As I approached our table at the coffee shop I noticed that Paddy had his pen and paper out, so I knew I was in for a grilling of some sort.
“What’s up?” I asked.
“Have you ever written anything on starting your own business?” he asked in turn.
“Off the top of my head,” I replied, “I don’t think so. Why do you ask, and why are you poised to make notes?”
“Well,” Paddy said, “my nephew is an electrician, and even though he has a good job he’s thinking about starting his own business. I was hoping you had some tips.”
“I certainly have some views,” I assured him, “ask away.”
“What do you think is the most important consideration,” he asked, picking up his pen and positioning his paper.
“He’s going to have to have a high threshold for enduring stress,” I told Paddy. “There’s going to be no regular pay cheque coming in, and he’s going to have to make a lot of decisions that other people have been making for him.”
“Yes, I can see that,” Paddy allowed. “I think he can handle decisions, but I agree that the loss of a regular income can be stressful.”
“And,” I added, “the loss of his take-home pay is not the end of it. Has he factored in the loss of benefits, such as a pension plan, group insurance, workers compensation, paid vacation and holidays and being able to claim unemployment insurance?”
“Probably not,” Paddy surmised. “What’s next?”
“He’s going to have to line up a lawyer, an accountant and a bookkeeper,” I pointed out.”
“What’s the best way to do that,” Paddy asked.
“Recommendations from someone whose judgement he trusts.” I answered.
“Why does he need a bookkeeper and an accountant?” Paddy inquired.
“Accountants are a lot more expensive than bookkeepers,” I explained. “He’ll need an accountant for annual statements, tax planning and compliance and, depending on how successful he becomes, possibly financial planning. But, he’ll also need someone to do simple bookkeeping on an ongoing basis, and an accountant would be too expensive for that”
“What about insurance?” Paddy asked next.
“He’ll need liability insurance,” I pointed out, “and, of course, he’ll need insurance on his assets, such as his truck, tools and parts inventory. He should also look into business interruption insurance. I mentioned earlier that he’ll no longer have employer group coverage so he needs to look into disability and life insurance. He should see what’s available through trade associations
“And speaking of inventory,” I went on, “this will now be his responsibility, which includes finding suppliers and doing the actual purchasing.”
“Wow!” Paddy said catching up with his note taking, “That’s a lot to consider. Is there anything else?”
“He’ll need to make banking arrangements and get set up to accept credit cards. Under no circumstances should he grant credit to anybody. And, on that subject, for any big job he should get an advance and bill his client regularly as the job progresses. He should have his lawyer draw up a standard contract for these situations.”
“What about incorporating?” Paddy asked.
“He should speak to an accountant about that,” I answered. “There are additional costs involved and the advantages of incorporation often aren’t as great as people think, especially in the early days.”
“Generally speaking,” Paddy inquired, “are you in favour of people starting their own businesses?”
“If they have the right mental make-up for it,” I said, “I definitely am. Running your own business can be very satisfying and, if done properly, very profitable.”
“But it’s not for everyone?” he suggested.
“Definitely not for everyone,” I agreed, “but I think more people should consider it than do.”
Paddy put away his paper and pen and we began discussing the Stanley Cup playoffs.