Dreaming of being your own boss? Is it time to leave behind the nine-to-five and start doing what you’ve always wanted to do? If your answer is yes, read on.
It can sure be scary to say goodbye to that guaranteed pay each week, but how great would it feel to walk away from the job you feel meh about? In New Zealand, it’s not hard to become self-employed.
You don’t even have to officially register as a sole trader, unless you want to make it a limited company.
Handy Tip: If you’re not sure which business structure is right for you, answer these quick questions.
[link to: https://www.business.govt.nz/choose-business-structure/]
Here’s a scary statistic: According to MBIE, just one out of 25 businesses in New Zealand manage to get through their first two years. For a motivated new business owner, that’s a tricky thing to get your head around but as with anything in life, if you are well-prepared before going all in, your chances of survival will be much better. Running a business and being self-employed is an amazing journey, but it takes courage and careful planning. When you’re new to business, keep these 11 pitfalls keep in mind.
- Starting with little or zero capital
As the old Dutch saying goes: “Don’t throw away your old shoes before you have new ones”. You need to think about security and the risks you are taking when you are planning a big change in your life. Before you start your new business, you must be financially secure and have a healthy buffer in the bank. Do you have enough cash to survive on while you build your customer base and get your first payments in? Take a good hard look at the numbers. You may be itching to launch but if it’s too risky, wait and save a little longer.
- Not doing market validation
You’ve got your big idea, have raised the start-up funds, and believe you’ve got what it takes to become an entrepreneur. Now it’s time to validate the potential of your products or services in the market. It’s a critical step that many new business owners ignore. Don’t be that person! Market validation is essential to determine if there’s an actual need for your offerings. Validating your business idea can empower you as it gives you a reasonable prediction if people will buy your product or service or not, and whether your business will be profitable.
- Launching too quickly
Even with the best idea in the world, you won’t get far if you don’t have the tools to execute it. When starting a business, you must pick your timing wisely. Don’t jump in before you can swim, but also don’t wait too long and miss your opportunity. Passion is one thing, but to keep a business running in the long run you will need to adapt and adjust to changing situations. Keep building on your idea and have a backup plan, just in case things don’t go the way you expected. Your business can also burst if it grows too fast. It’s an exciting journey but getting there can be a bumpy road.
- Being sloppy with record keeping
Good record keeping is essential for anyone running a business, no matter how big or small. Accurate financial records are most important, as you’re required to hold on to those for seven years for legal and tax purposes. If the IRD decides to do an audit on your activities, it’ll be a lot less stressful if you have all the documentation handy. Find a good accountant or tax advisor, and make sure to set up a proper accounting system. This is not only helpful when the end of the financial year comes around, it will also give you a good overview and understanding of your financial position throughout the year.
- Trying to do everything yourself
The truth is: you are not good at everything. No one is! So why try so hard to do everything yourself when you’re starting out in business? You’ll be much better off when you figure out which tasks you genuinely enjoy, then spend most of your time doing those. Identify the areas of running a business that you struggle with and find help. Hire someone to do the jobs you find tedious, difficult, or too time consuming. That could be admin, social media management, or even housecleaning. If cost is a concern, figure out how you can fill that time you’re saving by doing something you can invoice for.
- Undervaluing your product or service
Pricing is important and being price-competitive is a factor. Everyone loves a good deal but offering your products or services too cheap can be self-defeating. Take your time to look at your cost and establish your value. Have the courage to charge what you’re worth. Many new entrepreneurs undercharge or give things away for free, just to become visible. Although this comes from a good place, be careful with that. Helping others is admirable but do it only if you can afford it. Think about your profitability first.
- Having a negative mindset
It can be overwhelming to be responsible for everything. When you’ve put yourself in charge, you’ll ride a wave of ups and downs. Overthinking and setting unattainable goals can have a negative impact on your mental health. Negative self-talk limits what a person can do. May business owners quit as they lose confidence in their talent, offerings, or their ability to pull it off. If you want success, you must find ways to shift that negative mindset into a positive one. A tale of self-improvement is at the heart of every success story.
For a little extra motivation, check out our blog about the 8 habits of highly successful people.
- Working without a marketing plan
A marketing plan is the glue that holds it all together. It ensures that the right activity is taking place at the right time, aimed at the right audience, and through the right channels. If you don’t have a plan, you’re flying blind. How do you evaluate which of your marketing tools works best for each of your different products, services, and needs without it? But most importantly, a good marketing strategy and detailed plan is critical for your business’s growth. If marketing does not have an ongoing focus, you’re just jogging on the spot.
- Not signing contracts
A gentleman’s agreement is risky business. One of the best ways to protect your business from legal liability and to make sure you get paid without issues it to formalise it. Think Terms of Trade, confidentiality agreements, leases, employment and contractor contracts, service agreements, and more. Contracts outline expectations for both parties, protect each party if those expectations aren’t met, and lock in the price that will be paid for services. To make it easier, you can work with templates that you can tweak to suit each new client or supplier.
- Underestimating what it takes
Freedom is a big reason why people choose to become self-employed. Your hours will be more flexible as you set them yourself. But assuming that it is a way to get rich quick, or an escape from all your problems, is a big mistake. Starting a business is hard work. It requires a lot of focus, determination, and learning. Usually, it only pays off in the long term. If you’ve finally left the rat race of your 40-hour a week job and the gruelling commute, be prepared to work hard and smart as this time, your own financial health and wellbeing is on the line.
- Not planning for success and growth
Working on the business, not just in the business, is essential if you want to be successful. If you want sustainable growth for your business, make sure to keep your growth plans simple and agile. Research and list where your opportunities are. Set a turnover target for the next three years. You can find a whole range of useful strategic planning tools online, or for a more personal and customised approach you could consider working with a great mentor or coach. With the right tools, mindset, support, and focus, you’ll get to that next level!
You can do it!
Although starting and running a business comes with challenges, it can also be hugely rewarding. Give yourself the best start possible, believe in yourself, and keep these traps in mind on your new journey. It’ll lay the foundation for your success and a happy, independent future.