People start businesses for all sorts of reasons and do so with the understanding that the first few years will be hard work. But the ultimate goal usually boils down to having more control, a different kind of life, perhaps involving more flexibility, money or time in the long run.
As such, being your own boss is an ambition that many people strive for.
But for a number of entrepreneurs who have overcome the initial challenges of building a successful business, these benefits still fail to materialise and they find themselves working under considerable pressure at unsociable hours for little reward. Fulfilling your ambitions shouldn’t have to mean sacrificing a balanced and fulfilling life.
Chris Bryce, CEO of The Association of Independent Professionals and the Self Employed, lists dictating your own working hours, negotiating your own rates, being your own boss and having a better work life balance as key motivators for striking out on your own1.
So, what might stand in the way?
Money and wealth
Though rarely the most common motivator for entrepreneurs, it’s undeniable that the prospect of financial independence and prosperity is an appealing draw for those setting up on their own.
According to the Resolution Foundation, self-employed people are taking home on average just £240 a week, compared to £400 on average for employees2. Of course, not all business owners and entrepreneurs fall into the category of self-employment, particularly where company directorship comes into play – but many entrepreneurs get short shrift when it comes to wages. AXA Business Insurance research found that a third are taking home less than £10,000 a year3.
Finding a solution:
But small changes can make a big difference to a company’s profitability – particularly when it comes to financial management. It’s about aiming to optimise the business to ensure efficiency and profitability; from pricing strategies, to operating hours, overheads and productivity. But whatever is changed needs to be done so with good reason – and this can only be done with a clear and up to date view of the business’s management accounts.
Using real-time reporting can help managers stay on top of fluctuations in the business and spot potential issues – such as undercharging for your people’s time if you are a consultancy business – before they become a problem. Working with an accountant or financial adviser can also help improve profitability through forecasting and planning. This way, businesses can start to deliver the financial results to match their potential and owners can start to pay themselves the wage they need in order for them and their families to live the life they want.
Time and freedom
Many entrepreneurs strike out on their own to escape the ‘9 to 5’ or to reclaim some flexibility and freedom in their lives. Achieving greater independence and autonomy is the number one reason entrepreneurs give for starting a business (cited by 54% of business people), according to The Department of Business, Innovation and Skills4.
This is not to say that business owners are work-shy – far from it. Entrepreneurs tend to be highly motivated and committed people who simply want to work on their own terms. The key is achieving a flow between work and home that suits their lifestyles, family circumstances and ambitions.
Three quarters of small business owners work through public holidays, while 30% take less than ten days holiday a year – two thirds less than the amount employees are legally entitled to5. Running a business obviously takes a time investment, but when owners find themselves struggling to reclaim their personal time years into a venture, this is an issue that needs addressing.
Finding a solution:
Sometimes the answer is as simple as learning to let go – though this is easier said than done and requires a significant psychological shift. When you’ve built a business from the ground up, it’s hard to step away or relent control to others, but putting your trust in an excellent second-in-command can allow business owners to step back on the operations and focus on what they are passionate about.
This also alleviates some of the pressure to be on-hand every hour of the day and in the longer term, can help lay the foundations for developing a succession plan so that there is a plan for exiting the business when the time is right.
Being your own boss can be a dream come true but for the stars to truly align, business owners need help – they cannot do this alone. Entrepreneurs need the support of experts and decent financial management tools to ensure profitability, and work with a trusted team to allow themselves the freedom to step back every now and then, and live their lives.
The opinions expressed by third parties are their own are not necessarily shared by St. James’s Place Wealth Management. This article originally appeared on the KPMG Small Business Accounting website
1 cbi.org.uk, The freelance economy can mean big business, June 2016
2 resolutionfoundation.org, October 2016
3 axa.co.uk, October 2014
4 The Department of Business, Innovation and Skills ‘Understanding Motivations for Entrepreneurship’, March 2015
5 Opinium Matters. May 2016