5 Self-Employment Options

You can’t know the best option without knowing all the options.

Chapter Overview

Many executives and managers think they can pursue self-employment at the same time they search for a new job. Those who try are usually unsuccessful at both. This chapter will help you:

Decide whether self-employment is an option you should consider.

Understand the different types of self-employment options available.

Understand if you have what it takes to be successful at self-employment.

Develop a business plan for your self-employment option.

The main sections in this chapter include:

When you should consider self-employment.

Basic considerations about self-employment.

What are you going to sell?

Who will be your customer or client?

How will you brand your business?

Do you have what it takes to be self-employed?

Different types of self-employment.

Creating a plan for your option.

Milestones.

When You Should Consider Self-Employment

If you aren’t finding personal, professional, or financial satisfaction in your current job, the first few chapters helped you reassess your values, goals, personality type, skills, strengths, and what you’re passionate about. In Chapter 4, you looked at how to make changes to another employer, field, or industry. If you’re still uncertain about whether another job is the right direction your career should take, it’s time to explore your self-employment options.

In a robust, growing economy, continuing permanent employment for all may be possible. In recessionary times or even during a sluggish economic environment, however, permanent employment for the middle-aged who are looking for a new opportunity becomes increasingly more difficult as they grow older.

Referring to my “A Shared Experience” in Chapter 4 (page 66), you may not notice that doors are closing if you aren’t looking for another job. However, you need to be aware that they are, even if you’re happily employed. It’s all about the general perception of older workers and has nothing to do with your capabilities. If you’re a CEO with a strong track record of success, you’re somewhat insulated because your achievements demonstrate what you can do, and your reputation and contacts will enable you to find another opportunity more readily than those who report to you.

If you’re below the CEO level and middle-aged, employers consider whether younger candidates could be a replacement. They will compare your salary to a younger worker’s, think about how many more years of work they can rely on from you, and how much more you’ll cost them in health insurance than a younger worker would.

If you doubt that employers make these considerations, you only have to talk to others who lost their jobs from “restructurings” that eliminated positions held by older workers. The increasing competitiveness of lower-cost countries and what I call the Wal-Martization of American business will continue to place downward pressure on companies to cut costs to remain competitive—or even just to remain in business.

I could spend several paragraphs explaining why employers shouldn’t look at it this way. The reality is they do, and neither governmental restrictions, nor you or I, are going to change their thinking. The point is you need to think about it and prepare for alternatives.

If you’re middle-aged and in transition and you’re not getting interviews, or you’re getting interviews but not offers, you may want to explore self-employment.

Basic Considerations About Self-Employment

When considering self-employment, I can’t overemphasize the more you know, the better. You can never do enough research into self-employment.

If you’re leaving employment after a long career, you’ve probably developed a set of skills or gained knowledge or experience that would be helpful to others. You may have left your last employer with a cash settlement that you might want to use as a springboard to finance a new business. You may even be considering a business in which you’re not totally familiar, but you know you can use your skills to develop it.

When starting a new venture, keep in mind the following six keys to a successful business:

1. Need. Be certain you fill a need or resolve a pain.

2. Niche. Be clear about who your target market is. The narrower you define your niche, the better others will recognize who needs you and be able to refer them to you.

3. Brand. You already have a brand. Others who know you well know what it is. Ask them to describe their perception of your brand. Build on that. Don’t try to create a new one.

4. Passion. You must be passionate about what you do, and others must see it.

5. Money. Know your value to others and how you will earn it.

6. Team. Build relationships and affiliations with others. Be a resource to them, and use them as a resource for you. Make sure your family is on your team and supports you.

What Are You Going to Sell?

What you sell depends on the type of business you decide to start. One of the most common choices for executives is some sort of consultancy that uses the skills, experience, and contacts they’ve built over a long career. It may also incorporate a product with which they consider themselves to be an expert.

Similar to a 30-second message you would use for a job search, you’ll need to describe what you’re selling in a way that others will instantly understand it and be able to decide if it might be appropriate for them.

Think about it as a pain that you resolve for another. Be it a personal or business issue, your message needs to address how you resolve or overcome that pain. Purchasers of business services or products seldom purchase a service or buy a product because it would be nice to have, they could use it, or they might want it. They purchase services or products they recognize they need, or they make these purchases because sellers have convinced them of their need.

You may have great skills and experience that made you successful in your career, but what you’re selling today also must be something that’s in demand today. For example, if you gained your expertise at developing and marketing VHS-based products internationally, you would have to update that experience to a market that now uses CDs, DVDs, and Blu-ray Discs. You would then need to become an expert with the changes taking place caused by wireless technology, and with whatever technology that follows that.

