Last week, we saw how identifying the life you want, what you’re good at and love doing and finding a problem to solve or a gap in the market helps a lot when starting a new business. Since I am confident you did the homework I gave you last week (because I have limitless faith in you), you should already have a pretty good idea of what kind of life you want for yourself.
So, what does your ideal life look like?
If you want to work from home to be with your family, crafts, clothes-making, map printing or any other manufacturing business would be good for you. You can sell these online at various market places, at Social Media sites or from your own website, you can sell at craft fairs and you can also commission pieces to shops. However, bear in mind that if you want to do craft shows you will need to spend some time on the road, so think about whether you want to include them in your business model. This kind of business has some overhead costs in the form of materials, fees and transport (if you do fairs), but they are not nearly as bad as they used to be when you had to rent a shop to sell your wares.
If you want to get out of the house and have some recognisable structure but still want to work for yourself, a business focused on the needs of local people would work great. Things like sewing services and workshops, craft supplies, baked goods, childcare and pet care, plumbing, IT skills training, retail or travel & transport agencies could thrive in any given community if there is a need for them. If you don’t want the significant overhead that comes with renting a space, you can focus on a service that can be delivered online or uses your client’s home or office as a meeting place.
If you couldn’t care less where you wake up every morning and want to carry as less baggage as possible, digital information is definitely for you. Anything related to writing, teaching, coaching, consulting, designing, etc. can be included here. The benefit of a business like this is that it’s got minimal overhead costs and is less location-centric than others, but if your talent lies in making pottery or baking cupcakes, please don’t try to ram your way into something like this just because it sounds great. You can incorporate parts of it (we’ll see how later), but if you base your whole business on it when your talent is obviously somewhere else, you’ll hate it and you’ll get frustrated because you can’t work on what you love.
What can you do and love doing?
I’m also going to believe that you have made a little list of your skills, what you love doing and what you could charge for, based on my previous post. You’ve probably made the list on a napkin that you’ve lost already, but hopefully you remember some broad categories from it. These will be the basis for your business, and it’s time to go deeper and pinpoint what kind of activity would fit your skills and what you love doing – which should be easy. If you already have a business going, you can still use the list to figure out if there are other areas, products or services you can tie in with what you currently do.
For example, let’s say you love baking and are great at it. Opening a cake business seems the obvious choice, but what if you realised that you are also very good at communicating ideas? It might be an opportunity to offer baking classes to people as a way to rediscover homemade, slow food. Or perhaps you have an over active imagination and hate sticking to recipes – this might lead to you opening a blog where you offer weekly recipes made with whatever you find in your fridge, or take up challenges where people list random ingredients and you make something (edible!) with them. Alternatively, you might find out that you love baking but don’t like interacting with people, and decide you’d be better off by offering to sell your goods through other shops. Can you see how knowing which skills you have and how they can tie in with your passion help direct which form the business can take?
That Elusive Gap
The last idea we discussed last week was the impact that solving a problem or filling a gap in the market through your product/service can have on making your business work. I hope you have been looking around you for problems and missing things, but if you need a bit of inspiration, let’s see how other people have done it.
Problem #1 – Some people would like to rent out their house but they don’t know how to find lodgers and whether they can trust them. Other people would love to stay somewhere more personable than a hotel and enjoy the feeling of being at home out of home, but they don’t want to get scammed and they also don’t want to get murdered in their sleep.
Solution – AirBnB.com offers a platform in which home owners can put their houses for rent and people can enjoy the advantages of staying in a house wherever they go and pay less than they would for a hotel. It also tackles the trust issue by encouraging references.
Problem #2 – People with great ideas often can not get funding to develop them. They miss out on opportunities and we miss out on some amazing products and services.
Solution – Crowdfunding via sites like Kickstarter offers a platform where you can post your idea and people can pledge in order to fund it. Not only that, but the backers get something in return, according to the amount they pledge. How cool is that?
Problem #3 – You like the “jeans tucked in boots” look but they always bunch around your knees making you look like a hen.
Solution – The Küza Strap clips to the hem creating a sort of stirrup, keeping your jeans tucked in the way they should.
Problem #4 – If you want to travel somewhere, your options are booking through a travel agent (expensive, but they do all the work for you) or building the trip yourself (cheap but time consuming). What do you do if you want some direction on what to see/where to go for little money but you don’t have a lot of time to shift through hundreds of websites?
Solution - Way Away offers travel itineraries in different countries for under £5. You can still book it yourself and save money, but you save a lot of time on research.
