On entrepreneurship & taxation

If you are excellent in what you do for living you might want to start your own business.

Countless people do that every year. Some succeed. Some struggle and give up. Many fail and retreat. Some fail, learn from it and start again. Some succeed on second on third attempt and some fail again. I have seen it all and, honestly, sometimes it is hard to predict if a business will grow and bloom or wither and fade away. There are some key indicators that might predict something but sometimes it is just hard effort combined with pure luck.

But today I do not want to dwell too deep on success vs. failure issue.

One crucial part of survival of a small business is the taxation system set by the government. While huge multinational companies can transfer their profit over borders and reap the benefits in states with low or zero taxes, SME-s are usually more vulnerable. Rapid changes in legislation and tax rates can burn the low margin and erode any resources accumulated.

A lot depends on general business culture around you as well. If most of the companies around you do not play fair game you are destined to fail if you try to compete them while paying all the tax they do not. If you try to adjust your business plan accordingly, think again. Some people prefer a good night’s sleep to temporary “success”. This is often true for businesses with high percentage of cash turnover such as cafes & restaurants or construction companies.

Any advise here? Be proactive. Try to find out the planned changes in your field of activity at least a year beforehand. Adjust your plans and activities accordingly. The competitive edge you have over huge companies and chains is your size. You can decide to change the way you do things literally overnight.

Where I come from one does not get a year for planning ahead. Changes in tax rates and legislation might change literally in a couple of weeks or months. But that is probably true for all the small countries with low number of tax payers vs. high number of people living off social security one way or another. Decreasing number of entrepreneurs and eroding margins in global turmoils leave the tax burden to the ones that simply won’t give up.

Regardless of business environment and the government’s insatiable thirst for taxes there will always be people who prefer the relative freedom of entrepreneurship. If you are willing to work countless hours, fail and suffer, learn and succeed, you might actually enjoy being an entrepreneur. If all you see is dollar signs, fancy cars and gadgets and everlasting fame I suggest you become an Youtube star instead 🙂