One of the ironies of moving from employment at a company to self-employment and trying to market your skills and experiences is that potential customers may associate your expertise with yesterday’s services or products. Unless you have a way, the desire, and the means to keep current, your expertise may become obsolete sooner than if you had remained employed.

Who Will Be Your Customer or Client?

Vance Caesar, PhD, a noted executive coach and professor, refers to the process of defining your target customer by describing your “Stick Figure.” To help you understand this concept, go to any large bookstore and look at magazines on the rack. Pick a few and ask yourself, who is the “Stick Figure” who would read this? As an example, describe the target audience “Stick Figure” for Seventeen. It’s probably a fashion-conscious, 12- to 17-year-old girl who lives in a middle- to upper-middle-class household and who wants to be seen as being “totally with it” and one of the “in crowd.”

The “Stick Figure” is important to Seventeen because it informs the publisher of the best place to sell the magazine, how to market it, what stories and articles would be of interest to the person with that profile, what companies would pay to advertise to reach that market, what products they would feature, and so forth. Try to describe the “Stick Figure” of readers of Field and Stream, Sports Illustrated, and the Wall Street Journal. Wal-Mart and Nordstrom have widely divergent but very clear “Stick Figures,” which are significant factors in their success. Macy’s and Sears continue to struggle partly because they have not created a clear image of their target customer. Though these organizations may think they have clearly identified their customer, it’s not clear to the customers who these organizations want to shop at their stores.

Define your target market precisely because what you sell, how you market it, and how you communicate it to others must enable them to have a clear picture of your customer or client and know whom to refer to you.

How Will You Brand Your Business?

Closely aligned with determining your “Stick Figure,” you need to brand yourself and your business. When you’ve determined what you’re selling and to whom, your next task is to decide how you’re going to tell others what you do, why it’s needed, and what sets you apart from others.

Your verbal and written communication needs to set a style consistent with your service or product, as well as your customer or client. Branding your business is not creating a nice visual image that’s colorful, flashy, and catchy, but more about creating an image in someone’s mind that’s consistent with the product or service you offer.

When you buy a BMW, you aren’t buying just a car—you’re buying “the ultimate driving machine.” They reinforce their emphasis on engineering and road-handling by focusing their marketing message on the driving capabilities of the car and the driving experience of owning a BMW. They don’t focus on cup holders (a frequent complaint of BMW owners!), the size of the glove compartment, or electronic gizmos. They don’t show how easy it is to park; they show how well it handles on the road.

Your brand is not what YOU think it is.
It is what OTHERS think it is.

If you want others to perceive your brand accurately, you must be sure that your printed business card, your verbal business card, your letterhead, your brochures, your proposals, and your products and services have a consistent message that is clear to others. A good book on this subject is The 22 Immutable Laws of Branding by Laura and Al Ries (Harper Business, 2002).

New businesses often have difficulty trying to identify what makes their business unique. This is particularly true if you’re considering consulting or coaching. People want to know why they should use you and what sets you apart from others. Don’t look at others who are in the field to find out what separates you from them. It isn’t about them; it’s all about you. Your skills, experience, and knowledge, and how you interact with others make you unique. Focus on what you bring to the table, not what others bring.

Do You Have What It Takes to Be Self-Employed?

Here are the 10 most important characteristics you need to be successful in self-employment:

1. Organization.

2. Common sense.

3. Business sense.

4. Enthusiasm.

5. Self-motivation.

6. Commitment.

7. Financial awareness.

8. Business development.

9. Independence.

10. Support.

Let’s look at each of these characteristics in more detail.

1. Organization

Organizational skills are essential. You’ll have primary responsibility for organizing the business structure, making banking arrangements, developing marketing material, getting business letterhead and business cards, office facilities, and administrative and technical support. You’ll also be responsible for developing the business, keeping in touch with potential customers, maintaining computers, telecommunications and office equipment, keeping accounting records, filing tax returns, and so forth.

If you thought you were proficient at multitasking in your last job yet depended on a support network, you’ll find being self-employed has its own set of challenges. If you know your organizational skills are lacking and have always relied on an assistant for the “detail” work, you’ll find success in self-employment very difficult without that support. A spouse can often help, but, if not, consider finding a “virtual” support person.

If you’re not computer-literate and don’t understand basic software such as Microsoft Word, Excel, and PowerPoint, you’ll be at a serious disadvantage. If you’ve relied on someone else to send your e-mail or to print your e-mail so you can read it, self-employment may not be a successful option. Being unfamiliar with computers and the Internet will put you at a disadvantage in almost any occupation you choose. If you aren’t proficient using computers, e-mail, and the Internet, you’ll need to pay someone to do it for you and hope he knows enough to alert you to what you need to know.

