Check risks of being own boss

Jeremy Tauri.

It seems to be the year of the start-up business.

When I meet people who are considering self-employment the reasons are such - I want to be my own boss and take control of my destiny and hours, I'd like to not exchange hours for money, I want to do something I enjoy.

The reasons are varied and based on an evaluation of risk, reward and opportunity.

That risk appears to be less in our current environment, interest rates are low, there's work, property values are high and borrowing is available if you have equity and your business is not a completely terrible idea.

But business like any form of investment needs to have a long term plan.

Borrowing to pay for a job is a bad idea but you'd be surprised at how that happens when there's no long term thinking involved.

So what should you be thinking about long term if you're stepping into the self-employed arena? Here are some thoughts and examples.

Getting off the tools - Say if you're a builder the long term plan would be to be building your own houses to plan as opposed to throwing a hammer around subcontracting to someone else's builds.

Any other builder could build a house but a businessperson will need to build a business.

This will take time to do but will generate more income than subbing.

Succession - This is where a chunk of the working on your business will pay off.

Systems, clients, methods and brands are all saleable if they can generate income for someone beyond your years.

Return on Investment - We all know what ROI is, but I'm not sure SMes measure it or discuss it frequently.

A quick way to measure your ROI is to take your profit - deduct what you're worth for your effort then what's left is your ROI. Divide this number by your business assets to get a percentage.

- Jeremy Tauri is an associate at Plus Chartered Accountants