It’s a big world out there, and opportunities abound, in fact, there are so many opportunities that planning your escape from 9 to 5 life can feel completely overwhelming! Never fear – as I’m going through exactly the same process I thought I’d share my learnings and my approach to becoming an entrepreneur in this handy beginner’s guide.
Now, before we get into the nitty-gritty, I need to remind you about the concept of decision paralysis. Decision paralysis occurs when there are multiple options that are difficult to compare, and therefore we tend to do nothing rather than risk making the wrong decision (the frivolous version of this always happens to me when I have to choose ice cream from a shop with loads of flavours – I freeze!). While its occasionally possible to get away with this while working for other people (although frowned upon as I’m sure you’ll agree), doing nothing will be a death sentence to your budding business – especially as decision paralysis is one of the things that can stop you before you’ve even got started!
To help you get past decision paralysis – make one choice pick a starting place in the creative process or a target market, then work through the full process below and see what come out with at the end, if its not right try one of the other choices. Back to ice cream – I now start with a fruity one first, it narrows down the number of options that I have, and then I buy a cone with as many different scoops as they’ll sell me! This technique is useful if your facing decision paralysis at work too – if you don’t know which option to focus on first, picking one is a lot better use of everyone’s time then waiting for inspiration.
- So, we want to escape the 9 to 5 life, but where to start?
- The Chicken or Egg Dilemma
- Creating the Elusive Irresistible Offer
- Take a deep breath – and drawing it all together!
So, we want to escape the 9 to 5 life, but where to start?
With the money, I’m afraid – before we get into all of the exciting bits of the entrepreneurial journey we need to start with how we’re going finance our business.
Now, I am not an accountant, so the following section should not be construed in any way as advice. This is the general way that I think about budgeting, turnover, cash, and expenses. Please consult your accountant for any specific requirements related to your planned company and unique to your country or area – they are your best resource for financial matters.
So, if nothing else while getting your business established you need to eat and have somewhere safe to sleep (and shit, shower, and shave presumably). The costs of these necessary elements must be considered when you’re making your affordability plan.
It is a good idea to look at your last year’s worth of expenses, and determine how much you have spent on average each month so you know roughly what your monthly financial requirements will be. Now, when you’re doing this you must be careful to consider the timing of one-off annual expenses (things like insurance, vehicle safety inspections or servicing, memberships, software renewals, etc). These items can have a big impact if you’ve neglected to include them in your cash flow forecast when planning your affordability. There is potentially a big cash hole in your plan if you fail to consider the difference between averaging the cost of your car insurance over the year (say £50 per month), compared to taking that £600 hit to your current (chequing) account all in one go.
Budgeting versus Cash Flow Forecasting
A key thing to understand is the difference between a budget and a cash flow forecast. A budget is a monthly or annual plan of your projected income and expenses, while a cash flow forecast is a plan showing how much money your business is expecting to go in and out of your bank account on a daily, weekly or monthly basis. Although the budget shows both turnover and profit, the importance of the cash flow forecast is in making sure that the cash is available in your bank account when you require it.
For example: if you set your rent payment to come out of your bank account the day after you get paid while working in the corporate world, you are making sure that the cash is available in the account. However, if, in your transition to entrepreneurship your income doesn’t go into your account until after your rent payment was due you may have to use an overdraft facility or short term loan to cover the cash shortage – and both of these come with an additional cost.
“Turnover is vanity, profit is sanity but cash is reality.”Original Author lost in the sands of time…
There is a reason why this quote has persisted for quite so long! You’ll note when people are trying to influence you to buy a course or info product related to any form of “make money online” opportunities they’re focus is always on the sales figures (the turnover).
They will tell you that they sold $100, $1,000 or $10,000 worth of product in a short period and imply that you can too! What they aren’t telling you is the expenses associated with running their business which might include (this is a non-exhaustive list):
- hosting of their site
- advertising (pay per click, Facebook ads, Pinterest ads, etc)
- email autoresponders
- premium themes
- premium (paid) access to graphic tools, spell checking tools, automation tools, etc
- bank transfer costs
- Staff or freelancer (virtual assistant, freelance writers, SEO experts, website administrators)and associated costs (payroll, social insurance, benefits, employer liability insurance, etc.)
