Running a small business is notorious for being one of the most demanding yet rewarding professions a person can choose.
But are you cut out for it?
Here are just some of the pros and cons of running a small business to give you a balanced view.
PROS
1. You make the decisions
One of the best things about running your own small business is that you have full control over its operations. So, whether you want to try new ideas, expand, invest, take risks, or take the business in a new direction, it’s all up to you.
2. It’s tax efficient
If you run a limited company, you can enjoy some tax breaks which aren’t available to salaried employees. These tax allowances are designed to help small businesses grow.
For example, corporation tax on profit is 19%, less than half what you’d be paying in income tax as an employee.
3. Good earning potential
The key word here is potential. You only get out what you put in, but you can make uncapped profits if your business is thriving. This is in contrast to working for someone else, where you’re at the mercy of their salary structure.
4. You can benefit from limited liability
If you choose to run a limited company, your assets and personal wealth won’t be personally tied to any debts the company incurs. It’s worth remembering that a sole trader structure doesn’t have limited liability, so to benefit from this you’d have to be ‘Ltd’.
5. Connect with your community
Increasingly, people are looking to their own communities to source products and services from smaller businesses. This creates a more cohesive community feel in your local area, with repeat customers and word-of-mouth marketing, which as a business owner can feel very rewarding.
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CONS
1. Start-up costs
Even the smallest business incurs start-up costs like marketing, stock, equipment and technology. Not to mention the time you’re taking out of paid employment to set your business up before it ever makes a penny.
Remember, the UK government has various tax relief schemes in place to help start-ups get off the ground – an accountant will be able to walk you through your options.
2. Ultimate responsibility
Yes, this is also considered a pro, but having the buck stop with you is a huge responsibility which isn’t for everyone.
3. Accounting
Accounting for small businesses is an administrative nightmare, right? Well – yes and no. While it’s true that the bookkeeping, accounts and tax affairs of small business ownership aren’t something to be taken lightly, working with a good accountant will make your small business accounting more than manageable.
4. Longer hours
Running a small business isn’t a 9 – 5 job. You should expect to regularly work evenings, weekends and holidays, especially when you’re just starting out.
5. Self-discipline required
It can be challenging for many people to hold themselves to account when it comes to working for themselves. The temptation to work too much – or too little- is strong when you’re the only one you’ve got to answer to.
6. Unreliable income
Just as your income is uncapped, there’s also no lower limit on the amount you can earn running a small business.
Unlike with salaried employment, there are no guarantees on earning a set amount each month, so you’ll have those leaner months where you need to manage your finances accordingly. An accountant will help you plan for the financial ups and downs.
Is running a small business right for me?
If you’re prepared to plan for the future, discipline yourself and take the rough with the smooth, then the answer is probably yes!
Speak to an accountant today about how to get started.
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