Problem #5 – Every year for Thanksgiving, thousands of Americans follow this tradition where two people hold the “wishbone” – a Y shaped bone in the turkey - and make a wish. The person that ends up with the longest part when it breaks will see their wish granted. The problem is that there are too many people and not enough wishbones.
Solution – Ken Ahroni from Lucky Break Wishbone started selling plastic wishbones after noticing the problem – they became so popular that giants like Wall Mart soon started selling them too. Luckily, he had the foresight to copyright them so he was able to stop them.
What can we learn from the way these people solved a problem or filled a gap?
· They can immediately identify their target audience - independent travellers, entrepreneurs, American families – and find out where they hang out and what they respond to.
· Their audience already wants what they offer, so they have to do very little (compared to other businesses) to get them onboard.
· They have a very clear vision and message – save research time while you still book trips independently, post your project and get it funded, no American without a wishbone – and can devote their marketing efforts to sell you hard on it.
This makes running the business a lot easier than if you just sell something that anyone would perhaps buy and a lot of other people are selling. I know it can take a while to come up with something of this calibre, but the more used you are to thinking up solutions to problems or spotting gaps in the market, the more chances you’ll have of coming up with something that works for you.
In the meantime, you should also know that solving a problem or filling a gap helps a lot but it’s not the only way you can make your business kick ass. One of the reasons the above businesses work is that they did something nobody else was doing, or they did it better than the others. Toolea offers a platform where people that work online can keep all their stuff. There are plenty of online calendars, email services, cloud type storage sites for your documents or chat services where you can create groups and talk. However, Toolea offers everything in one place, whether through their own software or by making it really easy to sync your cloud storage account or Google Calendar with them. Nobody else offers something like this, and if they keep the service up to date they will be able to trump any copycat that might appear along the way.
Shaping Your Business Idea
Now that you hopefully got some ideas and are getting excited, let’s think of how we can flesh them out. One of the first steps is creating a basic business plan, which will give you your business structure. There a lot of ways to structure a business, and you don’t need to stick to one of them - you can mix and match, selling a product, a service or both (for example, by offering an end product and teaching something related to it), working online and offline, using different price structures or a single flat rate or going after different markets with different products/services. You can have a look at 10 business models that rocked in 2010 here. They are a bit biased as they are mainly based on services, but you’ll get an idea of what a business plan looks like.
Creating a business plan might sound like a headache, but since I’m a big fan of Thoreau’s quote “Simplify, simplify” and this is a micro business we’re talking about, a one page business plan should suffice. What do we need to include?
· Offer – What product/service are you offering?
· Infrastructure – What do you need in order to offer it? A physical shop, a warehouse, an internet connection, machinery…
· Market – Who will you be selling to and through what channels (online shop, street market, physical shop)?
· Finance – What are your costs, what is you price & how are you going to get paid?
Done. Let’s move on.
Another thing I’d advise you to have is some kind of vision. This is not just what you tell people when they asked you what you do – this tends to be descriptive and, in some cases, boring. The thing about your vision is that it should show some passion, it should help people feel why they should come to you and not someone else. This is where solving a problem, filling a gap or doing things differently comes in handy.
Imagine that you have a toy making business. If someone asked you what you do for a living, you could say “I make toys for kids”, which would probably get you an answer like “oh, cool”. Now, let’s say that you’ve focused on using non plastic, long lasting materials, or on making the toys interesting for both kids and parents, or on making the toys educational in some way. Someone asks you the same question and you say something like:
“I provide children everywhere with toys that are both fun, safe for them to play with and last a lifetime, so they don’t become slaves of disposable products”
“I help parents rediscover the pleasure of playing with their kids, as I know those memories will stay with them forever”
“I encourage kids to learn different skills while they play, because that’s how kids learn best”
Can you see the difference? Not only you are tapping on the emotional aspect with your customers, but whoever asked you the question is bound to want to know more about how you do what you just told them to do. It sounds interesting, it shows why you’re passionate about it and it’s easy to see the benefit of buying from you. What’s not to love? So go on, find your “thing” and think of how you can put it in words that make people think “that’s just what I need”.
That’s really cool, but I’m still scared
What we’ve just covered should have helped you feel like you have more of a handle in how starting or running a business works. Still, most business owners I’ve talked to share similar worries and fears that levitate over them like a black cloud and hold them back. This is normal, but after indulging in hearing your own repeated claims that this is never going to work or breathing in a paper bag for a little while, it’s always a good idea to put them in perspective and ask yourself “is it really that bad?”.
