Meanwhile, in the same period in 2021, more than 340,000 new businesses were registered. That means, despite the challenges posed by the pandemic, the number of newly registered businesses actually increased by 32% during 2021.
This begs the question: is there a “right” time to start a business? What sort of factors influence when it might be the optimum moment to begin a new venture? And when do you know it’s your chance to start yours?
Here are a few things to consider if you’re thinking about starting your new business in the near future.
Are you emotionally ready?
A good starting point for your readiness is how you feel emotionally. Are you ready to take on the hard work and stress that comes with starting a new business?
In a study published by Business Leader, insurance provider Simply Business found that 82% of small or medium-sized enterprise (SME) owners said their mental health had declined during the Covid-19 pandemic.
This is understandable; after all, businesses struggled to operate as lockdown restrictions brought many industries to a halt, threatening many entrepreneurs’ livelihoods.
While these may have been exceptional circumstances, you need to be mindful of the fact that being a business owner is stressful and requires you to be emotionally resilient. Make sure you’re ready for a new set of worries and concerns that owning a business can bring.
Are your personal finances ready for a business?
Next, you should consider giving your personal finances a thorough inspection.
You might not think that your personal finances are important when starting a new venture, as they’ll be separate from your business cash. But you need to be confident that you can afford to take this on, or that you’re willing to make changes to your lifestyle to make it happen.
There are two reasons for this. Firstly, you may be giving up a paid position as an employee to start your new business. You may also be giving up valuable financial benefits that come with your position, such as a death in service arrangement, employer pension contributions, or a company car.
As a result, you need to budget for the fact that you’ll no longer be receiving this money once you go for it alone.
Additionally, you may even go for a period in your new business in which you don’t generate much profit at all. In fact, according to software provider FreshBooks, it takes businesses an average of two to three years to become profitable.
Be sure you know what kind of sacrifices you might have to make when getting your business off the ground.
You may also want to check that you have an emergency fund of cash held in an easy-access savings account. This should contain three to six months’ expenses to fall back on if you need to rely on it.
What do you want to achieve in the future?
As part of considering your personal finances, you might want to give some thought to your goals for the future.
If you’re still in the middle of your career, your aspirations might include buying a new home or living a certain kind of lifestyle that allows you to go on regular holidays with your family.
Meanwhile, if you’re approaching the end of your working life, you might have one eye on your retirement plans.
No matter where you are, you need to make sure that your plans for your new business are compatible with what you want to achieve in the future.
It’s probably not sensible to use the money you had set aside for your dream retirement in your business. Equally, you may need the money generated by your business to drive you towards your targets.
These goals are just as important as how much money you have, so make sure you include them in your planning.
Have you prepared properly?
Finally, you need to make sure that you’ve done all the necessary preparation that every aspiring entrepreneur needs to do.
There are many things to think about before you start a business, but some key elements to consider could be:
- Researching your target market, including whether it’s currently a profitable sector
- How you intend to fund your business, whether that’s from your own funds or from loans
- Your business protection options, including insuring the business if something happens to you or someone working with you
- The tax efficiency of your new business.
Areas such as protection or tax can be complex and difficult to understand. If you think you might need help with this part of your endeavour, consider taking financial advice from a professional.
So, when is the right time to start a business?
There are a lot of different things to consider when starting a new business.
Unfortunately, the truth is that the answer to whether now is the right time for you or not will depend entirely on where you are now and where you want to be in the future.
If you have years of your career ahead and have a firm financial base to build on, now could be an ideal time for your new business.
Equally, if you’re approaching retirement and already have an exit plan for your new business that still lets you reach your later-life goals, this could be an ideal opportunity too.
If you’re in any doubt about whether now is the right time for you to start a new business, you should consider working with us at Bowmore.
We can help you to make informed decisions about your current financial situation and provide advice on how to manage money in your new business.
Email email@example.com or call us on 01275 462 469 to find out more about how we could help you.
This article is for information only. Please do not act based on anything you might read in this article.