- Service support (accountants, solicitors/lawyers)
All of these expenses need to be taken into account (including any salary that they draw for themselves and its associated costs) to give you your business profit. But, don’t forget, after all this, we still need to pay interest on any loans and any tax that our business owes.
How are you going to finance your entrepreneurial adventure?
There are three broad methods of financing a business: bootstrapping, formal loans, and selling shares.
Bootstrapping is one of the most common ways of financing a start-up business, and it is my preferred method for my business. Bootstrapping involves using your own savings to launch your business, but can also involve informal loans or investments from friends and relatives. A personal loan, leveraging personal overdrafts or credit cards would also fall within the category of bootstrapping.
There are multiple ways to increase your pot of startup funds:
- Increasing your savings pot
- Flipping goods for a profit – for instance buying undervalued items at yard sales, car boot sales, thrift or charity shops and reselling them at a higher price to a targetted audience.
- Working a part-time job, if your contract of employment allows it you could supplement your savings pot by picking up some part-time work and funneling all of the payments directly into your savings account.
- Leveraging your Assets by renting them out: consider if you have any assets that you don’t use, or don’t use enough whether you’d be willing to give them up to increase your savings – perhaps you have a spare room that you could rent on a long or short term basis (my spare room has a lodger – it’s an excellent source of money topping up my savings – particularly because in the UK there is a scheme that means your income from renting a furnished room in your primary residence is tax-free up to a certain amount (see details on the Rent a Room Scheme).
- Leverage your assets by selling them: maybe you have an old bike, some clothes you never wear, some furniture that’s just getting in the way or even a vehicle that isn’t really getting much use – consider selling them to fund your new business.
- Make sure your savings are working for you – look for bonus introductory offers that top up the interest rate while still keeping your cash accessible (or making it available when you anticipate needing it). Keep on top of this account, move the money to the most advantageous position as soon as it makes sense to do so.
- Reducing your expenditure
- If you have a gym membership that you don’t use or a music subscription plan that you no longer need (I just canceled my Spotify Premium plan) cancel them sooner rather than later to generate the most benefit – and don’t let that money just sit where you’ll be tempted to spend it, redirect it into your business start-up savings pot as a standing order. It wasn’t available to spend before so you won’t miss it now!
- Consider learning to cook quick, delicious and nutritious food and reduce your food expenses (raw ingredients tend to be less expensive than prepared foods and certainly less expensive then takeaway or dining out). Don’t forget to allow yourself a bit of a treat now and again though, you will need a way to celebrate your successes!
- Coffee, I need my cup of joe every day (actually I need two), not only for the caffeine jolt, but it also forms part of my daily routine. I plan my day with a cup of coffee, once the cup is empty the day’s proper work starts. I used to my coffee a cup at a time – depending on where I bought it the cost ranged from £0.80 (the machine at work) to £2.65 (Costa Coffee)… two cups of this a day is a significant expense, so I’ve switched to making my own at a much smaller cost (between £0.04 for instant and £0.11 for roast and ground per cup).
- Check that your bills are correct and on the best rate – consider whether you really need a new mobile phone with unlimited minutes (if you’re like me you never get close to using even minimal minutes – thank you Whatsapp!) or the new car, the fastest possible broadband, etc. Check that you’re on the best value internet plan, getting the cheapest possible electricity and gas and that your insurance renewal quote is still competitive.
This involves going to a lending institution (such as a bank or credit union) and securing a formal business loan. There are multiple types of business loans available, these can take the form of installment loans or revolving credit. Depending where you are located there maybe government backed loans or charitable programs providing start-up loans with associated mentoring and advice.
An installment loan is repaid by fixed monthly payments, whereas a revolving credit works more like a line of credit. For businesses that are a bit further along in the cycle, there is also the option of factoring – where, provided your customers have a good credit history, you can arrange to “sell” your outstanding invoices to a third party in exchange for immediate payment (for a fee, of course, this is usually a percentage of the value of the invoice).
