How to Be in Business for Yourself within Six Months

by Neal Frankle, CFP ®

If you want to have a business for yourself within six months, I’m going to tell you exactly how to do it.

But it’s not just a question of having a good small business and enough working capital for your enterprise (although that’s important). It’s also a question of your personality too. Follow these 5 steps and you’ll have a much higher likelihood of success. Launching a business is easy. But launching a successful business is another story – most fail. The reason they fail is that the owners fail to prepare enough. If you follow these 5 steps, you will be very prepared, so your chances of success will rise dramatically.

1. What’s Your Line? – Day 1 though Day 30

If you are already convinced you want to start being self-employed, you probably already know the business you want to be in. (Don’t worry if you don’t know which business to start…we’ll get to that). But just because you want to be in a certain business doesn’t mean it’s a good business or that it’s a good business for you. The first questions you must ask are:

a. Are you well suited to this business? What personal skills do you have that make you think you’ll succeed? Are you a good salesperson? A good manager? A great bookkeeper? What skills and training do you have that will help your business soar? If you can’t name any special skills, you don’t know enough about the business, and/or this isn’t the business for you. You are probably drawn to this opportunity for the money alone, and that isn’t enough to make it succeed. People often call and ask me how to become a financial planner. Among other things, I caution them against doing so if their main motivation is to make a lot of money. It just doesn’t work that way.

b. What is your competitive edge? If you’re thinking about opening this business, realize that many people before you have thought of it before you, and so will many people consider it after you. That means, sooner or later, you’re going to have competition. You’ve got to have something they don’t have in order to attract business. What is it? Unique experience? Talent? What is it?

c. Do you have the financial resources to launch the business successfully? People who consider college business ideas notoriously overlook this. But every business needs capital to provide the necessary office space, equipment and staff. You’ll also need sufficient working capital to keep the business running. Do you know what those numbers are? If not, do not go another step until you can answer these questions. (See “Business Plan” below.)

d. What is your definition of success (in dollars), and is it achievable? Can this business, even if very successful, really give you what you want? Let’s say your dream is to have your own comic book business. You do the numbers and determine that you’re going to have to sell 10,000 comics each month in order to make the kind of money you need to make. Is it reasonable to sell that many comics in a month? What makes you think so? Let’s say you interview five other comic book store owners and they tell you that the most successful comic book stores in the world only sell $5,000 a month tops. The last thing you want to do is get involved in a business that, even when successful, will lead you into poverty.

What do you do if you don’t know what you want to do?

If you don’t know which business to start, look around. What existing small business appeals to you? You don’t need to start a brand new industry – very few business owners do. They open up shops or service companies in industries that have been around forever, but they run their shops differently. And that gives them the edge they need.

What existing services do you think you could run better than the competition? When you go to a store and buy something, do you see a huge opportunity to improve things and make more money? What services can you provide that people are willing to pay for? List all your skills that other people value. Then highlight those that you can see yourself doing full-time – 52 weeks a year. Bounce your ideas off of friends and family. They know you best – ask them what kind of business they think you are best suited for.

2. Market Research Day 30 though Day 60

You have to make sure that there are people willing to pay you for the products and services you want to provide, and you have to make a profit.

The best way to determine this is to see if people are buying those products and services now. Believe it or not, you probably don’t want to get into a business if there is no competition. If that’s the case, it probably means there is no market for your business.

Do a trial run. If you are going to launch a service business, place an ad on Craigslist to see how your market responds. While you’re on Craigslist, see what the competition is doing and what they are charging. Also, call them to see the level of service they provide and how hungry they are. If you are going to provide a service you can promote and deliver using the internet, look at guru.com and elance. com. That’s where you’ll find your competition and the people hiring the competition. You can get a feel for what resources you’ll need and how much you can charge by visiting those sites.

3. Your Plan Day 60 through Day 90

It’s critically important for you to create your business plan. This is central. If you can’t create the plan by yourself, hire someone to do it for you. Don’t even think about launching your business without having a business plan. In it, you’ll project your start-up capital, working capital needs, timing of revenue and expenses. You’ll also detail your marketing plan within the business plan. Becoming self-employed without having a business plan is like taking off in an airplane without a flight plan. Dangerous. This is how you’ll know if you have a reasonable chance of making a go of your business.

4. Warning Sign – You Are in Debt

If you are currently in debt, this may not be the time to become self-employed. Things rarely work out as well as hoped for or even as well as expected. If you are currently in debt, it means you need to make more money, spend less and learn how to track your expenses (with a program like You Need A Budget). These are important business skills to have, but it’s way too expensive to try to acquire those skills on the job. Master them personally before you try to do so professionally.

5. Pre-Launch – Get All Your Resources Lined Up Day 90 through Day 120

At this point, you know which business to get into; you know you’re well suited for it; you’ve bounced your ideas off your closest advisors; and you have a killer business plan in place. Congratulations! You are more prepared than 90% of other people who try (and mostly fail) to become self-employed. Now you have to get your resources lined up.

It’s critical to keep your costs as low as possible. Don’t lease an office if you can work out of your home (or someone else’s home) for free. Don’t hire a large staff, buy an expensive phone or computer system or drop a big wad of cash into advertising. You can launch your business, but you are still testing the business plan. You’ll make mistakes. Expect it. But make the mistakes when the consequences are small. Look at every expense five times and ask yourself if the outlay is absolutely necessary. The reason most businesses fail is because they don’t have enough working capital. The best way to make sure that doesn’t happen to you is to keep your expenses to a ridiculously low amount. Once you see that sales are coming in and you have some experience with costs, you can start investing more money and growing your business.

During the testing period, you shouldn’t expect to make lots of money. Remember, you are testing your plan. That’s why the business plan is so important. Make sure you have a reasonable amount of cash on the side to keep your family and your business afloat. I strongly recommend that you keep your day job for at least six months during the launch and testing period. At that point, you’ll know if the business is a go or not.

If you tried to be in business for yourself and it didn’t work out, why not? If you have launched a successful small business, what was the secret to your success? What tips can you share with us?

 

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