Last Updated on August 9, 2021 12:59 pm by Editor
This is the first in a series of Barbados Uncensored articles that look at some of the challenges of owning your own business. This first instalment takes a deep dive into the need for commitment and outlines five (5) ways in which commitment is important to the success of the venture.
Gone Too Soon
The Covid -19 pandemic has not only brought death but has destroyed many livelihoods across the world. Reports continue to come in of the total departure or downsizing of large established businesses as well as small, one-door or mom ‘n’ pop stores.
Well-known stores such as Macys, JC Penny and Pier 1 Imports have drastically downsized their presence in the marketplace putting thousands out of employment. However, it is important to note that some of these downsizings were being made long before the pandemic, both in the US as well as the UK market.
But what happens to the employees of these firms that have closed their doors for good? The obvious answer is that many former employees have had to resort to seeking employment in other areas or start their own businesses, in other words, become entrepreneurs.
In the Caribbean, a significant proportion the population tends to rely on government for employment. But as Caribbean governments struggle with ailing economies and seek programmes with the IMF, dependence on government as a source of employment has become a dead end.
In Barbados, the tendency towards self-employment has been evidenced by the increase in registration of business names at Corporate Affairs, the government department responsible for maintaining a registry or list of business names and companies in the country.
Barbados Uncensored believes that the essence of independence is learning to help oneself and that the more independent one is of government the more freedom we can demand from its control. As a community service, therefore, Barbados Uncensored offers those undertaking this novel task of starting their own business some advice which, it is hoped, will get them off to a solid start and position them to grow their businesses. Let us begin with the most fundamental of all questions: is self-employment for you?
Strategic vs Reluctant Entrepreneurs
We would like to suggest that there are two types of persons who might be starting their business at this time. The first group is made up of those persons who always wanted to start a business but never had the time to do so. For them, this is an opportune time to “seize the moment”. It may be that they are still employed but may be earning less and / or the job may only be temporary. We call these strategic entrepreneurs since they had always seen self-employment as a strategy going forward.
The second group consists of those who have been forced into the self-employment option because of a loss of income; their national insurance may have run out and there are still bills to pay. The distinctive feature of this group is that they may still prefer to be employed so becoming self-employed may just be a stop gap. We call this group the reluctant entrepreneurs.
We have made this distinction because creating a successful business requires a certain level of commitment and effort. In fact, it can be stated with near certainty that the presence of a strong commitment to a self-employment venture is a key factor in making it successful.
The Challenges of Commitment
We often tend to take the meaning of words for granted so let us look at the meaning of “commitment” for a moment. Of all the definitions of this word, we find the following most interesting.
“A commitment is an engagement or obligation that restricts freedom of action” (Dictionary online)
This is a meaning that should be taken to heart because starting a business will restrict your freedom of action in several ways.
First, if you are going to succeed you may have to spend time and effort on the business to the detriment of other activities such as sports or simply “chilling out”; even if temporarily. This is what we call an “opportunity cost” which simply means what you have to give up to gain something else. Especially in the initial stages, you will have to spend time organizing the business. This can range from getting its name registered, to purchasing equipment, to setting up service operations or production facilities or getting customers.
A second way in which starting a business may restrict your freedom of action has to do with following regulations related to the type of business in which you want to operate. For example, food service ventures such as restaurants and itinerant food vending (e.g. selling beside the road) must have a health certificate. An important part of preparing to be an entrepreneur is learning about the regulations relating to your business. Failure to do this could land you a date with the law courts. Of course, you could also come by such a date if you engage in an illegal business!
A third way in which starting a business may restrict your freedom of action has to do with your opening hours or the timeliness of your service. Retail businesses usually have specific opening hours, especially if they are located in malls. Some individuals may find the discipline of having fixed hours challenging. If you are going to run a service, such as repairs, the time you take to complete such services can either build or retard the growth of your business. There is always a competitor willing to capitalize on your weaknesses in this area.
A fourth restriction is that as a self-employed person you will have to pay your own taxes and NIS contributions as required. As an employed person most of these were handled by your employees. Now you will have to assume responsibility for these yourself. The importance of paying NIS should not be overlooked. Even though there have been some issues with this, it is a form of insurance which can very helpful to you and your business.
A fifth restriction or commitment is that you will have to keep fairly detailed records, a task that you might more than challenging, especially if you are not accustomed to balancing your checking account or keeping a budget. But keeping records will be helpful in several ways. First, your accounting records will help you determine your profit or loss which is an important measure of the success of your business. Second, records will help you determine the level of taxes you will be required to pay. Third, keeping detailed records will help you immensely if you want to obtain a loan to finance the growth of your business later. Fourth, keeping customer records will help you identify your most profitable clients and their buying habits.
Notice that we did not call the five issues above “problems”. We described them as “challenges” by which we mean that they can be overcome with some effort and specific training.
Of course, some of you may not want to have formal business with a name and the other bells and whistles such as website. However, if you want to run and grow a business successfully, some level of formality will definitely be necessary for legal and marketing purposes. If you are committed to tackling these challenges then you should go right ahead and start thinking seriously about your venture.