The period of the loan is usually considered short term (up to 2 years) or long term (greater than 3 years). These loans may be secured on some form of collateral – for instance, assets owned by the business, or in the case of the start-up, it may include your personal assets.
It is definitely worth checking out what your local government can offer by way of assistance – with a quick search I’ve found that as of April 2020 the UK government has a start up loan program offering between £1,000 and £25,000 as an unsecured personal loan. They also have links to a full suite of local initiatives to support startup and small business growth.
Once you have a solid business plan showing good growth potential, you can consider raising capital by selling shares in your company. Public sale of share is not an option that is generally available to small businesses or startups – but finding an Angel Investor and arranging a private sale – in the manner of Dragon’s Den (or in a slightly less pressurized environment, could be a route into financing your small business.
Be aware that by selling shares in your business you are giving up an element of control – your shareholders will have rights regarding electing members of the board, receiving dividend payments and reviewing company documents (among others). You should always make sure that you have a full understanding of the shareholder rights and obligations before even considering selling shares. Your solicitor (lawyer) and accountant should be your go-to people for advice before you even consider raising capital by selling shares.
The Chicken or Egg Dilemma
Ok, so you have an idea of how you’re going to fund your business (I’m going with bootstrapping at this point, paying off loans makes me very grumpy and I don’t want to give up some vestige of control from the very beginning), and you have an idea about a product or service (otherwise you wouldn’t be starting a business). Now – where do you go from here? Do you really get into the details of the product or service your business is going to provide? Or do you look for your market (one you know really well) and design something specifically for them?
In my opinion, it doesn’t matter which way you go – because this is an iterative game. Much like the chicken and the egg, one begets the other and then you go around the cycle again. Despite this being laid out in a linear manner – its really rather more circular. Don’t be afraid to go around the circuit a few times to clarify your product offering and your target market.
Defining your Product / Service Offering
As we’re not particularly worried about the chicken or the egg at this point, we’ll start with defining our product or service. There are many ways to do so, but SCAMPER is one of my favourite creative techniques. SCAMPER is based in classic brainstorming, which came about in 1939, from a team lead by advertising executive Alex Osborn. Osborn suggested that by using a collective of brains to creatively attack a problem think of as many solutions as possible (including the wacky ones) while postponing judgment as to the worth of the suggestion, creative or innovative solutions might be realised.
Do I SCAMPER?
It was devised by Bob Eberle, an education administrator who organised many of Alex Osborn’s brainstorming questions into the easy to remember SCAMPER acronym.
SCAMPER stands for Substitute, Combine, Adapt, Modify, Put to another Use, Eliminate and Reverse. It is a framework for creating a new idea or product by transforming an existing one. Although it will be presented here in a table/questioning form, this should be considered to be a guide to stimulate creative thought rather than a rigorous questionnaire to be filled in. You should also bear in mind Adam Grant’s assertion that the most creative ideas occur after the brain has had time to rid itself of the more mundane or conventional ideas – don’t stop when you get to 20 – try for 200 ideas!
|Substitute||– Materials or Resources to substitute in making this Product / Service? |
– Substitute feelings or attitudes towards this Product/Service?
– Does this Product/Service have other uses?
– Can this Product/Service be delivered in a different way? (substitute place, format)
– Who else might benefit from this Product/Service? (substitute demographic or user completely)
|Combine||– Can ideas be combined to make a new product/service?|
– New combination of materials to deliver a benefit? (new blend of physical materials, new packaging of products or services)
– Can purposes be combined to generate something new?
– Can appeal of the product/service be combined? (perhaps advertising to a new audience, using a new method, revising target)
– Can people and resources be combined to create something new (Saas products for example)
|Adapt||– What other product/service is like this? Is it missing something?|
– Does a product/service suggest a new idea?
– What existed in the past that might be adaptable?
– Who is the best at this product/service – can I take inspiration and adapt their offer?
– Can I change this product/service to deliver a new benefit, serve a new purpose or appeal to a new niche?
|– Can I change the shape, look, appearance, feel of the product/service?|
– Can I add something or take away something to generate more value?