If organization isn’t one of your strengths, you may find it difficult to develop new business or expand. In the early stages, your sole source of new business may come from people who already know you, but, if they perceive you’re not well organized, you won’t get the referrals to sustain and grow your business.

If this is not one of your strengths and you still want to pursue self-employment, consider working with or affiliating with others who can provide that support. Clients will soon know if you lack organization, so it’s in your best interest to align yourself with those who can provide that support. You might not want to do this permanently, but consider it as a stepping stone arrangement until you can develop a business base and have a better idea about what you can do.

2. Common Sense

This is a difficult area to assess, but, if you’re honest with yourself, you’re probably the best person to make that assessment. Being self-employed, you probably have (and need!) some knowledge of every aspect of your business, but you don’t need to be an expert in all things. This means that your common sense has to help you to make decisions in those areas where you lack expertise but where, nevertheless, you have to make a decision.

Take a cue from angel investors who look to avoid the 85-percenters and the 105-percenters. The 85-percenters are those who can never quite seem to gather all the information they need to make a decision, and the 105-percenters always need just a little more information to make sure they make the right decision.

You’ll need to make decisions on the fly, without a lot of detailed analysis, research, or input from colleagues who have expertise in their area. This type of decision-making will be a crucial part of your business risk. The trick is getting the balance right—getting just enough information to be able to make the right decision. You may make many decisions in a new business that, with hindsight, will be wrong. With common sense, you’ll learn not to make the same ones again and will find that you make more good decisions than bad ones.

3. Business Sense

A business consultancy exists solely because the person or people providing the service have skills, knowledge, or expertise needed by someone else. If you have recognized expertise in an area needed by others, you have a starting point.

Starting a new business in an area you don’t know or in which you don’t already have an expertise can be a blueprint for disaster. If you choose to start such a business, you have to spend time learning it. Then you must become proficient in it. Finally, if you’re able to hang on long enough financially, you might develop expertise that others recognize and for which they will seek you out.

If you’re considering buying a business where you think you can use your skills and expertise more effectively than the current owners and make it more profitable, spend time talking to competitors about the business, hire an industry consultant, subscribe to and research industry or trade publications, and attend trade shows to learn more about it. Another alternative is to work in the business to learn it, even if you have to work for “peanuts.” You may find that knowing the business itself may be more important than the skills and expertise you bring to the business. Unsuspecting business buyers often find the business they just bought is in a declining market, or that environmental regulations are making the business unprofitable. You may even find that you will need to implement a new technology to sustain the business, but the business base won’t support the investment or the new technology may change the nature of the business in a way you don’t like.

4. Enthusiasm

To be successful in any small business, you must have enthusiasm for the work and its products or services. That enthusiasm also must be evident to others. If you like the work but are naturally a dour individual, you’ll send the wrong message. Every person you meet is a potential customer or can recommend you to others. Your attitude and your passion also affect your employees, whose support you need and who can put out an upbeat message to customers.

5. Self-Motivation

A small business is dependent on the driving force of its owner. You must have an inner drive that sets the pace for the business and others in it. Opportunity exists, but only if you take advantage of it. You will be the driving force that develops new business. If the opportunity is there and you fail to recognize it, your business will suffer. If you see something wrong in your business, you are the person who must take action and see that it gets fixed and doesn’t happen again. If your employees don’t have proper training, you have to recognize it and arrange it or you will be the one to suffer.

The biggest need in any new venture is developing new business. You can’t rely on others to get the business for you. It will become one of your most important jobs.

6. Commitment

A small business takes total commitment and dedication to be successful. It’s important to stay healthy and to allow time for your family. Choosing to spend your time on personal matters or at the golf course will impair the development of your business. Customers or clients want to see total dedication to their work or assignment when you work for them. If not, there are others vying for it who are prepared to put in the effort customers want to see.

Don’t expect to start every workday by eating a leisurely breakfast while you read the paper, then walking the dog before getting started around midmorning. Even if you get charged up during the day and are prepared to work past midnight, that’s not the work ethic that fits most business situations. If you have others working for you, they’ll look to you to set the standard for them.

7. Financial Awareness

How will you price your services? If you are considering a consultancy, will you charge an hourly, daily, or weekly rate, or a fixed price for the project? Do you charge on a retainer or contingency arrangement? Do you price your services low, at market rates, or at a premium? What are market rates? Do you use price to differentiate yourself from the competition to get started?

