Yesterday I received an email.
I found your site whilst searching for information about... Currently I work as a teacher and I am thinking about a career change...Your advice would be greatly appreciated.
Now that got me thinking.
Where do people go if they are bored with their current jobs, they are tempted by the lure of self employment, being their own boss and want to be an "entrepreneur"?
And in particular where do people go if they are not sure what they want to do but they know they want to start a home based business?
It's one thing to have become fired up with passion to right a wrong that you believe represents a opportunity to do good and make a large amount of money. These are the people that Michael Gerber wants to help in his "Awaken the Entrepreneur Within" book due in March 2008.
But what do people do who want to move on to something new but aren't sure of what it is that they really want to do.
Finding The Right Opportunity For You
A few weeks ago I posted an item about ideas for starting a new business so it's worth taking a look at that to see if any of the items listed appeal or inspire you.
But you don't want to have one of those "out of the frying pan, into the fire" moments.
Yes you are bored with your current job, but if you are going to cope with all the uncertainties of being self employed after enjoying a nice reliable salary, then you need to find something that you love.
Take a good look at your skills, abilities and talents.
I was reading a Business Summaries review of "Discover Your Sales Strengths" last night (blog posting will appear soon) and one of the key questions for success was asking yourself how much you agree with this next statement:
At work I get to do what I do best every day
It's only natural to enjoy doing what you do best and to do best what you enjoy.
It doesn't always work but if you have passion, commitment and belief in what you do, it will shine through in every contact you have with any customer, prospective customer or potential referrer of customers.
I'm sure that you have noticed that I love business and understanding what makes a business tick and how it can be improved. It's no chore for me to read a well written business book.
Investigating the Business Opportunities
Hopefully you have identified a few things that you enjoy doing and that you can do much better than the average person.
The next stage is to discover whether there is any money to be made. You don't want to find yourself trying to sell snow to the Eskimos and being surprised to learn that they are over-supplied and didn't really have a demand for it anyway.
The article I wrote on preparing for the Dragons Den is a very useful guide for assessing business opportunities as it asks you to look at the business opportunities in terms of three main risks:
- Is there strong customer demand? If no one wants to buy what you sell, the business is not going to succeed.
- How strong are the competitors? With the massive presence of Amazon, it's probably not the time to think about starting a book or music website unless you can find a really specialised group of people where their wants and needs are not catered for.
- Do you have the capabilities to succeed? In Michael Gerber's legendary book, "The E Myth Revisited" he talks about the problem of waking up with an entrepreneurial seizure (a compelling desire to start a business) when you know how to do the work but you don't know how to build a business.
My Eight Pillars Of Business Prosperity coaching model outlines the areas that you need to do well to succeed but on top you have the burden of all the compliance issues (accounts, tax, health & safety, business law, employment law...the list seems endless).
But it's not just about capabilities. It's also about commitment, your health, the support of your family and friends and your own pig-headed determination to make it happen.
OK you've found an opportunity and you've checked it in terms of demand, competition and your own capabilities and you still want to go ahead but what do you do next?
First stop and take a deep breath.
I can feel the pent-up emotions of excitement and fear from here but don't you feel so alive after being repressed by that dull job that paid the mortgage but didn't give you much challenge or satisfaction?
You are about to start on a journey that could make or break you.
Thousands of people every year launch a new business that is the start of a major success, many more build nice life style businesses - fewer hours, more convenient working times, avoiding the rush hour and a reasonable income but some go badly wrong.
Far too many businesses fail every year.
For some people it just means that their income wasn't as high as they wanted and they needed to live on their savings.
For others, who made big investments or commitments, it means that their life savings are wiped out and possibly things became so bad that they had to sell their homes and become bankrupt. Fortunately this is unlikely in a low cost home based business.
It's Time For A Business Plan
Boring and predictable that I should say that it's time for you to start a business plan but in my view it's absolutely essential.
It's far better to lose money on paper than in real life.
I recommend that you take a look at the business plan resources on this blog.
If you are worried about the numbers then either
b) try to find someone with some formal accounts training who can help you. I did the numbers for my Dad's business plan when I was a first year chartered accountancy trainee.
Try to keep things fairly simple but you do need to produce a profit forecast starting with your sales, a cash flow forecast and a balance sheet forecast (it may mean more to your bank manager than to you but it checks that the other two forecasts are consistent).
At this stage it is important that you don't get bogged down in the numbers and concentrate on planning the other aspects of your business:
- What customers are you targeting? Why do they buy or why should they buy? How much do they buy? What price are they prepared to pay?
- What do you need to provide the product or service? What equipment including a computer? A vehicle? What materials and do you need to stock anything? Where can you buy from at the best combination of price, service and credit? How much space do you need?
- Who else needs to be involved? Can you run this business idea on your own or do you need to take on a partner or staff?
- How are you going to promote your business?
- What risks are you prepared to take to grow quickly or if you need to borrow money? There is no point planning big if you need to borrow but you are not prepared to put your personal assets and those of your loved ones on the line.
Until you answer these questions, your numbers won't make much sense and until you've got your first happy, satisfied customer you can't show that you have a business that could work.
Whatever you do, don't make your numbers fit. It's easy to make money on paper.
By this I mean don't fall into the changing assumptions trap. Instead of three new customers in month three, you plan to get five in month two. Instead of a first order for £100, customers buy £250. Instead of waiting six months before they come back and buy again, they will return after three months.
Hey presto! A flourishing business and you're on your way to be the next Richard Branson...or perhaps not.
Keep your targets achievable and make sure you believe them and are committed to making them happen.
