the economic climate isn't the only cause. Some have found they haven't provided for their retirement financially. Preparing to start a business can take a considerable amount of time. You need to arm yourself with information about your business and understand your own psyche, says Douglas. "A lot of people have good technical expertise, but don't have the business skills."
Both Douglas and Karl Baker, founder of the Red Hot Business Coaching franchise, say that would-be entrepreneurs often do not appreciate how risky business can be. Baker recommends people write down their worst-case scenario - and if they can't live with it, don't go into business.
They also underestimate the need for sales skills. Just because you're an engineer and your work is done largely alone, you still need to sell your business, your skills and the concept.
Some people are more suited to starting from scratch than others, says Baker. "If you are not an entrepreneur and you are risk-averse, then buy an existing business or a franchise," says Baker. "It is far less risky. But do extensive due diligence. A lot of people think it sounds good, but then find the business they have bought is a turkey."
If you are keen to start in business, says Baker, it's essential to take advantage of the free business training on offer from enterprise agencies.
Enterprise North Shore, for example, offers both courses and online diagnostic tools to help you understand:
* Whether starting a small business is appropriate for you.
* What is your business model.
* What your product is.
* Your level of preparedness.
The online diagnostic tools give immediate feedback and also allow Enterprise North Shore to tailor courses to groups of start-ups that have similar weaknesses.
If you pass the diagnostic hurdle and still want to go into business. Enterprise North Shore offers four-hour workshops covering the basics of getting started. Similar courses are available in Auckland, Waitakere and Manukau.
They cover the mechanics of starting up a business and include topics such as feasibility studies, skills evaluation, people, and marketing plans, financial analysis, entity formation, tax, premises and launch. At Enterprise North Shore, for example, services on offer include:
*Courses.
*Mentors.
*Networking.
*One-on-one consulting.
* High tech networking groups and self-help groups for business.
Once past the fledgling start-up stage, many businesses go on to get private mentors and continue with business networking groups such as Business Networking International, Employers and Manufacturer's Association, Rotary, Her Business Networks and more.
Business Mentors New Zealand, another government-funded body, can also help organise mentors. Prospective business owners shouldn't underestimate the amount of help they need. Older new business people especially are "babes in the woods", says Baker, compared with others who started their businesses in their 30s and have 20 years' entrepreneurial experience under their belts. "They can be very naive."
Some people will never look back from taking the leap. The positive benefits, says Baker, include:
*Becoming aware of just how talented you are.
*There is no boss.
*Increased freedom.
*They are building equity in a business, not just earning a salary.
*There is more opportunity to be creative and innovative.
*Doing what you always dreamed of doing.
* The thrill of employing staff and providing livelihoods for others.
On the downside, says Baker, many new business people struggle with having to do everything from marketing to website development themselves. Dealing with accounting and the Inland Revenue Department can be taxing. It can also be more difficult to get a mortgage.
Hoskins encourages people to move as quickly as they can from self-employment or contracting to a full-blown business by taking on associates and outsourcing activities such as clerical and accounting. By doing this they are both building the business' saleable value and also ensuring there will still be a business in existence should they need, for example, to take time off for health reasons.
