The Great Resignation: Are You Ready to Chase Your Small Business Ownership Dreams?
An astounding one-third of all employees who quit work recently plan to start a small business. If you’re one of them, are you ready for the challenge of small business ownership?
Millions of people lost their jobs during the 2020 pandemic-driven economic shutdown. Now as the economy recovers, people plan to willingly leave their jobs in what is being called The Great Resignation.
Plenty of these workers held jobs in the restaurant and hospitality industry, retail, or healthcare before the shutdown. And now that many have returned to work, they’re experiencing burnout due to demanding hours, staffing shortages, low wages, working in potentially unsafe conditions, and being in the unenviable position of enforcing mask or vaccine mandates with disagreeable customers. Other workers are simply unwilling to give up the benefits of working from home. You are not alone if you see yourself in these stories. Fifty-two percent of respondents to a recent survey indicate they plan to look for a new job in 2021, up from 35% the prior year.
The Drive to Small Business Ownership
Describing the forecasted mass workforce exodus as The Great Resignation is no exaggeration. The US Bureau of Labor Statistics cites 2021 as the highest quit level since it began tracking that information. While resignations peaked in April 2021, workers have not returned to the workforce to fill the record-breaking 10.9 million job openings at the end of July. Instead, they are choosing to start a business and work for themselves. An astounding third of all employees who quit are planning to start their own small business. The record pace of new business applications in 2020 reflects this sentiment.
When One Door Closes …
Simply put, being your own boss is looking better than ever. People have had more than enough time to philosophically examine their relationship with their jobs over the last year and the result is driving people away from toxic work environments to create something better on their own. This is still true even after a year that saw the closure of almost a third of all small businesses. When one door closes, another one opens.
Starting a business used to be more time consuming than having a job where you could reliably clock in and out of daily. However, as staffing shortages continue, the burden falls on the remaining staff who are already overworked. The only difference is that in one scenario you get to chase your entrepreneurial dream, be your own boss and envision a bigger payday.
Knowing Your Why
One of the most important considerations for would-be business owners is to understand your business purpose, or the why of your business. One way to crystallize your why is to draft a purpose statement. According to Afdhel Aziz, a purpose statement is “a higher-order reason for a brand’s existence that goes beyond making money and adds value to society.” For example, the SurePayroll Purpose Statement is to empower the dreams of small business owners. The statement is brief, ambitious, inspiring and customer focused. It also serves as a reference point for decision making.
Consider the following questions as you draft your purpose statement.
- What inspired you to start your business?
- Who is your target audience?
- How does what you do add value to your customers?
- What problem does your product solve?
- What makes your product or service unique?
- Why should customers care about your founding story?
- How do you define business success?
Investing in Your Future
When deciding to become an entrepreneur, it’s important to take time to calculate a personal budget against current savings to see how long you can sustain your current quality of living. The initial stage of planning business finances may also entail cutting unnecessary bills or expenses to give more flexibility until your investment can turn a profit. List expenses like rent, food, utilities, credit card or loan payments, as well as transportation costs. Financial planner Suze Orman used to advise people to save for six months of expenses, but like everything, that number has gone up to a safer eight to 12 months.
Not only does starting a business require initial investment capital, you will also need to write out a business plan to determine how long it will take for the business to be profitable enough to sustain itself and your desired lifestyle. The good news is that businesses can be cheaper than ever to start. Most microbusinesses cost $3,000 to get started, with home-based businesses costing $2,000-$5,000. However, there will be unpredictable expenses that come with running a small business you need to plan for, such as insurance, permits, licenses, equipment, maintenance, taxes, payroll, inflated inventory costs due to supply chain issues, shipping, travel, marketing, website design, registering the company name and credit card fees.
Don’t Forget About Healthcare
Before you decide to leave a job that provides health insurance and other benefits, complete medical, dental, and optical wellness visits and checkups. It’s important to have a full understanding of your health status before you leave behind employer-provided insurance so you can take advantage of those pre-taxed benefits before they become out of pocket expenses when you set out on your own.
Paying out of pocket for insurance can cost $495 per month on average, but the recent CARES Act makes affordable insurance subsidies accessible to freelance and self-employed workers who previously did not have access to insurance cost assistance.
People increased their savings by 10% during the shutdown as they eliminated work-related expenses like transportation, dining out, wardrobe, and more. Many people have invested these savings buying homes at low interest rates or to help start their small business. Even though many people increased personal savings, it may not be enough for certain commercial financing needs.
If personal or business loans are something you need to start your small business, be sure to take steps to improve your credit score. Consumers posted a record-high average U.S. credit score in 2020. Anything above the 720 threshold is considered excellent credit and boosts your potential line of credit, which is vital for business startups. In additional to a personal credit history, it’s vital to establish business credit. The Small Business Administration offers a quick 5-step guide to help you start.
Some startups require additional financing that may not qualify for bank loans. In that case, consider accessible options that circumvent traditional banks and avoid associated processing fees in the process. Alternative funding options for small businesses include crowdfunding, applying for grants (with a helpful outline for how to obtain a business grant here), convertible debt, where debt is converted to equity, or partner financing, where growth is paid in exchange for access to the product.
Additional financing routes involve using angel investors, people who don’t ask for company shares as opposed to venture capitalists, who assume part ownership in exchange for capital. Using peer-to-peer marketplace lending websites that connect borrowers with lenders is another point of access. There is also invoice financing, or factoring, which is when a service provider fronts the money until you get paid by your customer since small businesses can be more dependent on cash flow.
One of the most obvious financial resources for small businesses are community development finance institutions—or CDFIs—that provide capital with reasonable terms catered specifically to small businesses.
Where There’s a Why, There’s a Way
Ultimately, those who believe they can open a business and those who think they can’t are probably both right. But where there is a will—and a why—it is possible to overcome any obstacle to starting a small business.
Are You Ready to Start a Small Business?
Check out this get-started list, then visit The Small Business Administration for more resources to start and grow your business.
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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.