– Can I tweak it to be used in a different way?
– Can I magnify or minimize an element of this product/service (frequency, strength, physical dimensions, streamline operation)
|Put to |
|– Are there any by-products of this product/service which could generate value? (consider the 8 wastes)|
– Can this product/service deliver value to someone outside its target market?
– Can it be modified to be used outside its core market?
– How would this product/service be used outside its core market – would it need an update, upgrade, tweak?
|Eliminate / |
|– Can an element of the product/service be removed or repacked to generate more value?|
– Can it be slicker, more streamlined, simpler, more fun, easier?
– Can you take away an element or split the product/service into multiple products/services?
– What happens if you make it bigger, better, more extreme?
|Rearrange / |
|– Are there components of the product/service that can be interchanged?|
– Can you make the opposite product/service?
– Can a process be reversed or resequenced?
– Can roles be changed?
Leveraging Other Creative Techniques
The great power of creative techniques is that they can often be combined with great success. Different techniques will appeal to or stimulate responses from different people because we are each drawing on unique life experiences and different ways of combining ideas together. Your goal is to come up with something unique, and it’s often the wacky ideas that get you there, they don’t necessarily become the solution that you pursue, but they do aid in the stimulation process.
Don’t forget the outlier resources – the elements which may not fit in well with anything else at this point, they can sometimes have a big role to play later on!
Want to know more about resources? Consider taking a detailed look at the resource based view of the firm.
Tangible (anything physical)
- Financial (Cash, borrowing capacity, etc)
- Property (land, equipment, etc)
Intangible (anything owned by the company without a physical presence)
- Brand / Reputation
- Patents / Copyrights / Trade Secrets
- Communication and Collaboration
Capabilities are the result of combining your resources together in a way that generates value for your company.
Functional/ Operational Capabilities
- an understanding of the business’s activities and associated capabilities supporting these activities
- management capabilities allowing for the adjustment or modification of the functional or operational capabilities as necessary
How does Strategy figure in all of this?
The Resource-Based View of the Firm (RBV) emerged in the late 1980s and early ’90s and suggested that competitive advantage can be obtained by leveraging resources and capabilities to deliver competitive advantage. The RBV suggests that competitive advantage can be obtained when the resources and capabilities are valuable, relevant to the market success factors, scarce or unique (so not everyone has access to it) and durable so that it exists in the long term. This is just a taster of this particular strategic model, and its purpose here is not to talk about business strategy, as we’ll get into that elsewhere, but rather to provide support to the daunting prospect of producing an inventory of your resources and capabilities.
How do I sell this?
Now that you have some ideas, you need to figure out how you could turn these ideas into a sustainable business. One way of looking at this is figuring out what problem your idea will solve. In general, neither people nor businesses buy products, what they are really buying is a solution to their problems. If you can solve the element that is causing them pain then you are on the way to figuring out how that problem makes them feel, and what their desired outcome would look like.
What is a Pain Point?
If you think about it, people go grocery shopping to solve the “pain” of being hungry. However, this is the obvious solution – and it doesn’t explain why people will by premium products, or go to restaurants or buy a takeaway pizza. These are all solutions to the pain of hunger – but anything other than the basic provision of food indicates that something else is going on – emotion or aspiration, both of which are based on how people feel.
If you create a product or service that solves the obvious pain point, but then goes on to fix an emotional problem (you want them to be able to justify their purchase to themselves afterward on the basis of also having a positive emotional response, for instance, a feeling of success), you’ve hit on a potentially valuable solution. Think of it as people buying the outcome that they truly desire!
Now for the Market Research
So, we now have some product or service ideas, and we have an idea of the pain points that they can solve, but let’s expand it further – Market Research is the process of gathering information about the potential buyers of your product or service and your competition. You can use it to help understand who is looking for a solution, like the one that you have to provide.
Exploratory research is used to narrow down the general problem areas that your customer market is experiencing. It can be used to identify gaps in the market that you may wish to target or problem areas that align with your resources and capabilities for product or service development.
Specific research usually follows exploratory research and is used to get a deeper look into the gaps or opportunities identified in the exploratory research phase.
