Starting your own business takes more than getting money to cover your start up costs. Prospective business owners should consider the following costs of starting their own business:
Things that you should consider before starting a business
In the beginning the owner has often problems meeting his or her financial needs and has to live of savings. You may however manage the gap by:
- Preparing a household budget: Write down the amount of money that you have available and then estimate what your expenses will be;
- Identify the things that you really need such as food and housing and prioritize them;
- Cut down on the unneeded luxuries;
- Try get some money borrowed to help pay for your start-up costs of the business.
Risk of losing all one’s capital
The failure rate of SMEs is high and new business owners that fail may lose all their personal savings. Prospective business owners should carefully consider the financial risks involved when starting your own business. You should consider:
- Type of business: with a sole proprietor business (one man business), the business owner takes full responsibility for the assets and liabilities of the business – i.e. you may lose your house if your business can’t pay its bills. The responsibility of liability of a private company (Pty) is, on the other hand, proportionally shared by the shareholders.
- A well written business plan: to put your business idea in practice and to identify the possible weakness and strong points of your business to tackle the opportunities en threats of the market. A business plan is also required if you want draw investors or lend money from banks.
Long hours and hard work
A new business requires a lot of time and energy. In the beginning the business owner often has to do a lot of the work himself and may end up working eighteen hours a day for six or seven days a week without leave.
Initial lower quality of work
The long hours and hard work involved in starting a business can take its toll on the business owner’s family and social life.
Business owners often have to take decisions about things which they know little about. The knowledge that the success or failure of his business relies on the decisions that he has to make, can be very stressful for the business owner.
A well researched and written Business Plan helps to get your business started the right way.