Introduction
Self-employment is a real option for some graduates, particularly in creative industries but also in less obvious areas like counselling or animal behaviour. Our brilliant examples in this chapter come from graduates who have recently set up businesses in ethical clothing, recruitment, counselling and digital multimedia. In this chapter, while we don’t have space to give you the nuts and bolts of setting up your own business, we will give you some pointers to help you explore this career option in more detail. We’ll begin by looking at two related concepts, entrepreneurship and intrapreneurship. Any or all could be part of your working life, for some people immediately after graduation, for others at a different career stage.
The number of people in the UK who are self-employed has risen steadily in the last five years to around 4.4 million. This is believed to be due in part to the reduction in the number of full-time jobs that are available, and the choice made by some to become self-employed rather than unemployed. However, there is also a steady rise in the number of business start-ups, with new enterprises setting up at the rate of 435,000 per year. This rise is impacting on graduates too; of those who graduated in 2013, 4.8% were self-employed six months later (around 7,000 graduates), compared with 3% of those who graduated in 2007. The percentage is higher in subjects such as Art, Design, Drama and Multimedia/Computing. But before going into any more detail, let’s clarify what we mean by entrepreneurship, intrapreneurship and self-employment.
Entrepreneurship
What do you think of when you see the word entrepreneur? Probably due to its original use in the entertainment industry, you might think of glamour, drive, ducking and diving, imagination, success. But put simply, an entrepreneur is a person who organises and operates a business or businesses, taking on financial risk to do so. The Business Zone website fleshed this out:
‘An entrepreneur sees an opportunity which others do not fully recognise, to meet an unsatisfied demand or to radically improve the performance of an existing business. They have unquenchable self-belief that this opportunity can be made real through hard work, commitment and the adaptability to learn the lessons of the market along the way.’ (www.thebusinesszone.co.uk)
So while self-employment describes a status, entrepreneurship says more about the style and approach. In other words, to be successfully self-employed you need to be entrepreneurial.
Nature or nurture?
Many studies of well-known entrepreneurs draw attention to the personality characteristics they appear to share, such as a need to achieve, a desire for autonomy, a capacity for risk taking, high creativity and a glass-half-full outlook. Some researchers extend this observation to the belief that entrepreneurs are born, not made. However, most studies of this kind are based on a small sample, and it would be easy to identify people with these characteristics who are not successful entrepreneurs, and vice versa. During the last twenty years, many schools and universities have introduced ‘enterprise education’ – you may have experienced this yourself – in response to policymakers believing that equipping students and graduates in this way will help organisations to operate more effectively during times of rapid change. So this approach assumes that entrepreneurship can be learned.
Intrapreneurship
If the idea of being entrepreneurial appeals to you, but you have reservations about going it alone, here’s an alternative. Intrapreneurship refers to the process by which employees are supported to create and develop new products, services and systems, with necessary resources and the freedom to bypass or shortcut the organisation’s usual routines and procedures. The term derives from an abbreviation of ‘inside entrepreneurs’. Here’s a simple example to illustrate how it works.
A final-year student aims to work in retail management as a graduate trainee and has a part-time job in the local branch of a global fashion brand. She knows that students perceive the brand to be too dressy and business-dress focused, even though there is a good range of more casual clothing, but the window displays are determined by head office and must be the same in every store. She believes that if part of the window display could be used for more informal clothes, it would attract more students into the store and sales of these products would increase. She makes her case to the store manager, pointing out that the success of the scheme would be measurable using the stock control system, and asks if special permission could be given for a two-month experiment. The store manager is persuaded and manages to get approval from area office, who allocates a design colleague to work alongside our student on an eye-catching and targeted window display. The student is encouraged to talk about her idea at a morning staff briefing so that colleagues will be receptive to new customers. The scheme becomes a success and is rolled out to other branches in university towns.
So, being part of a large, formally structured organisation need not prevent you from being innovative and creative. Intrapreneurs transform ideas into social or economic capital through ventures which are consistent with the goals of the organisation. So the benefits to the organisation are clear, but what does the intrapreneur get out of it?
