When asked what it’s like to be your own boss, many sole traders will say that overall, it’s one of the most rewarding experiences of their life. But if you dig a little deeper, they will often describe the challenges they have to overcome day-to-day to make it worthwhile. Starting a sole trader business is no mean feat and you will have to put in the hard yards in order for it to work.
This may make starting one all the more daunting if you are on the fence. But the more you understand the difficulties of starting a sole trader business, the easier it will be to avoid falling victim to the struggles small business owners face time and again.
We walk through two of the main challenges so future business leaders can see the warning signs and futureproof their sole trader business strategies going forward.
1. Taking all the responsibility
One of the key differences that sets sole traders apart from other types of business structures is that the responsibility falls squarely on you. You will make all the big calls and decide on the direction your business will go. The buck stops at you for all decisions even in areas outside your expertise whether it be marketing social media or accounting.
What’s more challenging is the fact that you will also have unlimited liability thrust upon you. What this means is that there is effectively no difference between your personal and business assets in the eyes of the ATO. So, if you make the wrong decision or acquire significant debts, the legal responsibility falls on you. This is the opposite of a company, which has its assets and liabilities tied to a separate corporate entity.
Perhaps the best thing you can do to overcome this struggle is to build a business plan and stick to it. You need to create a realistic vision of your business’ future and be plan for the bumps along the way. Talking to a business development coach or mentor can help put things in perspective and create a contingency plan. When you can see potential obstacles before they arise it’ll make it that much easier to take on the responsibility.
And enjoying yourself is exactly how it should be…You are the boss after all!
2. Wearing too many hats
Another thing that many small business owners struggle with is wearing too many hats when starting out. As previously mentioned, you have a lot of responsibility across a lot of different areas when running a small business. You will have to quickly learn new skills that may be in vastly different areas outside what you’re used to.
But just because you bare the responsibility of the consequences doesn’t mean you have to do it all. If you don’t know anything about social media or website design, consider asking for help from experts that do. Delegating responsibility and managing how others work for you are a key part of running a business.
Another way to overcome this challenge is to take a step back and understand what’s important about what ‘hat’ you wear. Consider for example, your business insurance. No one expects you to know the intricate differences between Public Liability insurance and a Professional Indemnity policy (unless your sole trader business is based around insurance broking).
But what you probably do know is the risks you face. Whether it’s a third-party slipping and injuring themselves in your business premises or the consequences of you giving the wrong advice, consider writing down situations that could pose a risk to your business if a claim were made against you.
Once you understand your risks, services like BizCover can help you compare what types of cover you may need and get quotes from multiple insurers. That way you don’t have to go chasing up insurance companies yourself when finding out what’s a reasonable price for sole trader insurance.
The bottom line
There are many challenges of starting a sole trader business. But if you delegate aspects of your job and set clear goals, you will likely be on the way to success.
© 2022 BizCover Pty Limited, all rights reserved.
ABN 68 127 707 975; AFSL 501769