0 ^ Published by Information Development and Marketing Alberta Advanced Education and Career Developmen 8th floor, 10155 - 102 Street Edmonton, AB T5J 4L5 Phone (403) 422-1794 Fax (403) 422-5319 For additional copies please contact: Learning Resources Distributing Centre 12360 - 142 Street Edmonton, Alberta T5L 4X9 Phone (403) 427-5775 Fax (403) 422-9750 ISBN 0-7732-1715-0 © 1997, Her Majesty the Queen in right of the Province of Alberta, as represented by the Minister of Advanced Education and Career Development. 01/97 15M Self-Employment: pi^ mi Is it for me? JI^Table of Contents I. So You Want To Be Your Own Boss? Self-Employment: Aaah, This Is the Life, or Aaaaugh, Is This Living? What Motivates Entrepreneurs? What Motivates You? II. Do You Have The Right Stuff? Characteristics of Successful Entrepreneurs Find Your Self -Employment Strengths III. The Idea Factory Self -Employment: What Are Your Options? Three Ways to Get Into Business Buying a franchise Buying an existing business Starting from scratch Where Did They Ever Get That Idea? IV. Getting Started Doing a Market Analysis Financial Considerations Licenses and Permits Writing a Business Plan Writing Proposals Next Steps V. Resources Government Departments and Agencies, Associations, and Community Resources Internet and Other Electronic Resources Books Other Publications Digitized by tine Internet Arcliive in 2015 littps://archive.org/details/selfemployiinentisOOalbe 1 Self-Employment: Is it for me? I. So You Want to Be Your Own Boss? . You're not alone. More and more people are ^ considering self-employment as a work option. In fact, self-employed people are now creating more jobs in Canada than companies in the private sector. Many of them left steady jobs to strike out on their own. What's more, the majority are finding they are happier working for themselves. ne major reason for this trend toward self-employment is the changing workplace. As governments and corporations downsize, secure, full-time employment is becoming a thing of the past. There's still plenty of work that needs doing, but it's being packaged in different ways. Instead of hiring employees, governments are privatizing and contracting out a wide array of services. Contracting out, or outsourcing, is also becoming a favoured way for companies in the private sector to do business. If you can see opportunity in this situation, you're already ahead of the game. What's more, you probably have some entrepreneurial blood in your veins. Many people are starting businesses in order to bid on the increasing amount of work that is contracted out. In some cases they are bidding on the very work they used to perform as employees. Of course, there are reasons other than economic ones to go into business for yourself. Maybe you've taken an early retirement and can't imagine a life of total leisure. What next? More than one successful business has been started by retirees with get-up-and-go to spare. You may also be looking for a home-based business to supplement your pension benefits. Perhaps you're at the front end of your working life and considering your options. Faced with a shrinking job market, you might well consider creating your own job. If so, you are likely to find plenty of encouragement. Governments at all levels are recognizing the importance of entrepreneurship in job creation. As a result, they are working with the business community to offer all sorts of programs to encour- age young entrepreneurs — from Junior Achievement, and Career and Technology Studies, to "incubator" services that reduce overhead by pooling space, equipment and secretarial services. Last, and most obvious of all, you might be one of those people who knew from your first lemonade stand you were going to be your own boss. As one successful young entrepreneur put it: "I like to run the show." 2 Self-Employment: Is it for me? What does it mean to be an entrepreneur? As it is commonly used, the word entre- preneur refers to someone who organizes, manages and assumes the risk to start a business or enterprise that ultimately creates jobs for others. This type of entrepre- neur usually invests a high level of time, energy and financial resources to succeed in business. At the other end of the scale are people who choose self-employment in order to get out of the "rat race" and are content to make just enough money from self-employed earnings to support themselves. Throughout most of this booklet, we use entrepreneur to refer to anyone who is self-employed no matter where they fall on this scale. Just the stats More and more Canadians are choosing to be self-employed. Just look at the stats: * Between 1992 and 1996, the number of self-employed people in Canada increased by 325,000 or 17 percent. Of these 325,000 people, only 60,000 run companies that hire other people; 265,000 work on their own. The percent of Canadians who earn at least some of their income from self -employment jumped from 10 percent of the workforce in 1991 to 15 percent in 1995, and to 17.3 percent in 1996. Between December 1, 1995, and November 30, 1996, Canada's private sector created 202,000 jobs. Of that number, self-employed people represent 94,000. Sources: Industry Canada and Statistics Canada. Self-Employment: Aaah, This Is The Life, or Aaaugh, Is This Living? Like any other career or lifestyle choice, self-employment has its bonuses and chal- lenges. Here are some important factors to consider when deciding whether to go out on your own. Not all of them apply to all types of businesses. Not all of them are equally important to all potential entrepreneurs. Decide for yourself how important each one is to you. Self-Employment: Is it for me? Bonuses • Satisfaction of creating your own jobo Many self-employed people enjoy the sense of independence and accomplishment that comes from using their skills and experience to create their own work rather than depend on an employer for a job. • Opportunity to follow your heart, Self-Employment offers the chance to work at something that not only provides a paycheque but also appeals to your passion. As your own boss you have the freedom to determine where to invest your time and energy. • Variety. No day is predictable. There are always new customers, clients and suppliers to meet, new problems to solve, and new projects to tackle. • Feeling of control. Being self-employed gives you control over your schedule, working conditions, and how you do your work. • Opportunity to use your creativity. Many entrepreneurs say they felt confined and their creativity thwarted in a corporate or government environment. Being your own boss lets you test your bright ideas and fulfill your passion for creativity. • More tax deductions. Self-employed people are entitled to tax deductions on a wide range of things such as a car, home office, travel, professional development, and other items related to their business. • Flexible work hours. If you want to spend time in your garden in summer or catch a child's performance at school, you may be able to juggle your schedule to do so. And if you make up for it on evenings and weekends, it will be by your own choice. • No dress code. Every day can be "'casual Friday," when you're calling the shots. Home-based business operators, in particular, can enjoy dressing for comfort on days without meetings with customers or clients. • Opportunity for a healthier lifestyle. Working at a home-based business can pay health dividends, according to a recent survey by Income Opportunities magazine. Among people who work at home, 45 percent say they exercise more often than they did when they were employees. 