Evidence from organisations which actively encourage intrapreneurship suggests that there are two key gains for employees. First, there are gains in motivation and job satisfaction for the intrapreneurs themselves. And second, because staff can use entrepreneurial skills and techniques such as persisting until successful, and learning from failure, without the risks associated with operating alone, the organisation can be less static and livelier as a place to work. And, of course, intrapreneurial success is a great basis for setting up a new enterprise later on – according to the Office for National Statistics, people over 50 account for 84 per cent of the increase in self-employed workers during the last five years – using their amassed capital and experience.
Self-employment
You might be surprised to know that, even though there are legal and financial implications, there is no clear definition of self-employment. However, according to government advice, you are likely to be self-employed if you:
- run your own business (including as a franchisee) and take responsibility for its success or failure;
- have several customers at the same time;
- can decide how, when and where you do your work;
- are free to hire other people to do the work for you or help you at your own expense;
- provide the main items of equipment to do your work.
Note that there are some employers who require their staff to be technically self-employed, even though none of the above criteria apply. This is a technique for managing human resources and while legal, can have drawbacks for the staff concerned. In media and IT the term freelance is often used – usually meaning contracted by an organisation or series of organisations for a particular task or role and for a fixed period of time. You may be called a contractor and there is a useful graduate guide to contracting at www.contractoruk.com. For the purposes of this chapter, however, we are staying with the accepted understanding of self-employment covered in the bullet points above.
- Entrepreneurship – identifying and taking forward an opportunity to meet an unsatisfied demand or improve an existing business
- Intrapreneurship – applying the skills and techniques of entrepreneurship within an organisation
- Self-employment – running your own business and taking responsibility for its success or failure
Setting up and running your own business
So now let’s focus on what self-employment might mean for you as a new graduate. According to a recent report by the UK Commission for Employment and Skills, there are three main reasons why running your own business might be a serious option: opportunity, lifestyle and necessity.
First, opportunity – because in the sector you are interested in, it’s the norm, or because you have spotted a gap in the market for a product or service. Second, because you see yourself doing it – perhaps it’s in your family, or you are attracted to the idea of working independently and ‘being your own boss’, so it’s a lifestyle choice. Third, out of necessity – you see fewer opportunities to be an employee in your chosen field, and you see self-employment as a better option than unemployment. Of course, it may also be a combination of these reasons.
So you have your motivation. What else do you need? An idea, obviously. But in addition to technical or sector-specific knowledge and skills, you will need to know how to set up, promote, operate and resource your business. Here are just a few of the questions you will need to be able to answer:
- Market research: how do I know there’s a demand, who are my customers and who are my competitors?
- Marketing, publicity and promotion: how will I promote my product or service, both to launch the business and to keep it going? Am I aiming for repeat business or will I have to keep finding new customers?
- Financial management: setting up income and expenditure accounts, following tax regulations by keeping records and completing returns on time, budgeting, setting a fair price which will generate demand and income, sourcing and costing materials and equipment.
- Premises: do the planning regulations permit me to operate from home? If I rent premises are there health and safety considerations? Are the premises secure?
- Resources: what finance, equipment and materials do I need to start off with? What are my renewables, and what will they cost? Can I get supplies quickly when I need them? Do I have anyone to call on if I get urgent work?
- Operating: do I have insurance for when things go wrong? Am I clear about what I am offering and what I am not offering?
Skills and knowledge
The list of questions above may have given you an idea about the skills and knowledge you need to be a successful entrepreneur, but we will list the most important here.
Skills
If we look more closely at just one of these skills, confidence, it’s partly about how you feel and partly about the confidence others have in you, as Gemma, who has a multimedia development business, describes.
‘When I first started out, it was quite difficult to get potential clients to look past the fact that I was just one person, working from home. Although I was basically just a sole freelancer, I think it was massively helpful setting up as a proper limited company. It only costs around £60 and meant I could give the impression of a more professional, serious setup. And I found it was always best to refer to the company as “we” and not “I”. Of course, when a client had worked with me once, they could see I was capable of delivering so it became easier as it went along, together with word of mouth recommendations. I think that acquiring office premises helped boost our company image further.’
