Career Doctor Articles

With the kind permission of the Career Doctor, jfo is able to bring you a series of articles to help you in your work situation and longer term career management

Starting Your Own Business

When some people hit a bad patch in their career - been made redundant, or so fed up with their job that escape is the only option - they often fantasise that they would like to set up their own business. The attractions of self-employment seem very appealing, being your own boss and doing it your way can be a very beguiling prospect. Having been self-employed for the past 13 years I can certainly confirm that there are many advantages. But I can give you chapter and verse about the downside, too!

In this article I will discuss what actions you should take if you are really serious about starting up your own business. In an earlier article I wrote about buying a franchise and so here I have assumed that you have decided to go it alone and not become a franchisee.

So that’s your first brave decision, as it is well known that a very high percentage of new business start-ups fail in the first 18 months; whereas buying a franchise is, statistically, a more safer alternative.

THE STARTING POINT

What type of new business will you start up? Suppose you are currently employed as a Marketing Manager but want to go self-employed. Most people’s natural inclination would be to set up their own marketing consultancy - but wait, is this the best idea? Suppose you are currently employed as a Teacher, what self-employment could you do? Set up a training consultancy? Is this the best idea?

Assuming that there is a ready market for your particular skills and experience is not always a very safe idea. Perhaps the Marketing Manager or the Teacher might be better advised to consider setting up a business that makes candles, or sells designer greetings cards, or imports curios from the Far East. Think beyond the obvious is the real starting point! And certainly do not assume that companies will flock to your door to hire you for your current expertise. That is possible, but not certain. Do not delude yourself that there will be a strong and sustainable demand for your talents.

I would advise that you go to the reference library and read some books on starting up a small business, and then have a serious discussion with your spouse / partner about the implications of becoming self-employed. Look at the downside as well as the upside. Think about the likely effect such a decision will have on your finances, family life, health and career. For I can assure you that once you have become self-employed, you will have probably divorced yourself from mainstream employment.

Most recruiting managers will view an applicant who is self-employed with grave suspicion, for such an applicant has demonstrated entrepreneurial flair, is used to making his / her own decisions (and could therefore be a loose cannon) and could be difficult to manage. Someone who is self-employed could therefore represent a threat to the recruiting manager. There is some truth to this stereotype, as I could vouch for!

That does not mean that becoming self-employed will make you unemployable should you later decide to return to mainstream employment, but you will find some “buyer-reluctance” should you decide that self-employment is not for you, after having had your own business for a few years.

A BUSINESS PLAN

Assuming that you have now decided to go self-employed and that you want to import Far Eastern curios (or whatever), the next step is to develop a Business Plan. Failure to do this is a recipe for disaster. There will be books in the library about Business Plans, and the major banks have some excellent publications that will help you develop your Business Plan.

You should consider the trading name you will use. If you will be trading on the internet, you will need to consider what URL you will register. For example my company is Milverton Career Solutions Ltd, yet my URL is www.careedevelopment.co.uk. For who would type in the word “Milverton” into a search engine? Type in the words “career development” into a search engine and my website should be found. This simple technique will increase the number of hits on your new website.

You will need to decide whether you will be a sole trader, set up a partnership, and / or become a limited company The books in the library will take you through the pros and cons of these options, though I would add a strong word of warning against going into partnership with another person.

Now draw up a SWOT analysis of your proposed new venture. Think of your venture’s Strengths, Weaknesses, Opportunities and Threats. This exercise is essential. Assuming you are still feeling positive after your SWOT analysis, then think about how you will market your new venture. Draw up a Marketing Plan (plenty of advice from the library books on how to do this). Will there be a sufficient, ever-renewing market for your new venture? Will you get repeat custom, or will each new customer be a one-off, necessitating a never-ending search for new business?

Do you have selling skills yourself? You might be a highly skilled XXX, able to deliver a superb service, but if no-one knows about your company because your marketing is amateurish; or if they are attracted by your marketing, but you cannot convert their initial interest into a firm sale, then you will soon go out of business.

