Starting a business can be an exciting idea, especially when you feel unfulfilled in your current job. You might be earning enough to pay the bills and manage your loans, but still feel like something is missing. For many people, business ownership can seem like the answer.

But before choosing a business idea, there is an important question to ask:

Do you genuinely want to build a business, or do you want more money?

In this episode of The Account Rant, Latitude Accountants’ Client Directors Raymond Semaan and Catarina Santini discussed why this distinction matters. A person might consider opening a cheesecake shop one day, and a mechanic shop the next. While there is nothing wrong with exploring different opportunities, constantly changing direction may suggest that the real goal is not the business itself.

The common factor may be the belief that owning a business will lead to more money.

The reality, however, is that business ownership involves much more than making a profit. Before leaping, it is important to understand what you are trying to achieve and whether the responsibilities of running a business align with your goals.

Why Do You Want to Start a Business?

Before researching industries, registering an ABN or developing a business plan, take a step back and ask yourself why you want to become a business owner.

Your answer could significantly influence the type of business you build and whether business ownership is right for you.

For example, are you looking for:

• More income?
• Greater job satisfaction?
• More control over your work?
• Freedom and flexibility?
• A way to pursue something you are passionate about?
• An escape from an unsatisfying job?
• The opportunity to build something of your own?

These are all very different motivations.

If someone wants to open a bakery one week and a mechanic workshop the next, the industries themselves may not be the driving force behind the decision. The common goal could simply be making more money.

There is nothing wrong with wanting financial success. Businesses need to make a profit to survive. However, profit alone may not be enough to sustain the commitment required to build and operate a successful business.

Passion and Profit Both Matter in Business

One of the key points discussed by Raymond and Catarina is the importance of passion.

This does not necessarily mean you need to love every task involved in running a business. Every business owner will eventually deal with difficult customers, paperwork, unexpected expenses, and stressful decisions.

However, you should have a genuine interest in the industry, service, or problem you are trying to solve.

Passion can help you remain committed when the business becomes challenging. It can also influence how you serve customers and the effort you are willing to put into improving your business.

Why Profit Alone Can Be a Problem

A business focused entirely on making money can sometimes lead to short-term decision-making.

For example, an entrepreneur might identify a temporary shortage in the market and see an opportunity to make quick money. During COVID, many people saw increased demand for products such as protective equipment, hand sanitiser and testing supplies.

The opportunity may have looked profitable initially.

However, when many people enter the same market for the same reason, competition can increase quickly. By the time products arrive or the business is fully operational, the original shortage may no longer exist.

This highlights an important lesson:

A business opportunity is not automatically a sustainable business.

Before pursuing an idea, consider whether there is long-term demand, how you will compete, and what will happen once the initial opportunity changes.

Being Good at Your Job Does Not Automatically Make You a Good Business Owner

Many people start businesses based on their existing skills.

A talented mechanic may decide to open a workshop. A skilled tradie may decide to start their own company. A great baker may decide to open a bakery.

Technical ability is valuable, but becoming a business owner means taking responsibility for far more than the technical work.

As an employee, your responsibilities may primarily involve completing your assigned work. As a business owner, you may also be responsible for:

• Invoicing and collecting payments
• Bookkeeping and reconciliations
• Payroll
• Staff management
• Administration
• Tax obligations
• Health and safety
• Customer service
• Business systems and processes
• Marketing and sales
• Cash flow management

Even if you outsource some of these responsibilities, they ultimately remain part of your responsibility as the business owner.

You are accountable for the overall performance and reputation of the business.

Business Ownership Comes With More Responsibility

Many people see successful business owners and assume they simply earn more money.

What they may not see are the additional hours, stress, and responsibility involved.

As an employee, you may be able to finish work at the end of the day and leave many of the business concerns behind. As a business owner, you may be thinking about whether customers are paying their invoices, whether payroll can be covered, or how an employee mistake could affect your reputation.

This does not mean employment is better than business ownership.

There is nothing wrong with being an employee, and there is nothing wrong with being a business owner. The important thing is understanding which path suits you.

Before starting a business, consider whether you are prepared to take responsibility for decisions and outcomes beyond the work you currently perform.

Don’t Forget the Opportunity Cost of Running a Business

One of the most important concepts for prospective business owners is opportunity cost.

Imagine you start a business and make $10,000 in profit. At first, this may sound like a success.

However, the number alone does not tell the full story.