Gemma, BA (Hons) Multimedia Computing (Multimedia Development Company)
Knowledge
- Market research
- Marketing
- Finance
- Business planning
- Business awareness
- Sector-specific knowledge
Here’s Gemma again, talking about developing her own business awareness.
‘I have become much more business savvy as the company has grown. Things like making sure that you get a 35% deposit and setting out clear terms and conditions before starting the project have been important lessons learned along the way. It’s so important to have a clear set of terms agreed in writing so that both we and the client know what needs to be delivered for the agreed price. In the early days it was easy to get pushed into adding lots of extras as the project went along, all for the same price. Also some people would talk you into doing projects for nothing in order to “gain experience”, but this is never a good idea.
Even if you are starting up from scratch as a sole graduate, you are still highly qualified in your field and clients should pay for your skills.’
Gemma, BA (Hons) Multimedia Computing (Multimedia Development Company)
Help is at hand
You might have been put off by now by that list of questions – but don’t be. There is growing support for would-be entrepreneurs and much of this is focused on undergraduates and graduates. Here are some of the ways by which you can learn.
Take a course or module as part of your degree
You may be able to choose a course or module within your degree which focuses on entrepreneurship. Around 80% of UK universities offer credit-bearing awards and modules related to entrepreneurship and, like Alex in our brilliant example, it might be a way to discover if running your own business appeals to you.
‘I thought I was destined to be employed as a graphic designer, but my third year at university really changed things. We had a module called business management and production and it was the highlight of my third year. It completely absorbed me. We had the opportunity to develop a business plan and then pitch it to professionals. Our pitch was successful and we were invited to develop the idea. Two of us took it forward.’
Alex G, BA (Hons) Graphic Design (Ethical Clothing Company)
Research and develop your idea
It’s a statement of the obvious, but you need to identify a product or service in which you have some interest, skills and knowledge. The book Start Your Own Business (Welsted and Whiteling, updated regularly) identifies ‘shoestring start-ups’ which can be set up with minimal capital and resources, including eBay business, tutoring, personal training and web design. This book also contains ten great questions to ask yourself before launching a business, to test for demand and viability in the market.
Many entrepreneurs build on the knowledge they have acquired as employees in setting up their business, but research is still needed. Our next brilliant example, Katie, worked for almost four years in recruitment consultancy before deciding to explore setting up on her own.
‘I decided in the February to start looking into my own business. I bought the Financial Times Guide to Starting a New Business and other similar books, including one which was specifically made for recruitment. I started writing lists of what I would need, for example, a name, telephone number, a domain email address and website, insurance, database, job boards etc. and then started looking into these specifically. Eventually, by July, I had done all my research and chosen the company name. I know it will be a hard slog as after a non-compete clause I had to find all new clients and candidates and in the current market this may not even work . . . I was investing a considerable amount of money from a house sale.’
Katie, BSC (Hons) Psychology (Recruitment Company)
You may have noticed the reference to a ‘non-compete clause’. This is something to look out for if you are already working and then setting up in a similar field, and protects employers from having their business taken away by the new company. It can also apply to a franchise, e.g. for exercise classes, preventing a former franchisee from running a similar business in the same locality.
Gain experience
Many entrepreneurs start out by working for someone else and being employed by an SME offers a chance to experience life in a small business at close quarters. You might even be able to arrange some work-shadowing of an existing small business, though perhaps not if you are proposing to become a competitor! Access to a business mentor can be valuable, as Zoe, our next brilliant example, found.
‘At university I was matched with a business mentor. This was extremely useful as I had not thought about how to run a business before. My mentor set me goals such as finding out about counselling rooms and advertising, and how to budget for such things. It really made me think about the business side of setting up a counselling practice.’
