Lots of us love the idea of having our own business – in fact recent research showed that last year, one in five people made this one of their New Year’s resolutions. At this time of life, self-employment lets you continue to work on your terms, doing what you want, for as long as you like. Perfect!

Unfortunately, as many people find to their cost, there are some aspects to having your own business that are far from perfect. So before you either resign from your current job or commit your savings to developing your business idea, take time out to think through some questions.

Do you have realistic goals?

Regrettably, just setting up a business is no guarantee of its future success. Statistics show that the vast majority of business start-ups fail within the first three years. And these are all people – perhaps like you – who had talent, ambition, and good business ideas.

There are many reasons why businesses fail, but for many it comes down to unrealistic goals. They went into the business thinking it would magically make a fortune, when from the outset any experienced analyst could see that it simply couldn’t happen.

So, concentrate on setting realistic, achievable goals for your first years of trading. If it all goes well after that you can build and become more ambitious – but at the outset your goals should focus on steady growth and staying afloat.

How much do you know about your competitors and potential customers?

If you’re setting up a business in the same field you worked in as an employee, you may think you know everything about who your competitors will be and who will buy from you. Wrong! You need to realise that you are now entering a new market – a market made up of customers who buy from small businesses – not the large company that was your previous employer. And as such, your competitors will be different also.

Of course, if you’re entering a completely new field of endeavour, research is even more important. Perhaps you’re setting up as a garden designer because you’ve always done it as a hobby. Great – but what do you actually know about garden design as a business? The time to find out is well in advance of committing to a business launch.

Do you have a workable plan?

The old saying ‘failing to plan is planning to fail’ is never truer than with start-up businesses.

Many people think that they only need a business plan if they want to raise money from a bank or other financial institution. Not so.  Having a plan that would convince a third party that you are a worthwhile case for investment is a good discipline and a great way of facing up to reality.

What are your overheads actually going to be? How much are you going to need to make each month to stay afloat? How much profit will you be able to generate? What’s your contingency plan? Who are your competitors? Where will your customers come from?

You may think you have all this information in your head but it’s surprising how much you realise you don’t actually know and haven’t thought through when you come to committing it to paper.

Do you have true grit, self-belief and dogged determination?

There are enormous and wonderful advantages to being self-employed, but the downsides can be equally huge. It can be lonely, depressing, and soul-destroying. At times, it may seem no one wants what you have to offer and yet you will find yourself working harder than you ever did when you worked for someone else.

You may find you have to do absolutely everything for yourself, including typing your own invoices and often, there’s no one to ask for advice about anything.

But if you are prepared for this at the outset, it too will pass. For those who have made the transition, self-employment is truly ‘the best job in the world’.

[Published on Sixtyplussurfers, January 2007]