How many hours did you spend building and operating the business?

How much tax will you need to pay?

What did you sacrifice to generate that income?

If you spent hundreds of hours working on the business, your actual hourly return may be significantly lower than expected.

Calculate What You Are Really Earning

It can be helpful to assess:

• Your total business profit
• Tax obligations
• The number of hours you worked
• Your effective hourly earnings
• What you could have earned working elsewhere

This does not mean a business should be judged only by its current hourly return. Some businesses require time and investment before they become profitable.

However, understanding the numbers can help you make better decisions.

If your business is generating less income than you could earn as an employee while also creating significantly more stress, it may be time to review the business model.

You may need to reduce costs, increase sales, improve pricing or explore additional revenue streams.

Know Your Break-Even Numbers Before Starting

Business owners need to understand their numbers.

It is not enough to know that customers are coming through the door or that money is entering the bank account.

You should understand how much revenue is required to cover your costs.

For example, if you own a sandwich shop, you should know:

• How much it costs to operate each month
• How much profit you make from each sale
• How many sandwiches you need to sell to break even
• How many sales are required to generate a profit

Without this information, it can be difficult to know whether the business is genuinely sustainable.

A simple profit equation may be:

Sales − Expenses = Profit

While the equation itself is straightforward, managing the factors behind it can be far more complex.

You need to understand how to generate sales while managing expenses and maintaining quality.

Don’t Let Tax Become an Afterthought

Quick money ideas and side businesses can also create unexpected tax obligations.

Someone may start a small venture, generate additional income, and feel successful because they have made $10,000.

However, that does not necessarily mean they will keep the entire $10,000.

Depending on their circumstances, tax obligations may apply to the income generated.

This is why it is important to understand the financial and tax implications of starting a business before focusing entirely on the money coming in.

Good business decisions require looking beyond revenue and considering the complete financial picture.

Build a Business, Not Just a More Stressful Job

Ultimately, starting a business should involve more than simply finding a way to make money.

A successful business should have a clear purpose, sustainable demand and a financial model that makes sense.

Before leaping, ask yourself:

• What am I passionate about?
• Why do I want to start a business?
• Am I chasing money, freedom or job satisfaction?
• Am I prepared for the responsibilities of ownership?
• Do I understand the numbers behind the business?
• What is my opportunity cost?
• How much revenue do I need to break even?
• Can this idea become a sustainable business?

Sometimes, the most valuable decision is not immediately starting the first business idea that comes to mind.

Taking the time to understand your goals, your numbers, and your responsibilities may help you avoid building a business that ultimately becomes nothing more than a more stressful job.

Frequently Asked Questions About Starting a Business for the Right Reasons

Should I start a business just to make more money?

Making money is an important part of running a business, but it should not be the only consideration. You should also understand the responsibilities, risks, opportunity cost and long-term sustainability of the business.

Do I need to be passionate about my business?

Passion can help you stay committed when business ownership becomes challenging. You do not need to enjoy every aspect of running a business, but having a genuine interest in the industry or work can be valuable.

Can I start a business if I am good at my current job?

Yes, but being technically skilled does not automatically mean you are prepared for business ownership. You will also need to manage financial, administrative, and operational responsibilities.

What is opportunity cost in business?

Opportunity cost refers to what you give up by choosing one option over another. For example, it may involve comparing the income and time required to run your business with what you could potentially earn working elsewhere.

Why do I need to know my break-even point?

Your break-even point helps you understand how much you need to sell to cover your business expenses. Knowing this number can help you set realistic sales and profit targets.

Ready to Understand Whether Your Business Idea Makes Financial Sense?

Starting a business is a major decision, and understanding your numbers early can help you make better decisions.

Latitude Accountants works with business owners to help them understand their financial position, manage their obligations, and make informed decisions about their future.

Whether you are considering starting a business or already running one, having the right advice can help you better understand your numbers and the opportunities ahead.

Latitude Accountants

📍 Sydney Olympic Park | Marrickville | Melbourne | Loxton
📞 1300 706 597
📧 info@latitudeaccountants.com.au

Want to discuss your business idea? Get in touch with the Latitude Accountants team today.

Disclaimer

This article is intended for general information purposes only and does not constitute accounting, financial, tax, legal or business advice. Every individual’s circumstances are different, and the information in this article may not be suitable for your specific situation. Before making financial or business decisions, seek advice from a qualified professional who can consider your individual circumstances.