Saturday, 27 April 2013

Is your small business idea viable?

There are lots of reasons why folks want to go into small business, so there are just as many ways of answering whether an idea is worthwhile or not.

This post examines just one criterion:

How much do you need to earn from your business for it to compare favourably with paid employment? (ie, working for "The Man").

Well, the median earnings for full-time workers in Australia in 2011 was $62,570 per year, including wages, superannuation, and other benefits.[1]

A salaried, full-time worker typically works a 5-day week, with four weeks' paid leave a year, plus around 10 days' worth of public holidays and up to around 10 days' worth of sick leave available. Totalled up, that means that our typical worker earns their $62,570 in 220 days of work.

Put simply, if your small business isn't returning you more than $285 per day on average, or if you're having to work more than an average of four days per week to earn that, then chances are you'd be better off working for someone else: most people with a full-time job are making more than you are (or are working less to make that same money).

Furthermore, with the national minimum wage at $31,530 per year[2], if your business isn't paying you $145 per day, you're not even making minimum wage.

I am not a financial adviser and this is not financial advice.

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