Secondary research is used to understand your competitors and their offering. There are usually multiple sources of data available, for instance, all the information which exists in the public domain including their marketing materials, customer reviews, government reports, and commercially available marketing reports.
Your target audience is your ideal customer. Through the previous work that you’ve done, you should have an idea of who your target audience is. For instance, it seems daft, but I do have to keep reminding myself that the target audience of this blog is people who are transitioning from the corporate world to entrepreneurship – but don’t have my particular business background.
So as you now have an idea of what your product or service is, and what pain point is solves – what does your ideal customer look like?
Demographics refers to statistical data. To better understand the marketing approach for your product or service it may be advantageous to know all kinds of details about the person who is going to be making the buying decisions. Things like:
- How old is your buyer?
- What is their level of education?
- What type of employment are they in?
- How much money do they make?
- What gender does your buyer identify with?
Although this is not an exhaustive list.
The product or service that you are offering may be particularly relevant in a geographical sense, for instance, if you are offering a local onsite consultancy, it just makes sense that you do not want to be marketing to customers physically located outside the area in which you work. However, if you are undertaking a remote consultancy, perhaps you wish your customer base to be within a certain range of timezones rather than specific countries. Product sales via marketplaces like Etsy, Amazon, eBay etc may come up with some unique geographic challenges depending on your product or service and delivery method.
There are instances where the geography of your customer is completely irrelevant – if you are exploring passive income streams related to social marketing platforms like Instagram, Pinterest, Facebook, (among others), or blogging, vlogging via YouTube or affiliate marketing you may find that your customer demographic is far more important then their geography.
Do I Niche Down?
It is usually advised to “niche down”, which means taking into account all of the information you’ve gathered about your product or service, the pain points it solves and its ideal customer and target your marketing with laser focus at this much smaller group of people. This is because, in an ideal world, you are much more likely to get a motivating, positive customer response when you present the perfect solution to a small group of perfect customers, rather than an ok solution to a large group of ok customers.
Confused about niches? No worries! A full post all about niche business and why niches are not just for blogging!
With regards to this blog – targeting everyone who wishes to leave their 9 to 5 job is a very big group of people (most people do want to leave their job at some point- even if it’s just because they’ve had a bad day). So who is the target audience?
- Ambitious people who want to take the leap, but don’t know how to start
- Hard workers without extensive business education (I think you’ve gathered by now that this is going to be hard work!)
- Age range 35-44 (how did I define this? I used my free account on the Ubersuggest tool to analyze some keywords associated with entrepreneurship and starting your own business, and looked at the searchers age range graphic).
Creating the Elusive Irresistible Offer
So, thinking about some no-brainer purchases I’ve made, they’ve all been when the value of what I’m getting well and truly outstrips the cost. You want your customers to think that purchasing your product or service is a no-brainer solution to their pain points.
Off the top of my head, the most recent example is the value that I get from Wealthy Affiliate.
You can read in great detail about why I chose Wealthy Affiliate to start my blogging journey, but in a nutshell, I got training, hosting for up to 10 websites, 24-hour access to support and an active community spanning newbies to very experienced marketers.
I got to try it out for free on a starter membership (not even a credit card required) and the value made so much sense I upgraded to premium almost straight away.
Hitting the right price
Price is a funny thing, the ideal price point would where both the vendor and the customer are satisfied with the transaction. If you think about pricing in a situation where negotiation is common, such as buying a house or a car – in most situations (excluding extreme need on either side) both the buyer and the seller have to be satisfied with the agreement reached (including the price) or the deal does not go ahead.
Now, this doesn’t mean that both sides will be over the moon about the price, although in the case of the irresistible offer the majority of buyers should be over the moon and sellers satisfied that the price was correct for a sustainable business. This becomes more nuanced when you are considering whether the value proposing that is being made is active or passive on the vendor’s side.
With an active offer (the vendor is selling something unique to the customer), to achieve a satisfying price the vendor must make sure to cover his or her full costs as well as profit within the offer.
