Starting your own business can be very rewarding from both a personal and a financial perspective. But before you enter life as a sole proprietor, it pays to look at your reasons for doing so. Understanding your motivation for starting the business can increase your chances for success and help you focus on what is most important to your new venture.
Running your own business can certainly give you a level of flexibility that is nearly impossible in a traditional corporate job. When you run your own business, you can set your own hours and determine when and where you will work. You can, however, expect to put in long hours if you want to be successful. Small business owners tend to put in far more time than their colleagues in the nine-to-five world. The difference is that those sole proprietors love what they do and that can make those long hours far less taxing.
Many sole proprietors start their businesses in order to serve a niche they feel is not currently being addressed. Identifying an underserved niche and providing individuals and businesses with value is one of the best ways to succeed in business, and one of the best reasons to start a new business.
As a sole proprietor, you may have more opportunities to plan for your future and set money aside for retirement. Building a successful business also builds value, and the chance that you will be able to sell that business to help fund your future. In addition to that possibility, being self-employed gives you access to retirement plans with higher limits than traditional workers enjoy. For instance, as of 2011, you can put up to $16,500 into a 401k or 403b plan, but if you open a SEP-IRA you can fund it with up to $49,000. That allows you to shelter more money from current taxes while saving more for your retirement.
When you are reliant on a paycheck from someone else, you are always in danger of losing that paycheck. No matter how strong the company or how secure your job, outside factors can play a major role in whether or not you will remain employed. When you start a sole proprietorship, you can attain a level of financial independence that is simply impossible in the corporate world. There are still risks, of course, and you need to be vigilant and run your business well. But as a sole proprietor, you are 100 percent responsible for the success of your business, and that puts you squarely in charge of your financial future.