Many people dream of having their own business. They focus on the benefits they could enjoy, including the freedom to choose the hours, the pride of ownership, and hopefully big profits.
Unfortunately, according to Innovation, Science and Economic Development in Canada, up to 97% of new businesses with fewer than a hundred employees fail within the first year of operation. Only 85% survive three years and 70% five years. Approximately 7,000 business bankruptcies occur in a year.
Even those who have years of college training and professional licenses can struggle if they don’t have a good business sense. From the outside it might look like psychologists, dentists, lawyers, doctors and accountants have done it! The truth is that your fees do not go directly into your personal savings accounts.
If you think the costs of professional services and expertise are too high, consider the following:
1. Credentials – In addition to registration fees, books, and living expenses over the many years of college study, many internships and supervised practice situations are unpaid. Getting a degree scroll and a practice license doesn’t just represent success. They also trigger the payment of what can be many thousands of dollars in student loans.
2. Annual Dues: Every year I pay almost $3,000 to my regulators and insurance agent for license and professional liability coverage.
3. Facilities and Equipment – Those who start a practice not only need to have office space but also furniture and equipment appropriate for their trade.
4. Staffing: Look into your doctor’s office the next time you have an appointment. How many families are receiving income from the doctor? Do they get paid if the doctor is on vacation or in training? How much does the professional pay on your behalf for labor benefits?
5. Supervision: The more staff, the more time is needed for mentoring, 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 run the office.
7. Professional Development – Most licensing agencies require a set number of training hours each year to ensure the professional has cutting-edge skills and knowledge.
8. Bookkeeping: Income tax filing costs and government program requirements must be completed by an expert who is usually charged by the hour. Some professionals also have to wait for payments from businesses or chase the check when clients don’t pay cash. It doesn’t take long for accounts receivable to pile up.
9. Taxes and Benefits – Unlike employees, professionals do not have paid sick leave, vacation time, or sick time. 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 are spent on paperwork, administration, or other unpaid tasks.
11. Time – Don’t be disappointed. Starting and operating a business takes a long time. Most successful entrepreneurs put in 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 the same professional was in the office until midnight the night before.
12. Responsibility: You are responsible for ensuring that all work performed by you and your staff provides ethical and appropriate services to the public. When there is a problem, it is you who has to solve it.
Over the years, I have worked in government, retail, and private practice, and therefore know that no matter what career you choose, there are pros and cons. If you want to open 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 is only getting a fraction of the fee they are charging. The rest goes to business expenses.
