Going it alone when it comes to your means of generating an income opens you up to all sorts of risks. Cash flow can no longer be guaranteed following the abandonment of a full time contract and instead, you will live and die by your own ability, focus and commitment.
Of course, there is definitely some attraction to this risk. It’s an opportunity to spread your wings and see just how much you are capable of, to say nothing of the financial boon that it can be to work for yourself. More than 480,000 new businesses started up in 2012 according to Startup Britain, meaning the entrepreneurial pull is definitely attracting a lot of people.
Setting up on your own is tough and risky, but actually going it alone without any business partners or additional staff at all can be even more daunting and risky. Here are a few of the more common risks that you face.
Many a business has fallen to an errant miscalculation that has seen the company simply fail to make as much money as anticipated. This is especially true of the solopreneur who is up against the added danger that they don’t necessarily have someone to bounce their financial predictions off. A lack of solid financial predictions or general forethought is probably the fastest way to destroy your business and not having anyone else around could make it harder to catch this very common mistake.
How to avoid: Plan. Planning can save a lot of time and heart ache in this area. Also, just because you’re on your own with this business, doesn’t mean that you are prohibited from seeking outside advice, either from a professional or a trusted friend.
Launching a business is exciting. There’s so much promise and potential in a freshly launched business venture, but whilst you can find yourself effortlessly ploughing 12 hours of your day into it at first, it can quickly deteriorate into a tedious slog that makes you just want to quit. Maintaining motivation and output is crucial to your survival and keeping up this pace and enthusiasm is very difficult if you’re on your own.
How to avoid: Part of avoiding burnout is making sure your day is adequately balanced. Being on your own means you’ll have to wear a lot of different hats, but this can work in your favour as it means that when one task becomes tedious, switching to another can be much more effective than simply quitting altogether.
As a solopreneur, you might feel insurance is either a luxury or something you just won’t ever need. Although it is sometimes the case that solopreneurs won’t find any business coverage particularly useful, it is largely dependent on the work that you do and it could be that not having insurance in place could be opening you up to an unnecessary risk. Just as an example, public liability claims can hit the millions in some cases, and it is unlikely that you’ll realistically be able to cover that sort of figure even if you do become hugely successful in your venture.
What many don’t realise is that insurance premiums for business insurance tend to scale depending on the size of the business itself, so if you’re on your own, those premiums are likely to be much lower.
How to avoid it: Contact a broker to confirm whether you actually could benefit from insurance or not. Being a solopreneur might mean that there’s nothing that you really need, depending on your field. Public liability insurance might be something you could take advantage of if you have lots of visitors to your premises, but the type of coverage you could use will largely depend on the sort of work you do.
Work flow is the problem of many small businesses, especially when starting out, but most people assume that it will only ever be a problem of not getting enough paid work through and struggling to find sufficient clients to pay the bills. Surprisingly, the opposite can be just as true and it is very easy to over-extend yourself when you’re starting out, especially if you are on your own. Sadly, the consequences of imploding under the weight of the extra work can be disastrous. If you let down your clients, they are very likely to take that disappointment away with them and not only seek other companies for themselves, but to warn others away from your business.
How to avoid it: Know your limits. If you have to say no to the occasional bit of work, this could help you out in the long run, especially when you are just setting up.
Not a lifestyle for the risk averse
Starting a business is never going to be an entirely safe past-time, much less if you are on your own, but the financial rewards can be great, as can the sense of satisfaction of being able to stand on your own with your company. If you are taking this difficult and challenging path, then make sure you do everything in your power to reduce the risks you face as much as you possibly can.
Written by David Hing for YOUR Insurance, a broker specialising in public liability insurance for small businesses.
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