FINANCING THE VENTURE

Naturally adequate capital is essential to start up a new venture. If you have received a large redundancy payment, should you use this to finance your new business, or would it be more prudent to use someone else’s money? A bank’s, for example.

Having set up a number of branches of my company, my advice to anyone thinking about starting up their own business is that if you do not have at least £15,000 of your own money to invest, then forget it! If you are not prepared to kiss goodbye to your capital, then you are not a risk-taker and will probably fail as a business person. Most new businesses fail in the early stages because of under-funding. That is a statistical fact.

If you need to borrow money from a bank to start your new business they will want to see a professionally prepared Business Plan. This will give them confidence that you have thought of all contingencies and have a potentially viable business proposition that would be able to support the repayment of a loan. If the bank is not convinced you have a viable proposal, then think again. Perhaps you have missed a point, or left something out of your calculations? If not, then its possible the bank will be doing you a big favour by rejecting your application.

In your Business Plan you should have made adequate provision for start-up capital, and have calculated the likely cost of setting-up your new business. For example, research the costs of premises; staff; vehicles; equipment; initial stock; IT systems; hiring legal, financial, PR and web experts; marketing / launch expenses, insurance premiums, etc.

Calculate the probably monthly operating costs - rent, phones, advertising, petrol, stock and material replenishment, salaries / wages (including your own!), consumables, etc. Maintaining cashflow is a big challenge, as getting customers to pay your invoices is a major problem. You might have to wait for three months before a customer pays you, in the meanwhile you are helping finance his business! Also allow for stock shrinkage (that’s a nice way of saying shop-lifting) if you want to open a retail outlet.

So you now have some idea of the likely costs of starting and running your new business. But what about projected income? How many units will you sell, and at what price per unit? This is very difficult to predict with any degree of confidence. Err on the conservative and don’t fool yourself. If sales are better than forecast that’s great, but what if sales are sluggish until your company’s reputation spreads? Many businesses operate at a loss in the first year; have you allowed for that? Can you afford to effectively work for nothing for 12 months?

Scary thought, isn’t it?

ACTIVATING THE BUSINESS

In the management theory books that I have read there was reference to the four stages of a business: Storming (brainstorming to get the idea), Forming (setting up the business), Norming (establishing standards and procedures), and Performing (carrying out the day-to-day operation of the company). When I was an HR Manager I used this formula when selecting managers, for it is true that some people are very good at setting up a new business or department, whilst others are better suited to running an existing business.

Those people who are Stormers, Formers and Normers often get bored once a new business or department has been set up, and the initial challenge / adrenalin rush has calmed down. Whereas those innate Performers who are most suited to managing an existing business are best kept away from new ventures, as such a challenge is outside their comfort zone.

But you, dear reader, will have to do all these functions if you want to be successful. Rise to the challenge of creating a new company from scratch, and then manage it on a daily basis. You will become truly multi-functional, and have a broader base of transferable skills than you thought possible. Activating the business once the plans have been prepared and the finance secured is the relatively easy part. Jump in with both feet and give it your best shot.

You will probably work longer hours than you ever have before, and will not be able to blame the boss for any problems, as you are the boss. You can anticipate suffering a financial roller-coaster. One month you will make a £5,000 loss, and the next month a £12,000 profit. The highs are good, but the lows need a lot of courage to live with.

I have deliberately emphasised the problems and challenges, as these will be many and varied, and it is better to go into self-employment with your eyes wide open. If I have dissuaded just one reader from starting up a new business that might have failed through under-preparation or under-funding, then I will have earned a Brownie Point. But fortune favours the brave, as we all know!

Good luck!

The Career Doctor is Eric Hearn, Chartered MCIPD and Managing Director of Milverton Career Solutions Ltd, Ascot, Berkshire, UK.

Contact details:
Tel: 01344 624383
Email: milvertoncareers@btconnect.com
Website: www.careerdevelopment.co.uk