Most things are easier than you think, so let’s deconstruct some of them, shall we?
· Setback #1 – I don’t have any money to invest!
Neither did Derek Sivers or John Paul DeJoria, but they founded CDbaby and John Paul Mitchell respectively. What you need to realise is that a lot of businesses can be started with very little money and grown organically. In other words, you can design and make a few products, or design a service and put in online for sale and use the money from those first sales to buy more stock, materials or advertising.
· Setback #2 – I’m not sure I have the skills to do this thing!
But I bet you can learn them fairly fast. Okay, perhaps not if you want to be a lawyer or a violin virtuoso, but you can learn how to sew, or the characteristics of the different kinds of coffees or teas or wines, or how to print maps in a reasonable time.
If you think you need to know everything about something before you launch it, you’ll never do anything. It’s scary to feel like you don’t have everything together, but this is part of the process. When you get a new washing machine, do you look at all the buttons and think “okay, that looks like the control panel of the Serenity spaceship. I think I’m going to wash my clothes in the sink”, or do you grab the instructions manual, fail to understand it and then call your mother crying so she tells you how that thing works?
Starting a business is the same. You start with what you can do and when you bump into a problem you can’t solve with your current skill set, you read about it and learn how to fix it, or you find someone who can do it and ask them for help. After some time, you’ll realise you don’t struggle with that problem anymore and you can move onto learning other things.
· Setback #3 – I don’t know how this whole “registering your business” thing works! And what about taxes?
If you’re the sole proprietor of your business – which means it’s just you working on it – a call to Revenue & Customs (or a non
equivalent if you don’t live here) to
register as a sole trader or as a limited company should be enough. Don’t
worry, they’re nice people, really. UK
I assume most of you would fall under the sole trader category. As a sole trader, you’ll be paying income tax on your profits, plus national insurance. You will have a personal allowance of £8,105 (year 2012/13) which will be tax free and anything on top of that will be taxed at 20%. For National Insurance, you should be on Class 2, which means you’ll be paying around £2.65 per week towards it.
Say you’ve made £11,000 working as a freelance photographer this year:
£11,000 minus £8,105 (tax free allowance) = taxable income of £2,895.
£2,895 x 20% (basic rate of tax) = £579
£2.65 NI per week x 52 weeks = £137.8
£579 + £137.8 = £716.8 (total tax you’ll pay)
These figures might change, but they should give you an idea of what to expect. As long as you keep receipts of the money coming in and money coming out, you’re groovy. See? It’s not that scary.
· Setback #4 – But what if my idea doesn’t work out?
I’m hoping that my constant rambling about thinking like an entrepreneur has made you realise that you are not stuck with one idea. Your skills can be used for so many related things, that if it turns out that using them to do one thing doesn’t quite work out you should be able to try a different approach.
The beauty of a micro business is that you can try a lot of different things without necessarily having to spend a lot of money on them. Think of it as “testing & discarding”. Why is this product or service not working? Can I fix the problem? If not, can I use the knowledge of the problem to go on a tangent and do something that works? Can you add something to it to make it more appealing? There are endless possibilities, and you don’t need to bang your head against a brick wall with something that doesn’t work.
· Setback #5 – I don’t want to run out of money and end up living in a ditch by the river.
Is this something that realistically could happen? If this is a “make or break” kind of deal I can understand why you’re anxious, but in most cases you can start your business without giving up another source of income. A lot of people hold onto their day job until they can see that their idea is viable. Others have savings that will keep them going until things start picking up, or they can rely on a partner or family member to pay the bills, so it really is quite difficult that you’ll end up sitting on a cardboard box on the street. And if things start getting tight, I’m sure you could always get another job to stop that from happening. Think of it as a safety net that stops you from going overboard and tells you when you’re about to cross a line that will make your life difficult, so you can back up a little and make some money to invest in your business.
Don’t be afraid to fail. You can try countless of things until you find the one that works for you, and if you need to keep working until that happens or you have to get another job for a while, don’t see it as failure – all you are doing is funding yourself. And every time something doesn’t go as planned, think that you are merely learning how not to do something so you can try something else next time.
So fail. Fail with pride. Fail big (but not so big that you end up living in a cardboard box). Leave what doesn’t work behind, take what you’ve learnt and build something great next time.
We’ll be looking at markets and audiences – how to find yours, where do they hang out, how to talk to them and how to attract them. Also, feel free to leave any feedback you might like to share in the comments!