What costs will you incur to start? Do you rent a full-service office or a small stand-alone office, or work from home? Do you purchase or lease furniture and equipment? Do you charge your client for travel costs, telephone, fax, and printing? How much should you spend for brochures, letterhead, and business cards?

All these issues will depend on the type of business you’re considering. The best way to answer most of them is to conduct research of others who are in the business you want to get into. What do they do (from a pricing standpoint)? Why did they decide to do it that way? Did they consider other ways and, if so, what were they? How do they enlist support from others when they need it? Would they consider using your services if they needed help? Would they consider working with you if you needed help? How could you best complement each other?

Budget your cash flow on a monthly basis for the next two years, because you’ll need to see the income stream that’s required to cover your monthly costs and to sustain your lifestyle. Forecasting your expenses in a business you don’t know may be the easy part. Forecasting a revenue stream from it, however, will be tougher.

8. Business Development

This is probably the biggest unknown and the most difficult to estimate. You may have a skill or some expertise that your former employer still needs. They may be willing to use you full-time as a consultant to do what they formerly paid you to do as an employee. It’s very risky to let one customer dominate your business, no matter what the relationship. Actively pursue developing business from others.

There will be a very strong temptation to say yes when someone wants your consultancy services full-time. Understand, however, that follow-on work comes from the business development efforts you put in many months before.

Leave at least one day a week available (preferably not a Monday or Friday) to do marketing and new business development. Most clients are aware of your need to continue developing business. If you don’t stick to this philosophy rigorously, you may have long periods when you don’t have any work.

9. Independence

A frequent complaint from people who have come out of a large organization and gone into consulting is the lack of collegiality in the business. You’ll do most things yourself. You’ll initiate contacts, type letters, send e-mail, prepare proposals, edit and proof what you wrote, go to the office supply store and the post office, do the work, deliver reports, make statements of recommendation or opinions, develop and nurture relationships with customers, give satisfaction and, hopefully, get paid. You’ll need to feel comfortable doing all these things alone.

Although you may be working as part of a client’s (or even your former employer’s) team, you’re always an outside member of the team. If you’re a consultant at a client’s office doing work, you may feel like part of their team. However, when lunchtime comes, be prepared to be on your own. This can be an unsettling feeling for someone who has always worked in a team environment.

Consultants often form relationships with others so they have someone to turn to when they need help in an area where their own skills are limited. As a consultant, even you will probably need to consult others.

10. Support

The most important item is last. Your family needs to understand what you want to do and why. They must see how important it is to you and how much you want it to succeed. You know it won’t be easy on you or your family, but, with their understanding and support, you have a good chance at success. Without it, everyone loses. If your spouse or family doesn’t support you, do you really want to jeopardize that relationship to try this option?

If they’re concerned about your potential failure, make sure you’ve involved them in the entire process before you reach your decision. Sometimes all that’s needed is for them to feel comfortable that you’re doing the research to make sure your ultimate decision is based on merit and not some vague feeling you have.

Different Types of Self-Employment

The most common types of self-employment executives and mid-career managers pursue are the following:

Consulting and coaching.

Starting a company.

Franchise.

Joining a start-up or early-stage company.

Buying an existing company.

Writing and/or speaking.

Teaching and training.

Turning a hobby into a business.

Doing what you always wanted to do when the time was right.

I’ll cover consulting and coaching first and in more detail, as that’s the most frequent type of self-employment senior-level individuals choose.

Consulting and Coaching

Consulting is where you use your knowledge and expertise to provide a solution to a client’s problem. You usually have a deliverable and provide it in the form of a document and/or an implementation plan.

Coaching is where you use your knowledge and expertise to help a client identify and take actions that enables him to accomplish one or more objectives. The major difference between consulting and coaching is that the coach doesn’t have the answers; the client does. The coach’s task is to help the client find them and then hold him accountable to achieve his objective(s). People in this field call themselves executive coaches, career coaches, leadership development coaches, or other coaching terms that give an indication of their area of expertise.

There are no governmental regulations that cover consultants and coaches because they are not a well-defined group like doctors, accountants, and lawyers. Many, however, belong to professional associations that require their members to subscribe to a code of ethics or standards of practice.

Consultants and coaches who work alone usually do so as a sole proprietorship. They may operate under a name different from their individual name, in which case, regional laws may require they file a DBA (doing business as) notice in a local or regional newspaper. If your municipality requires business licenses, as most do, they will be scanning the local papers looking for new businesses that need to register and pay a license fee.

If consultants or coaches work in a group, they usually structure the organization as a partnership or corporation, such as limited liability partnership (LLP), limited liability corporation (LLC), Subchapter S-Corporation, professional corporation (PC), or C-Corporation. These types of organizations require registering in the state where they operate and with the IRS. Consultancies typically engage individual consultants on a contract basis, referred to as a “1099 employee” (after the IRS reporting form) rather than employ them.