4 Self-Employment: Is it for me? Challenges • Long hours. Anyone who goes into business thinking it will be easy street compared to being an employee will not last long. Self-employed people often talk of 12 to 16-hour days as the norm. Clients and customers can be demanding, and customer service can make the difference between success and failure. • No benefits. A downside of self-employment is the loss of benefits such as health, dental employment and disability insurance. If you are used to having a benefits package as part of your employment, you can generally count on paying about 15 percent of your former salary to replace those benefits when Mtm wmki¥i§ for you become self-employed. B large cempiiter mm^nm for iwer • Loss of structure. Being your own boss can be 26 f e ars, Joyce Madsen unsettling if you're used to having an employer impose a certain structure on your work day. There's took an early retirement no ''time clock" to punch, no set coffee breaks. It's package and started her own up to you to create your own structure, based on consulting company, JMC what's needed to market yourself and your product or service and to get the work done. Associates. She works as a customer service consultant, • Isolation. As a self-employed person, you could miss the support of co-workers or the opportunity advising companies how to socialize on coffee breaks, especially if you work to improve their customer from home. service, and also does • Paperwork. When you run your own business, project managment, handling you're not only the president and marketing entire projects from beginning manager, but also the comptroller and bookkeeper. Of course, you can hire an accountant to help you to end. At times she's uncer- set up your books and do your taxes. But you will tain where her next still have to spend many hours doing the paperwork project is coming from, but and record-keeping required. she wouldn't trade her new • Unpredictable income. Until you get a new career for anything. "When I business off the ground and running smoothly, think Monday to Friday, nine budgeting is vital. Even if you've done your homework and prepared a thoroughly researched to five, that's not where I'm at. I c ontinue to move forward business plan, your income won't be as predictable as a regular pay cheque. Some new business owners each day." take part-time or even full-time jobs during the first year or two to keep a steady income until the business takes off. 5 Self-Employment: Is it for me? • Constant pressure to keep sales up or work coming in. Every day is a marketing day or a work search day for the self-employed. If you have "There are times employees, the pressure is even greater to bring in enough work to keep them busy and pay their when you have to salaries. work 16-hour days, • Potential for loss. Starting any kind of business but you also have requires some financial investment at the outset. more opportunity Even equipping a modest home office to perform a professional service such as accounting requires to have free time a minimum investment in such essentials as furni- ture, ac omputer, software, business telephone line, copier and fax machine. The capital required to start a restaurant or manufacturing operation can fBoob r L i byycoz, u Kirdss'E ed Fmulornnifttou.nr e" aG-nadl l eCrayl g aInrcy.., be substantial. Should your business fail, this investment may never be recovered. Bob Libycz and his cousin Walter Barbera opened ttieir What Motivates Entrepreneurs? first Kids' Furniture Gallery in Edmonton in 1991. During the Most people who start businesses have worked as employees for other organizations first. Why would first two years, the partners they give up their jobs to be self-employed? The didn't pay themselves. Instead, following are some of the main reasons people give they reinvested everything into for starting their own enterprises: the company. In 1992, they • They feel they can do the job better than their boss. opened a second store in • They seek the challenge of starting and nurturing a Calgary. Libycz moved to business from scratch. Calgary to manage it a nd lived in the back of the store for • They seek variety and a sense of adventure. nearly a year in order to save • They want to make better use of their skills and knowledge. money. The company's sales doubled as a result of the • They want the freedom to work in their own way. expansion and by 1995 Kids' Furniture Gallery was debt-free • They would get more of a sense of accomplishment from running a business. and the partners were looking at expanding across Canada. • They prefer to reap all the profits from their work. • They want to have more control over their career and their life. • They want to recapture the feeling of working at something close to their heart. 6 Self-Employment: Is it for me? Notice that money is not prominent on this list. For most successful business people, the prime motivation is personal fulfillment. Of course, money is important to them, but only as a means to do more with their businesses and their lives, not simply to acquire wealth and prestige. In fact, anyone who goes into business for the money alone- may be in for a rude awakening. Are you prepared to work longer hours and receive less pay than you did as an employee? That's the kind of dedication it takes to get a new business up and running. But the rewards in terms of work satisfaction can be great. According to a 1996 Angus Reid-Royal Bank poll, 55 percent of self-employed people in the study reported they were very satisfied with their work, compared to 44 percent of people who were full-time employees. Also, 77 percent said their job satisfaction improved after they started their own business and almost as many said they were better off working for themselves. What Motivates You? It's important that you examine your motives at the outset before you commit your time, energy and resources to a new business venture. Ask yourself: 1. What is my goal in starting a business, i.e. profit, freedom, opportunity to exercise my creativity? 2. What are my life goals? Visualize your ideal life 10 years from now and describe it, in as much detail as you can, with respect to: Work Family