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The notion of buying a business to control your own destiny is often glamorised but in reality, is buying or starting your business a smart idea?
Having your own business has a number of benefits, including the potential for you to earn more than you would as an employee. That can lead to strong financial rewards through profits, equity growth and potential resale value. You have the flexibility and autonomy to set your own schedule and prioritise tasks, therefore more control over your own destiny.
You can use creativity and innovation to express your ideas and bring your vision to life. You may find fulfilment in pursuing your passions and making a positive impact on customers, employees and communities. There will be continuous learning and personal growth, as you encounter new challenges and opportunities that help you develop new skills and expertise.
However, on the other side it is important to note that being a business owner comes with risks and challenges, including financial uncertainty, no steady pay cheque but regular costs, long hours and stress, and the potential for failure.
Entrepreneurship can be a solitary pursuit, especially in the early stages. You may find yourself making difficult decisions and facing challenges without the support network that comes with working in a traditional office environment. These days, owning a business comes with myriad legal and regulatory requirements that can be time-consuming and complex.
In all my years of having businesses and working with business owners, I generally find that in the early years, they work longer, get paid less and have way more stress than they did in a job.
If you are prepared for the hard work to be in a position of controlling your own destiny, here are the key things you should consider in starting or buying a business.
1. Is it a good fit for your skill set and interests? You will have more success if you have the skills and passion for it.
2. What do the numbers look like? Have you looked at the cashflow or, if it’s a new business, prepared a projected cashflow and proof of concept? What are the capital requirements to buy or start the business and do you need any working capital?
3. Do you understand the market? If not. research it thoroughly. Do a SWOT analysis (strengths, weakness, opportunities and threats). What are the industry regulations?
4. How easy is it to scale the business and what does its future growth potential look like?
5. How will it work? What does a day in the life of this business-owner look like?
6. What resources do you need: staff, equipment, stock, premises?
7. How does the business fit with your current financial situation? For instance, do you have enough savings to cover your living costs while you are building a business income?
8. What does the set-up of the business look like, or the buying process if you are purchasing a business?
Being a business owner is not for the faint-hearted, but it can come with significant rewards. There are many things to think about so ensure you do thorough due diligence and get the advice of your accountant and lawyer.
Lisa Dudson is an investor, entrepreneur, and author of 8 bestselling personal finance and property investment books. She has been a media commentator on financial issues for more than 20 years known for pragmatic, meaningful and easy-to-understand financial advice. She is a director and shareholder of Saturn Advice and National Capital and provides financial and property advice through her consulting business www.acumen.co.nz