Because there are no academic qualifications to be a consultant, or professional associations like the American Bar Association (ABA) or the American Institute of Certified Public Accountants (AICPA) that regulate, test, and qualify members, seek out a professional association that has a chapter in your area which would be appropriate for you. They can be an excellent way to find out more about the business you’re considering, meet others who are already involved in it, and network on how to develop your business. Occasionally, they can be a source of business.

Starting a Company

Choosing to start a small business generally takes the form of making or selling a product or offering a service. The business may be anything, such as:

A store or shop selling retail products or services to consumers.

A niche business selling products direct to other businesses, offering something that more established competitors can’t or won’t provide. Examples are distributors, resellers, or value-added retailers (VARs), such as those who offer additional support accompanying the purchase of computer hardware or software.

An owner-managed manufacturing or service business.

People often start small businesses to capitalize on a feature, service, or segment that their former employer wasn’t providing effectively, efficiently, or at all. Every recruiter and outplacement consultant I’ve met who started a business says he learned the trade while working for a larger organization. They left to “start” their own businesses and took many of their clients with them.

Ninety percent of all businesses in the United States are small operations, most of which were started with the owners’ knowledge or experience gained from previous employment. You’ll improve your success in a small business if you’ve already worked in the industry, have a thorough understanding of it, have a fat Rolodex of names and addresses of potential customers or clients, and know the future industry trends.

Start by discussing your ideas with your spouse, your mentor, and someone who knows the industry. Visit your local library and review the reference material on the type of business you’re considering, review industry publications, and search the Internet for information on industry trends.

Look to bring in another person to help you get started. If you choose to bring in a relative or a friend, be aware there’s a higher risk he won’t work out than if you brought in someone you didn’t know but who had skills and experience that complement yours.

Franchise

Becoming a franchisee enables you to participate in a business that has a proven business model in the marketplace. A franchise is generally a retail consumer business. Examples of some of the many better-known franchises include Baskin Robbins, Burger King, ChemDry, Dunkin Donuts, Subway, and The UPS Store (previously Mail Boxes Etc.).

Some advantages of a franchise include:

A proven business idea that is successfully operating elsewhere.

Results can be measured, quantified, and extrapolated to another location.

A protected business area where others within the same group cannot compete.

The franchiser helps in setting up, training, and providing specialist skills.

Standardized successful business practices create name recognition.

Being part of a large group enhances company image and controls costs.

The franchisor provides technical expertise and leads innovation.

Some disadvantages include:

You will be tied to a branded image without direct control over the quality of other franchisees.

You will be required to put up an up-front cash outlay for the franchise, business assets, and supplies.

You may need to make an additional significant financial investment to cover a rental commitment and initial working capital and may need to obtain financing for this on your own.

You will be required to pay a periodic fee plus a percentage of your gross receipts.

You typically must purchase all your supplies from the franchisor at prices they set.

You will have to depend on the franchisor to implement new technology.

Starting a franchise usually involves your making a substantial up-front cash outlay and obtaining a bank-financed loan. Your initial out-of-pocket cash investment generally covers the franchise fee, the cost of leasing premises, furnishing an office, buying equipment, and preparing promotional material. The additional financing is required to cover working capital until the business becomes cash-positive.

The franchisor will usually send you to a training course (at your expense). You then work with another franchisee for a short period to acclimate you to the business. The franchisor then helps you set up and start operating your own franchise.

Joining a Start-Up or Early-Stage Company

This is a common situation in the technology sector where one or more individuals decide to launch a new business based on an idea they have or on a new technology, often unproven. There could be opportunities for a senior executive to join the company to fill out the management team so it can secure seed funding to launch operations or to obtain angel funding to take the company to a higher level.

Early participants usually work for equity, not salary. If you join a very early-stage company with some financial backing, salaries for executives typically will be limited to the mid-five figures. If you come from a large company background, you’ll probably encounter some reluctance to consider you because too many executives with this background fail to adapt to a small company with limited resources.

Buying an Existing Company

If you’re looking to buy an existing business that you don’t know very much about, be very careful that you read the real signs of why the seller wants to “retire” (often the stated reason). It may be because it’s a dying industry, the equipment is obsolete or at the end of its useful life, a new technology could potentially overtake the business, the owner is unable to find and retain experienced labor at a competitive price, cheaper foreign manufacturers are taking over the industry, or potential laws may require the business to relocate or incur significant costs to meet new environmental requirements.

