Many people dream of having their own business. They focus on the benefits they could enjoy, including the freedom to choose the schedule, pride in owning, and hopefully big profits.
Unfortunately, according to Innovation, Science and Economic Development in Canada, up to 97% of startups with fewer than 100 employees fail in the first year of operation. Only 85% survive for three years and 70% for five years. Approximately 7,000 business bankruptcies occur in a year.
Even those with years of college training and professional licenses can struggle if they don’t have good business sense. From the outside, it might appear that psychologists, dentists, lawyers, doctors, and accountants have done it. The truth is, your fees don’t go directly into your personal savings accounts.
If you think the costs of professional services and experience are too high, consider the following:
1. Credentials – In addition to registration fees, books, and living expenses during the many years of college study, many internships and supervised practice situations go unpaid. Earning a degree scroll and practice license doesn’t just represent success. They also trigger the repayment of what can be many thousands of dollars in student loans.
2. Annual Fees: Every year I pay nearly $ 3,000 to my regulators and insurance agent for professional liability coverage and licensing.
3. Facilities and equipment – Those starting a practice need not only have office space, but also furniture and equipment appropriate to their trade.
4. Staffing – Look around your doctor’s office the next time you have an appointment. How many families receive income from the doctor? Are they paid if the doctor is on vacation or in training? How much does the professional pay on your behalf for employee benefits?
5. Supervision: the more staff, the more time it takes for tutoring, meetings and system work.
6. Monthly Expenses – In addition to interest on business loans, office rent or mortgage payments, and staff salaries, there are utility bills, office supplies, cleaning costs, and technology costs to operate the office.
7. Professional Development – Most licensing agencies require a set number of hours of training each year to ensure that the professional has state-of-the-art skills and knowledge.
8. Accounting – Income tax filing costs and government program requirements must be completed by an expert who generally charges by the hour. Some professionals also have to wait for payments from companies or chase the check when clients do not pay cash. It doesn’t take long for the accounts receivable to pile up.
9. Taxes and benefits: Unlike employees, professionals do not have paid sick, vacation, or sick leave. If they don’t work, they have no income. However, they still have to pay personal and income taxes.
10. Paperwork – Often what could be billable hours is consumed with paperwork, administration, or other unpaid tasks.
11. Time – Don’t be fooled. Starting and operating a business takes a long time. Most successful entrepreneurs work long hours, many of which are never seen by the public. When you see someone on the golf course in the afternoon, you may not realize that that same professional had been in the office until midnight the night before.
12. Responsibility: You are solely responsible for ensuring that all work performed by you and your staff provides the public with proper and ethical services. When there is a problem, you are the one to fix it.
Over the years, I have worked in government, retail, and private practice companies, and therefore I know that no matter what career I choose, there are pros and cons. If you want to start a business, consider the above so as not to be naive and vulnerable.
When you access the services of a professional, look around you and remember that the person in front of you will only receive a fraction of the fee you are being charged. The rest goes to business expenses.