Saturday 1 October 2016

Starting your own business takes bravery

If you do what you love, it won't seem like work, says Sinead Ryan. Do your research and the benefits will far outweigh the teething problems

Published 12/08/2016 | 02:30

Social Protection Minister Leo Varadkar Photo: Tom Burke
Social Protection Minister Leo Varadkar Photo: Tom Burke

It's the dream for many of those stuck in boring 9 to 5 office jobs - being your own boss, being able to work when you like and not having to answer to anyone. Yet starting your own business also brings its own fears - financial failure, cash-flow problems, debt collection, being everything from the receptionist to the CEO, and the loneliness that comes from being a sole trader, without colleagues to bounce things off or a manager to direct you.

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Anyone who has stood by the water cooler on a Monday discussing the football, or their weekend activities, had better get used to working alone without the distractions, or company.

Yet, according to the CSO, the numbers of people registering as self-employed increased by 5.5pc to 325,500 in the first quarter of this year, and there are now 237,753 small enterprises active in Ireland. Business types are classed in three ways:

A Micro enterprise is one with fewer than 10 employees, or a turnover of under €2m; a Small enterprise employs fewer than 50, while a Medium enterprise has fewer than 250 staff.

Mark Fielding, CEO of ISME, an advocacy group for all of them, says people are becoming a little braver. "During the recession, those who lost their jobs had no choice but to strike out on their own; now they're choosing to. Many retain their current job and start off in their spare time which is a great first step.

"The biggest fear is that you end up with all the overheads and it doesn't work out. When it does, it often makes the decision for you when you decide to go full time out on your own, so maintaining both is a good option, unless you have oodles of money."

He says the biggest mistake start-ups can make is underestimating the time and cash it will take to start a business. "Multiply both by two," he advises.

The hardest challenge is losing the safety net of benefits, he adds. "The self-employed pay 4pc PRSI but for that, they only qualify for an old-age pension. It's a disincentive to starting your own business that there are no redundancy payments and you cannot immediately claim the dole if it doesn't work out.

"If I have a family, a mortgage and €5m in the bank, I can claim dole as a PAYE worker; but I can't get anything if I'm self-employed."

Social Protection Minister Leo Varadkar is currently examining whether the self-employed could pay extra contributions to this end, but a previous study by his Department indicated the rate would need to be 22.5pc to qualify for all benefits - a figure far beyond what most could tolerate given there are no employer contributions to match.

For those unsure where to start, many Local Enterprise Offices (LEOs) run 'Start your own Business' courses, covering marketing, accounting, market research and business strategy. Others are run by private businesses while Revenue has a 'Starting Your Business' leaflet which explains the duties and obligations of both sole traders and new companies starting up, available to download from its website (revenue.ie).

In addition, until the end of this year (it may be renewed in the Budget), there is a Start Your Own Business tax relief scheme which provides for relief from income tax for long-term unemployed individuals who start a new business to a maximum of €40,000 p.a., for a period of two years to individuals who set up a qualifying business, having been unemployed for a period of at least 12 months prior to starting the business.

There are more than 80 separate supports available through Government agencies and departments for start-ups and SMEs, including grants, training and other assistance, although the decision to transfer many of these from the Department of Enterprise to LEOs means that accessing them is not consistent across all regions.

"It's a bit of a curate's egg," says Fielding. "Your 'boss' is the County Manager, who may be more interested in traffic and parks than your business, whereas in the Department they understood it better."

One of the biggest growth areas is small businesses, and 80pc of these have fewer than 10 employees. However, more than half go to the wall through not getting paid by customers, according to ISME, so many new bosses find themselves spending more time as debt collectors rather than sales people and managers. As such, many choose to outsource this function as soon as they can afford to do so.

Accessing credit remains an issue, with banks still reluctant to take a punt on many start-ups, although lending has loosened in recent years with both pillar banks meeting their €4bn target for SME lending.

The Credit Review Office, which is the mechanism for borrowers to appeal decisions to refuse credit by banks, welcomes the introduction of the Central Bank's SME Regulations which came into force last month, giving them more transparency when it comes to credit decisions. Meanwhile, 76pc of all SME lending is provided by AIB and Bank of Ireland, something which the CRO criticises in its latest report as it would like to see the base broadened.

Traits of successful self-starters

Passion: if you do what you love, it won't seem like a job.

Focus: you need to stay on top of all aspects of your business, and stay disciplined.

Courage: starting out on your own needs bravery, but the rewards are worth it.

Irish Independent

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