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 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.
Next week…
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!
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