Every year, thousands of people decide to set up their own business.

This post looks at why you might opt to run your own business if you do not already and different ways of making the move.

A good business idea
A good business idea could be an invention, a new product or service, or an original idea or solution to an everyday problem. It might also be:

an interest or hobby that you can turn into a business

a gap in the market that you can fill

a business related to the work you do already

Whatever the your business idea is be sure that it is viable from a business perspective but is also something that you are interested in and have knowledge about.

Questions you should consider include:

What experience and expertise can you bring to the business?

Is there a market? Are you solving a problem which customers will be prepared to pay for?

How big is the potential market?

How are you going to reach this market?

Who will be your main competitors?

What is different about your idea? Why will people buy from you instead of your competitors?

How will you fund your business?

What could go wrong? What can you prevent from going wrong by good preparation?

There are a number of different ways in which you can start out in business:

1. A tried and tested business model

To reduce some of the business risk you can look at buying an existing business or the rights to a franchise.

Advantages Obtaining finance is generally easier. A market for the product or service already exists. There should be some business plan in place. However you will need to still review the business plan. There should be sources of experience that you can benefit from. Many problems will have already bean encountered and solved. A franchise can come with financial assistance. Disadvantages Really understand why the business is up for sale. Are there any problems that may require investment to resolve? Are there any other significant issues? The franchise license or right to sell particular products or services can be expensive. Franchises can have less flexibility in the way the business is run. There will be certain terms and conditions that you will be legally bound to stick to. Check the details very carefully and get professional advice.

2. Business opportunity comes your way

Business opportunities can sometimes appear with out seeking them. This could be the chance to buy out your employer or take over a family business. Although these can be great opportunities you need to assess the opportunity and plan for it like any other business.

Advantages Planning and marketing programs should already be established. The business may already have a good profitable customer base. You will already understand the business and will have a good idea of the risks. Disadvantages Look very carefully at why the business opportunity has come your way. Are there existing problems that reduce the future value of the business? If you are buying out from your employer remember that you will now be responsible for all of the business not just the areas you used to work on. You will also not have your employer to turn to for help in the future.

3. A change in circumstances

Some people decide to start up a business following a change in their personal circumstances. This change could provide them with the opportunity that they have been looking for. Such changes might include:

unemployment

redundancy

a change of family circumstances

coming into money

Advantages This could give you the chance to do something that you have always wanted to do. Inheriting money, redundancy payment or any other receipt of money could provide the funds to invest in a business. If managed properly running your own business can give you the flexibility to fit your work around your lifestyle. Disadvantages A big change in circumstance could be a stressful time and may not be the best time to make an important decision. Think very carefully as to whether you are thinking logically about the decision and not being influenced by short term emotions. Most business’ take a long time to pay off the investment. Be prepared for the fruits of your labour to take a long time to be realised. You may need to make personal sacrifices in the short term. Starting your own business can involve a lot of work and long hours. You may have to sacrifice some of your personal life for a while.

4. Taking control and changing your lifestyle

Many people are driven to run their own business because of the feeling of self control over their lives. They enjoy being their own boss and having independence. However there are risks involved.

Advantages Allows you to be independent and flexible in your work and lifestyle. The potential financial rewards can be huge. Disadvantages Long hours maybe required to run the business. Keeping work and family life can be challenging especially if you work from home. It can be difficult to get away from the concerns of your business when you are away from your work. You will no longer get the employment perks that you are used to such as holiday leave, sick leave etc. Financial planning can be difficult and if your business does not perform according to plan then you could end up in personal financial difficulties. When starting out in business you can either do it full time straight away or do it part time to begin with

1. Going into business full time

Some business will require you to go straight into the business full time as there you will need a full working week to run them from the outset.

Advantages You can focus all of your energy and time into your business with out other work distractions. You can react to market changes quickly. It maybe crucial to enter the market quickly to exploit a market opportunity. Disadvantages You will no longer have an income and will have to find other sources of funds to live. You could look at these potential sources of alternative funds to help see you through the initial period of setting up your business: Live off a partner’s income. Use your savings. Get a loan. Use your home as capital - if you have capital in your house, you could use it as security. However this is risky, your house may drop in value and if you cannot keep up repayments, you risk losing it. Borrow money from family or friends – If they lend you money interest free this will save you a lot of money. However if you have problems paying them back you could be in an embarrassing situation and risk your relationship with them.

2. Going into business part time

Starting your business part time allows you to test the water whilst maintaining another income stream. If the business takes off you can then decide to go into the business full time.

Advantages Allows you to earn an income whilst you are starting up your business. Disadvantages Trying to work and run a business may take up a lot of time and be very stressful. You will not be able to spend as much time on your business as you could if you were working on it full time. You'll have to pay tax on both incomes. Many business start ups start out part time. You might be able to arrange to work more flexible hours with your employer to fit both in. Check your employment contract as this may have a clause preventing you from working elsewhere.