As a simplistic example: If I am consulting for a customer for 1 week, my 1 week’s worth of income from the customer needs to cover not just my operating costs for that week plus profit, but also the operating costs for the time spent landing the customer and administering their account (note, this may be apportioned between multiple customers depending on your setup).
With a passive offer (I am creating something once, and selling it to multiple customers), to achieve a satisfying price the vendor must split the full cost of making the offer plus profit over the anticipated number of sales (allowing for forecasting error).
What will the customer pay?
Now regardless of whether your offer is active or passive your price point must also be acceptable to your customer, or they won’t buy.
- From your market research you should have a good understanding of your competitors offering – how does your proposed price point compare to their similar products or services?
- Are you providing something (a better service, exclusivity, a unique twist, etc) which means you should be able to offer your product at a higher price point?
- Or are you providing a stripped-down product or service which (with the exception of supercars, where fewer features often mean higher prices) would tend to appeal to an audience targetting a lower price point?
Selling theory in a nutshell
Now, please don’t forget the basic premise of your offer – you have created something of value to your target market, you have priced it sustainably (for both sides) and irresistibly too if you’ve managed to hit the sweet spot. Now you need to sell it!
Now, as adults, with a long history of buying things, I’m sure you’ve been sold a few things in your life to date, although the why behind the approach may not have been explicitly laid out for you. Fortunately, in my brief career selling telephone subscriptions door to door, I had a crash course in selling theory – which I’ll share with you now.
Now, before you start planning a marketing campaign leveraging these inter-related theories of selling please bear in mind that people don’t necessarily like being sold to, and there is a 5th theory – playing hard to get, often if you don’t need to sell something people are much keener to buy it.
I’m not suggesting that you won’t need to undertake selling strategies to get your buyers to in the right mindset to purchase, but you do need to bear in mind that a lot of buyers are wise to these techniques, find them antagonistic and will often, if the value delivered by the product is high enough buy in-spite of the sales technique, rather than because of it. In these cases, it is hard to identify how many sales you may be losing for the same reason.
Take a deep breath – and drawing it all together!
Now, its time to take a deep breath! This post in and of itself has been a journey (it has taken the best part of a week to write, and there are still graphics to do). The last thing I expect you to have done is have gone through this post and have your business plan written (although it does contain a lot of the elements that you will need to put a business plan together).
I’ve included an index here for a reason, remember that creating your business is going to be an iterative process, and also that your subconscious mind will now be chewing away on everything that you’ve read. This will probably result in you having an epiphany or two over the next few weeks when you least expect them (mine always seem to happen either in the middle of the night or in the middle of a run), so keep a notepad handy to jot them down when they occur. Don’t be afraid to add these epiphanies into whichever element that they relate to – even if it means you go back through everything else again. After a few rounds through you will probably find yourself a lot clearer about your transition from employee to entrepreneur.
The last bit of advice I have for you is this – remember that this stage should be fun. There will be the inevitable times when your business is keeping you up at night, this shouldn’t be one of them. This is all about exploring and probing and seeing how your unique skills, talents, and experience might take you from being a 9 to 5 employee to being an entrepreneur – but that won’t be the correct path for everyone. If you conclude it’s not for you, then you’ve learned some new skills that you can apply in the corporate world, there are plenty of “intrepreneurial” opportunities to be found while working for others.
If you decide to pursue the transition from corporate to entrepreneurship I’d love to hear about your experiences, your challenges and your triumphs and disappointments please do drop me a comment or send an email via the Contact Us page.
We’re now through Q1 2021 – the Brexit transition period is well and truly over and we’re starting to actually see the Brexit impact on business. Now, you’re saying “hold…
As part of setting up your online, remote, or work-from-home business, one of the things you’ll need to consider is your business address.
Do you sometimes struggle to figure out if you’re making the right decision for your business, or even to make a decision at all? Fear not, you may be suffering from data overload and we can help! Not…
After I posted my Ultimate Guide to Setting up a home office checklist, my Pinterest account just exploded! Now, as I know a good chunk of the population prefers to digest their information in the vis…
Personally, I love working remotely, if I didn’t I wouldn’t have decided to quit my job and explore it full time! However, there are a lot of things that you should consider when setting u…