Talk to your banker about the opportunity you’re considering, even if you don’t plan to involve them in the purchase. They may know something about the industry from other customers that could be helpful to you.

In a small business, you’re likely to have employees who can do some tasks that you either can’t handle or aren’t good at handling. As with a consultancy, you’ll need all 10 personal characteristics to be successful in a small business. If your business is to prosper and grow, one of your biggest challenges will be to hire, lead, manage, train, motivate, and retain the right people.

You can find businesses for sale by contacting business brokers in your area. Your banker, accountant, and attorney should also be able to lead you to the best sources for finding companies for sale.

Writing and/or Speaking

Becoming an author and/or speaker is a business that will require a long lead time to develop material and obtain speaking gigs. Writing articles for publication in trade journals and a local newspaper is a good place to start. Writing an article and trying to get it published in a major newspaper will be a challenge because most papers will only accept articles from syndicated writers. They don’t want to be sued for something you said that offended someone or turned out to be incorrect.

If you have a passion to write a book, be forewarned that it can easily take years of dedication. This book took me several years to complete. Admittedly, I didn’t spend every waking moment on it, but it was a major focus during that time.

Start by writing articles for trade magazines and local newspapers and see what reaction you get. Using a professional editor to review and edit your work will enhance the success of getting your work published. If you have some initial success at this, consider writing a smaller version on the subject you want to focus on and have it self-published. You can then use that book to help you get speaking engagements as an author and sell copies at events. This can help you to establish your credibility and give you confidence.

Teaching and Training

I find many individuals want to leave the corporate life and give something back by teaching or training. If you have an advanced degree, you can pursue teaching at a major university. If you don’t, there are many other universities and colleges that would welcome you for your expertise and even pay you (but not much).

Inquire at local universities and community colleges about extension courses they offer adults who want to get specific training in a subject that isn’t an academic program and doesn’t lead to a degree. You’ll find courses covering many of the nuts and bolts issues of doing business ranging from accounting for non-financial business people, preparing business plans, preparing marketing plans, film production, import/export regulations, and so forth. More than likely, they’ll have a program that covers what you are already an expert at, and they may have a need for someone like you to teach it.

Training consultants work for companies, universities, and colleges. Refer to the section on consulting and coaching for suggestions. If you want to pursue this, look into joining the American Society for Training and Development (ASTD; www.astd.com), a national organization. Get involved in a chapter near you, and network to find out if this option is one you want to pursue.

Turning a Hobby Into a Business

If you don’t want to continue doing what you’ve been doing in the corporate world and aren’t motivated to find a business that capitalizes on your work skills and experience, look inward and ask yourself what you enjoy doing when not working. People often create a profitable new career by turning a hobby into a business. Many of these new careers require skills with tangibles, like woodworking, metal working, ceramics, painting, or buying and selling antiques.

Start by talking to others who are in the business of doing what you think you’d like to do. (I cover how you can gather this information in more detail in Chapter 8.) If you doubt that you’re expert enough to convert your hobby to a business, talk to people who are doing it as a business to find out if it’s an option you want to pursue. If it might be, ask if they would let you work for them for a while so you can understand the business better. Offer to work for free if they’re not willing to pay you. If they see that this new career is right for you, they may ask you to join them on a permanent basis or collaborate with you on some basis, if you want to specialize in something unique but complementary to their business.

Doing What You Always Wanted to Do When the Time Was Right

Suppose you don’t have a hobby that you think is convertible to a business, but you’ve always had a burning desire to do something else, if only the time would present itself. Without knowing what options you would consider, all I can do is give you some examples of what others have done so you can see the potential.

For example, if you take time off to do some traveling, think about how you could make it interesting to others. Journalize your trip and write an article or story about it. Focus on one of the countries you visited. Focus on some aspect of people or their life, and compare and contrast that to the people in each of the other countries you visit. If you say that you don’t know what would be of interest to readers, don’t worry about that. If it really interests you, you’ll be passionate about it, and it will be of interest to others.

Consider starting or joining a nonprofit organization where you can add a service or capability that you know others need. Look for corporate or government grants or get a company to sponsor the program. Talk to people in government about programs that aren’t working very well and how you might be able to help.

Creating a Plan for Your Option

The above self-employment options include some guidance on how to get information that might help you decide whether you want to consider any of them further. Keeping that information in mind, go to www.ExecGlobalNet.com, click on the Career Center, and download “Resource 4.1: Where to Get Additional Information.” You can use the summary to help you do your research depending on the self-employment option you want to pursue.

Look for books that are devoted to the specific type of business you’re considering. Contact Service Corps of Retired Executives (SCORE; www.score.org), an organization funded by the U.S. Government Small Business Administration (SBA) that offers free services to individuals who want to start a business.

