Where to start when considering: Self Employment

Many employees only dream of starting a new business. Self-employment has the advantage of not having to go through a job search, a job interview or writing a CV. You may want to know how to go about in starting a new business if you are one of those employees who are tired of working for a salary and a boss.

The following guidelines and tips on starting a new business are aimed at freelance writers, programmers, any type of service providers, and specialists.

Create a business plan

The business plan helps you to assess

  • the strength and weaknesses of your concept
  • cost involved
  • viability of your idea
  • expansion possibilities
  • minimum requirements
  • income potential
Once you've put your idea on paper, you will be able to see what makes your business different and what is needed to beat the competition. You won't be able to plan for all contingencies if it is only in your head. Financial institutions normally require a business plan before they will lend money for starting a new business. Your idea may sound good, but they want it on paper for evaluation purposes.

Since this is the most important step in starting a new business, you should invest enough time in developing the concept and to do your research before you write your final plan. Browse through websites and books on how to write a business plan. The expertise of brokers and financial advisors will come in handy.

Register a business name
Decide on an appropriate name for your business. Name you business something that is relevant to products or services that you plan to offer. If you browse through the Yellow Pages or online directories, you will find that business names that start with A, B, C, D, are almost always listed first in the directory. Since they list in an alphabetical order, you may want to consider a name that starts with A, B, C, or D or Z.

You need to register the business name to get an account, pay taxes, and market your business. In some countries such as the USA, you have to register the business name. Even though some businesses have the same name, they are in different industries, and are thus allowed to have the same registered name. If however, you apply for a name that is already taken in a specific industry, you will be required to change the name or application.

The name is not the trademark. The trademark application process is slightly more complicated and costs more. It is not a prerequisite for starting a new business.

Financing

There are several methods of obtaining finance for starting a new business but the two main methods are:

  • Obtain a loan from a financial institution
  • Use your savings or if you are retrenched, use the retrenchment
The best method is using your own funds since the repayment of a loan can seriously influence your cash flow. Try not to borrow from your friends or even family since you may be unable to repay them within a short period. They can become demanding and you may loose some valuable friends.

The bookkeeper or auditor
Get a qualified bookkeeper from the start. You will need his advice on the financial structuring of the business, tax issues, the best legal entities, and cost projections. When selecting a bookkeeper you should:

  • Use an accountant from your own country or state if you are in the USA.
  • Hire a business accountant not a family bookkeeper since he must be well acquainted with commercial taxes and laws.
  • Don't hire a family member since you need an objective person.
  • Office location
    When starting a new business, you need to decide on the location of the office. The office away from home has the following advantages:

    • It provides a professional image
    • Gives credibility
    • You can deduct all the office management expenses from tax
    • Provides an environment where there are no family distractions

    Disadvantages:

    • Additional expenses such as office rental, insurance, and safety equipment.
    • Additional travel expenses
    • Less hours worked since you office will only be open at normal business hours.

    Your decision on a remote office depends on the cash available, the image you need to portray, and the number of employees that will work there.

    The home office has the following advantages:

    • You can work longer hours since you are already home.
    • Many tax benefits
    • More time with your family
    • Less traveling

    Disadvantages:

    • If you are after image, you will need to upgrade your house
    • You loose credibility with large firms
    • Many family distractions

    Keep record
    Keep good record of all transactions, correspondence, clients, suppliers, bank statements, expenses and income. Make sure you have a procedure file for everything as well as hard copy backups of all of the above. Don't fall behind on filing. Effective filing will enhance your productivity and ability to act on leads and issues. Where possible get standard formats for all your correspondence and forms. Make use of templates that are available free of charge. Make sure that you keep copies of contracts with all the necessary signatures on them.Install control systems such as invoicing systems and tracking procedures. Keep a database of your clients and update it on a monthly basis. Don't let accounts get old; invoice and follow up.

    Small beginnings
    If you don't have clients that will visit you, rather work from home in the beginning as it is more cost effective. Keep your monthly running expenses to a minimum. Most small businesses go under within the first 6 months because many people spend too much when starting a new business. They eventually end up with a cash flow problem.

    Charging for your services
    Don't undercharge since clients will perceive your services as substandard and may also make misuse of your services. You should however also not price too high because you will struggle to get clients. Always study the market prices and charge accordingly.

    Keep a separate business account
    Don't mix your personal finances with the business account. It becomes very complicated when the taxes are due.

    Advertising and marketing
    The business will not grow fast enough if you don't market your business. Use appropriate advertising vehicles for your kind of services. A well-planned marketing campaign can bring many benefits. Keep record of where you advertise, the rates, and the responses from the advertisements. This will help you in finding the best methods and sources for marketing your business.

    Building the image
    One disgruntled customer will tell twelve other potential customers. One happy customer will only tell three potential customers. It is therefore important to keep your image clean and professional. Your clients must trust you. Choosing the right logo, color scheme, web design, company clothing, vehicles and point of sale material are essential to the establishment of a winning image. Spend time and money on this process. Dress in a professional manner and always be on time. Don't make promises that you cannot deliver on.

    The last tip for starting a new business: know your product, service, clients and competition. Self-employment entails hard work, constant learning, and determination to succeed.