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In such a situation, many people dream of having their own business. They focus on the benefits they can enjoy, including freedom to choose the schedule, pride of ownership, and expected big profits.
Unfortunately, 97% of new start-ups with fewer than a hundred employees fail in their first year of operation according to Innovation, Science and Economic Development in Canada. Only 85% survive to three years and 70% to five years. There are approximately 7000 business bankruptcies in a year.
Even those who have years of university training and professional licensure can struggle if they don’t have good business sense. From the outside it may seem that it is made up of psychologists, dentists, lawyers, physicians and accountants! The truth is that their fees do not go directly into their personal savings accounts.
If you think the cost of professional services and expertise is too high, consider the following:
1. Credentials – In addition to registration fees, books and living expenses, many practicum and supervised practice positions have not been paid during the many years of university study. Getting a degree parchment and practice license alone does not represent success. They also trigger the repayment of thousands of dollars in student loans.
2. Annual Fee – Each year I pay approximately $3,000 to my regulatory bodies and insurance agent for licensing and professional liability coverage.
3. Facilities and Equipment – People who start a practice need not only office space but also furnishings and equipment suitable for their business.
4. Staffing – Look around your doctor’s office the next time you have an appointment. How many families are getting income from the doctor? Do doctors get paid if they are on leave or in training? How much is paid by the professional on their behalf for employee benefits?
5. Supervision – The more staff, the more time is required for advice, meeting and system work.
6. Monthly Expenses – In addition to interest on any business loans, office rent or mortgage payments, and staff salaries, there are utility bills, office supplies, janitorial costs as well as technology costs to operate the office.
7. Professional Development – Most licensing bodies require a set number of training hours each year to ensure that the professional has state-of-the-art skills and knowledge.
8. Accounting – The cost for income tax filing and government program requirements must be met by a specialist who usually charges by the hour. Some professionals also have to wait for payments from companies or chase checks when clients do not pay in cash. It doesn’t take long to become accounts receivable.
9. Taxes and Benefits – Unlike employees, professionals do not have sick leave, vacation time or sick time. If they don’t work, they don’t have income. However, they still have to pay personal as well as income tax.
10. Paperwork – Often what could be billable hours are eaten up by paperwork, administration or other unpaid tasks.
11. Time – Don’t be cheated. Starting and operating a business takes a lot of time. Most successful entrepreneurs work 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 the previous evening until midnight.
12. Accountability – You are responsible for ensuring that all actions taken by you and your employees provide ethical and appropriate services to the public. When there is a problem, you are the one who needs to deal with it.
Over the years, I have worked in government, retail and private practice businesses and therefore know that no matter which career path you choose, there are pluses and minuses. If you want to open a business, consider the above so that you are not naive and weak.
When you use the services of a professional, look around and remember that the person in front of you will only get a fraction of what you are charging. The rest goes towards business expenses.
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