If you dream of being your own boss, you may have considered starting a small business. The idea of setting your hours, working from home and choosing projects that interest you is appealing. However, starting a business includes risks you should understand before you take the plunge.
Starting the Wrong Business
Maybe you want to start a bakery because you like cookies. Are you prepared to bake for several hours every day? Have you researched the local market to understand competition and what will set you apart?
Evaluate your personality, skills, education and interests as you decide which business to start. By choosing work you are passionate about and have the skills to do, you increase your chances of staying motivated and pushing through setbacks.
Finances
Owning a business means you hold financial responsibility for its success. You could turn to crowdfunding, private loans or investors for start-up capital, but you also need financial discipline to keep the business going.
Financial success starts with a solid business plan. Ask a trusted advisor or a successful business owner to help you create a plan that covers start-up costs, cash flow and repayment timing.
If you operate a storefront or lease property, consider policy types that address those exposures, such as Mercantile (Lessors Risk Only - LRO). For broader coverage questions related to underwriting and risk placement, review resources like Cover Holders and Risk Takers.
Family Relationships
Even if you start a business to be home more, you will likely put in long hours while you establish it. When your office is at home, a quick call after dinner can easily become hours of work.
Make sure your family supports your decision. Establish firm office hours that protect family time and reduce the risk of strained relationships as you grow the business.
Owning a business can be rewarding and enjoyable. Make sure you understand the risks and prepare before you take the plunge. Discuss your plans with people you trust, including your accountant and lawyer, and talk to an agent about coverage and liabilities you may face.
Frequently Asked Questions
- What is the first financial step for a new small business?
Create a realistic business plan and budget that outlines start-up costs, expected revenue, and a plan for repaying any debt.
- How much should I set aside for unexpected expenses?
Aim to build an emergency reserve that covers several months of operating expenses, but the exact amount depends on your business and industry.
- Do I need a separate insurance policy for a home-based business?
Many personal policies exclude business losses, so review your situation and consider a business policy if you have equipment, inventory, or client visits at home.
- How can I protect family time while running a business from home?
Set clear office hours, communicate expectations with family members, and create a dedicated workspace to separate work and home life.