Financial modelling is useful for understanding how sensitive performance is to your key variables. It helps you to focus and set priorities but please don't fool yourself.
Managing Your Finances
First I recommend that you get your own personal finances in order.
It will take time for your new business to get up and running and you don't want to be wasting money paying high interest rates on credit cards and store cards.
Look closely at what you spend and see what you can stop. While you were an employee living on a guaranteed salary you could splash out on all those little luxuries because you knew where the next pay cheque was coming from. As a small business owner, you have new responsibilities and aspirations and it has to stop.
Don't get me wrong.
You can still have the luxuries but you need to take the approach that you will be spending from profits that you have earned rather than spending your future earnings.
It is often tough at the start. It takes longer to get those first few customers or so that you get a track record you may decide to do some jobs at a low price or even free. You need to be prepared to see your personal spending go down before it goes up.
On the business finance side you need to do three things:
- Record everything - Book-keeping is dull but it is essential and you don't want to find that you have spent your own money but you can't remember what it went on and therefore you can't claim it back from the taxman. Consider finding a virtual book-keeper if you really can't face doing it yourself or you know that your time is better spent elsewhere.
- Measure and report everything - If you know your numbers, you know your business. Understand where customer leads come from, calculate how much it costs in time and effort to generate leads from each source, monitor your sales against your business plan, know how much money you've got in the bank and chase your customers for payment.
- Question everything - You will find that it is much easier to spend money than earn it so be your own Finance Director. Ask yourself whether you really need to spend that much money now or whether you can spend less or spend later. Be prepared to say "No" to yourself. Focus on the consequences - the technical term is cost benefit analysis - and the likelihood of success and any guarantees attached to the spending.
One of the biggest traps when you are starting is printing costs which reduce sharply as volumes increase. However it is an easy mistake to order large quantities because you've convinced yourself that you are saving money only to find that you throw most of it away unused. I'd recommend that you delay everything other than some nice quality business cards until you are sure about your marketing message and you have proven that customers are willing to pay the price you want.
For further guidance on Finance and what not to do, I recommend that you read my posting 8 Common Finance Mistakes That Could Cost You A Fortune.
You will see that I have strong views about the myth that all small businesses lose money in the first year. Think like that and you give yourself an easy excuse for poor performance.
One of the critical advantages about working from home is that it keeps your costs down and the closer the relationship between sales and profit the better.
Don't rush into renting an office even if you would like a posh address. You can have meetings with prospective clients in hotel lounges and coffee bars. Be proud of the fact that you are working from home because it is a sign that you are determined to make your business succeed.
The legal compliance issues of accounting and tax is complex but important. Find yourself a good local accountant and he will help you set up your business in the best way including whether you should be a sole trader or form your own limited company. I will be posting an article about how to find an accountant soon.
Marketing Your Home Based Business
A few weeks ago I wrote an extended article with marketing tips for a home based business.
Just like this article it was started by someone asking me a question. I spent about 90 minutes on the phone to her with follow up emails - all for free - before I decided that I needed a top quality article for small business marketing to point people at.
Just click on the marketing tips link to read it.
You will see that I do recommend several high value, low price marketing programs you need to spend money to save money because I believe that this is an area where .
I have commented on someone else's blog today when he asked which was more important - market planning or market action?
- Planning without action will mean that there are no results. Nothing happens.
- Action without planning means that you could be wasting a lot of money trying to tell the wrong prospective customers about the wrong products in the wrong way and at the wrong time.
As a start up business, your resources are likely to be small and you can't waste them so you don't have a choice - you have to focus on proper marketing planning and effective action. It was Peter Thomson who reminded me that "proper planning prevents particularly poor performance".
Your marketing will generate leads or prospective customers to contact you but the next stage is turning those leads into orders.
Improving Your Selling Skills
Accountant, marketer, now salesperson. Is there no end to the skills that you will have to master to make your business the success you want it to be?
Don't expect to convert every contact into a paying customer at the first contact.
If you do, it probably means that your prices are too low but you do need to make sure that some of your contacts turn into customers on a regular and predictable basis.
You do that by strengthening your selling skills and through persistent follow up.
First ditch everything you think you know about the stereotype of a salesman - a smooth and fast talking manipulator, liar and cheat, only after one thing and determined to get it.
The best sales people do more listening than talking. They build relationships. They know that the profit comes from repeat business rather than a one-off deal and that only happens when the customer is happy.
It All Depends On You
When you were employed you probably had a team to share the load but now your business success depends on you. Luck may help or hinder you but the main determinant of your success will be you, your attitude and commitment.
Please see my articles posted about Personal Improvement.
In particular you need to be clear about your goals and your priority actions to reach those goals. Next you should plan the use of your time around those priorities and be very disciplined about sticking to your plan.
There are many things that you could do, a lot that you should do, some that you must do because it's the law and some that will determine whether you succeed. Those are the ones that you need to focus on, but often these important activities seem less urgent. You must make time for them.
I find that the best way to think about priorities is to ask yourself about the consequences of doing or not doing something and the time it takes:
- "If I do this it should bring me three new clients?" That sounds like worth doing but ask yourself about the probabilities of success and the time required.
- "If I don't do this it will cost me £1,000." Do it if it will take 3 hours, don't do it if it will take three months of solid work. Some times you are better off spending more to earn more.
Starting and running a small business is very hard working but if you are successful, it will be among the most rewarding things you can do.
This is your chance to create something special out of nothing.
Please do have a good look around the blog. It is growing quickly, sign up to the newsletter and come back regularly to see what else you can learn.
I am committed to bringing you the best possible advice and helping you to build a bigger, better business with more profit.