Starting a new business without a plan is like
driving with your eyes closed.

Before you begin to launch a new business, you must prepare a business plan. This is a crucial step if you’re considering starting a business, whether the new business will be a sole proprietorship or you include others. Having a plan won’t guarantee success, nor will the lack of one guarantee failure. What it will do is to help you decide whether this is a good option for you and whether it’s financially viable. If you need bank financing to commence operations or to fund operations until you’re cash positive, the bank will require a business plan.

A business plan will help you through the thought process of starting a new venture to assure you’ve covered the significant points. You can find good examples of how to prepare a business plan at these three Websites: www.inc.com; Guy Kawasaki’s www.garage.com; and the SBA’s Website, www.sba.gov. When you’ve done your research and think you’ve found what you want to do in your new self-employment career, use the following sections as headers for your business plan. I’ve included an explanation of each section.

I recommend you start by preparing a two-page Executive Summary of your plan. If you can’t prepare a summary at this stage, you probably need to spend more time thinking through your potential business. When you complete your summary, prepare your plan by covering the following sections:

1. What Is the Business?

Describe the business similarly to a verbal business card. If you met someone who asked about your business, what would you tell them? Don’t limit your discussion to just the 30-second pitch. That will be in your Executive Summary. But in this section, describe it in a way that someone who doesn’t know anything about the business would understand it, at least conceptually. Don’t be vague to “protect your business concept.” If you can’t grab the interest of others in this first section, you should reconsider whether you really have a business.

2. Who Needs the Business and Why?

Describe why your target customer needs your product or service. What need is not being met that your business will fulfill? What pain exists now that your business will resolve or minimize? This section must support the first section, and it must describe a compelling reason why there’s a need for the business.

3. Industry/Market Characteristics and Size

Describe the industry or market. What’s the current state of the industry or market? How mature is it (the market, not the customer)? How does it work? Who are the competitors? How big is your target market (the people who are most likely to purchase your product or service)? What’s the market potential? Describe if it’s fragmented and, if so, why? How will technology influence your product or service? How will it affect your target market? What’s the labor pool that supports the industry? Why are others who are currently in the market not meeting the need?

4. Operating Strategy

Describe how you’ll operate the business: Will it be a partnership, sole proprietorship, limited liability company, franchise, and so on? If others will be involved, what will their roles be? If you have individuals who have agreed to participate, how does their background support their role in the business? Include brief summaries of the bios of the management team. Put resumes in an appendix.

Prepare a timetable to show when you start, what needs doing by whom and when, when others need to come into the business, and what their roles will be.

5. Marketing Strategy

How will you brand your business so that you have something unique that sets you apart from your competition? Describe how you’ll promote the business and develop new customers. How will competitors currently in the market react/respond to your business? Describe why you can do something that others haven’t done and how you can protect/insulate your business from competition. If there are no or only limited barriers to entry, what will keep others from taking your business? What’s your Plan B?

Include estimated sales by month and how you expect to generate sales (direct mail, telephoning, direct visits, and so forth). When making sales estimates, don’t use market-penetration-percentage assumptions in your calculations. Use a bottom-up approach, such as how many widgets you will sell by month, and how you support that rationale. The more realistic your assumptions, the more believable they will be to others who need to make decisions about you and the likely success of your venture.

If you’re looking for an investment from others, you’ll enhance the potential success of your endeavor in the eyes of potential investors if you can get some form of written confirmation from potential customers. Lenders or investors don’t take “guesstimates” very seriously.

6. Financial Forecast

Prepare a financial forecast, showing revenue, costs, and capital purchases separately, net cash flow, and the remaining cash balance or cash requirement. Indicate whether you’re using an accrual or cash basis of accounting. If you aren’t looking for outside investors, prepare a three-year forecast showing the first two years monthly, and annually for the third year. If you’ll be looking for outside investors, prepare a five-year forecast, showing the first two years monthly, and annually for the third, fourth, and fifth years.

Explain how you intend to support the startup costs. If you’ll need outside financing, what are your plans to raise it? Prepare supporting notes explaining assumptions for sales recognition and reasons for each significant element of cost or capital asset expenditure. Include only an annual summary for each three- or five-year period in the body of your business plan, and put all detailed monthly schedules and assumptions in an appendix.

Putting Your Business Plan Together

A comprehensive business plan should be no longer than 25 pages. Put all supporting information, schedules, and so forth in a separate appendix. When you’ve finished your plan, revise your Executive Summary to reflect the information you collected from your research.

