Open a business with your eyes open — not with your heart doing the talking

In 5 min you'll know: how to run the numbers on the worst-case scenario before opening a business — not the best dream

In Block 2, Lesson 7 we talked about green receipts: the regime for self-employed workers, tax obligations and the difference between being a freelancer and running a business. Now we take the next step — turning an idea into a formal business without illusions about what that means. The rule: before opening a company, run the numbers on the worst-case scenario — not the best dream.

Before you continue: if you earn extra income, you registered your activity and calculated tax before spending — but what if that income becomes a business?

(Answer in the next paragraph.)

Starting a business in Portugal begins with a choice: sole trader (ENI), single-member limited company (SUQ) or limited liability company (Lda.). ENI is the simplest form — no minimum share capital required, your personal NIF (Portuguese tax-ID number) is the business's NIF, and tax and social-security obligations are individual. SUQ separates personal assets from business assets (partial protection), but requires proper bookkeeping and organised accounts. Lda. involves partners and formal corporate obligations. The choice depends on risk, turnover and the need for legal separation.

The invisible cost of entrepreneurship is what surprises people the most. Social-security contributions for self-employed workers (21.4% on 70% of relevant income, with minimum and maximum limits), monthly or quarterly VAT, accounting (whether in-house or outsourced), public-liability insurance (in many activities), licences and registrations. The net income of a business with €2,000/month turnover can be less than €1,200 after all obligations — and that is before income tax.

The business plan is not an academic exercise — it is the sanity check. If you cannot answer three questions with numbers, you are not ready: (1) who pays, how much and why? (2) what is the total cost of acquiring and serving a customer? (3) after how many months does the business cover fixed costs? The company's NIF is the tax identifier that links it to the Tax Authority — with it comes the obligation to file returns, whether there is a profit or not.

Simulate your business’s worst-case scenario before launching (5 min) →

Your promise: This month, Saturday at 9am, I will simulate the business's worst-case financial scenario over 12 months.