When writing your business plan, avoid making sweeping, generalized statements about market size. Be realistic, and err on the side of conservatism rather than glowing potential. If you use industry-standard acronyms, include descriptions of what they mean, as others who read your plan may not be familiar with the terms.

Don’t be a name-dropper and infer that Bill Gates or Cisco is a potential associate unless you have a relationship with them and have an indication of their interest in participating. Avoid superlative adjectives because they’re judgmental and not objective, and the reader may conclude that you’re padding your plan.

Focus on the positive aspects of your business, not the negative aspects of others. It’s acceptable to make a comparison to another organization that doesn’t do exactly what you do.

Review your Executive Summary and, if appropriate, your business plan with a trusted advisor, your mentor, or someone you think would understand your business and the market, and will give you honest feedback. If you don’t know anyone who fits that description, talk to your accountant or attorney. They can usually refer you to someone they know who can help.

When you’ve completed your reviews and modified your plan and/or summary as necessary, send your Executive Summary to those you want to consider participating or investing in your venture. Investors won’t be interested in reviewing your entire business plan unless your Executive Summary elicits an interest in them.

Investors

The management team typically provides initial funding for start-ups and early-stage companies. As they either run out of money or need additional funds, they turn to the three “F’s”: family, friends, and fools (a typical reference to this stage of funding). If the business has raised an acceptable amount of money (as defined by later-stage investors) from these sources, the business can then look outside its circle of personal contacts for investors with no connection to the business or the management team.

This next stage will either be a corporate backer, an angel, or angel groups who pool resources to invest in promising technology. Angel investors typically don’t invest unless the company is already in business, has a prototype or proven business concept, or has established a compelling reason to believe the entrepreneur, such as an academic who has done some proof of concept. In addition, angel investors don’t typically invest in companies unless there’s a quick exit strategy (usually within two years), which typically means that a corporate investor will participate, or one or more venture capitalists (VC) will provide follow-on funding.

Most VCs aren’t interested in business models that don’t have the prospect of hundreds of millions of dollars of revenue within five years. VCs hope to be fabulously successful 10 percent of the time, and that one in 10 will make up for all the others that fall flat. If your idea doesn’t have the potential to generate hundreds of millions of dollars within five years, you should probably explore other types of funding, such as corporate investors or a strategic alliance with a corporate alliance partner. Keep in mind venture capitalists fund only about 3 percent to 7 percent of all new businesses.

To find out what other entrepreneurs are doing to raise money in your area, contact attorneys, accountants, commercial insurance agents, and recruiters for recommendations on where you can network to make the best connections for your new business.

Milestones

The following milestones recap what you need to do to complete this chapter. Include those items you are unable to complete in your summary-level open-items list.

Check off the following when you have completed each item:

1. Are you clear about the specific reasons why you want to consider self-employment?

Describe your reasons.

______________________________________________________________________

______________________________________________________________________

2. Do you have the personal characteristics indicative of those who are successful in self-employment? If not, how will you compensate for the ones you don’t have?

Describe the characteristics you don’t have, and indicate how you will compensate for them.

______________________________________________________________________

______________________________________________________________________

3. What is the service or business that you plan to offer through self-employment?

______________________________________________________________________

______________________________________________________________________

4. Describe your target customer or client.

______________________________________________________________________

______________________________________________________________________

5. Explain why your target customer or client needs your services or products. (What’s their pain that you can resolve, or what unfulfilled need do they have that you can satisfy?)

______________________________________________________________________

6. Describe how you envision branding your business.

______________________________________________________________________

______________________________________________________________________

______________________________________________________________________

7. You are prepared and willing to invest the mental and physical effort you’ll need to stay the course to build a business. This can take up to two years. You’ve discussed your thoughts with your spouse, partner, advisor, confidante, and/or coach and have their encouragement and agreement to support your decision.

8. You have investigated and defined the appropriate business structure your new business will take (corporation, sole proprietor, partnership, and so on).

9. You’ve prepared a preliminary Executive Summary for your business and discussed it with your spouse, partner, advisor, confidante, accountant, lawyer and/or coach, as appropriate. You’ve prepared a list of their questions or concerns and you plan to resolve those you need to clarify when you prepare your business plan.

10. Sketch out your business plan and be ready to complete it when you’ve finished this book.

As you read the next chapter on resumes, think about the concepts as they relate to your business. You probably won’t prepare a resume, but you will need a bio, and you may need a brochure, depending on the business you start.

Complete the remainder of this book, paying close attention to Chapter 8 (networking) and Chapter 9 (communicating). They’ll help you be more successful whether you’re looking for additional resources (financial or human) or you’re trying to develop business. Chapter 10 (interviewing) will be helpful to you if you plan to interview others who will be joining your business.