Zoe, PGDIP/MA Counselling and Psychotherapy (Counselling Practice)
Business start-up support
Look for business start-up support at your university – over 90% of universities provide extra-curricular support – or in your local area. Even if your course isn’t directly relevant to setting up your own business, you should be able to access local, regional and national information, advice and support. Alex, our brilliant example earlier in the chapter, developed his idea by attending an intensive training ‘boot camp’, then successfully bidding for funding and office space, all provided through his university. Our brilliant example below contains a local, regional and national initiative – see what you can find near you.
- A university in the north of England offers intensive ‘bootcamps’ and ‘boiler rooms’ for interested undergraduates and graduates, in which they develop a business plan, meet local entrepreneurs and experts in finance, market research and publicity, and have the chance to bid for funding and workspace.
- A group of universities in the Midlands offers students and graduates interested in starting their own business a programme which includes mentoring, tailored training, networking pportunities, access to business incubation space, and the opportunity to bid for financial support.
- Shell liveWIREUK provides online support and the opportunity to apply for start-up funding to young entrepreneurs aged 16 – 30 (www.shell-livewire.org).
Taking the first steps: three ways forward
Start your business immediately at full strength
This can work if you have done your research and feel reasonably confident of success – or have a financial cushion to protect you while you put all your energy into your new business. As a new graduate, Alex had nothing to lose by committing himself full-time to his new business, particularly as he had been awarded £1000 start-up funding and a year’s free office space. His location meant that he also had access to legal and financial advice and networking events. But note what he says here about attitude and mindset.
‘You need to be highly self-motivated and competitive, in order to push yourself to work those long hours and possibly weekends. You also need to have confidence in yourself and your ability to make your business work. If you don’t believe in yourself, and your idea, no one else will – confidence is key. You need to grasp every opportunity, even if it’s things that scare you, like public speaking. If it could help you and your business, it’s worth doing.
Furthermore, make mistakes, as you don’t learn from success, but from the mistakes you make – don’t be afraid to fail, as this will lead to you getting it right next time. . . . Determination is the backbone to it all.’
Alex G, BA (Hons) Graphic Design (Ethical Clothing Company)
Start with a micro-business using evenings/weekends to try out, then expand if successful
For some people, either because of funding or because of the nature of the business, it makes sense to start on a part-time basis. This helps to grow the business at a rate you can manage, and also gives you the chance to decide if it’s for you before you make a full commitment. Our next brilliant example, Gemma, faced exactly this decision. Towards the end of her degree in multimedia computing, she was offered a job at the same university, working on the development of a Second Life project. After six months, she felt that the job was not ‘techy’ enough for her, so she left and started a PhD. She takes up the story.
‘I was hoping to do some freelance work alongside the PhD, to bring in some extra money, so I set up a company with just myself on the roster. I was contacted by someone from another university I had met during my employment, asking if I knew anyone who could work on their ‘Second Life’ development. I explained that I was just starting up a small business for this kind of thing . . . My quote was accepted.
After a few weeks, other enquiries came in and I realised it was going to be too much to balance this new venture and a full-time PhD. I had to decide which one to pursue. After much deliberation I realised that running my own multimedia development business was my ultimate ambition, so this had to be my choice. That was four years ago and I have been running the company ever since.’
Gemma, BA (Hons) Multimedia Computing (Multimedia Development Company)
Be employed in an innovative organisation
If the idea of running your own business appeals to you but the time isn’t right just now, make it your aim to work in a small company which is itself innovative, and perhaps just beginning to take on staff. This way you will get to experience the commitment, risk-taking, multi-tasking and long hours which characterise successful small businesses, and you will develop some of those skills for yourself. Small businesses advertise in all the usual places, covered in Chapter 2. Be proactive; look out for networking events, work experience and work-shadowing opportunities and make some speculative applications.
Do
carry out your market research;
devise a business plan;
get access to financial and legal advice;
make sure that you have the drive and commitment to see your plan through.
Don’t
set up in competition with your current employer without checking your contract first;
borrow more than you can pay back;
think self-employment is an easy option.
Look to the future
Finally, remember that entrepreneurship and enterprise training, even if it’s not used to set up a business, increases your employability by making you more enterprising, creative, innovative, commercially aware and self-motivated. And you may find that there’s an opportunity later on in your career to set up your own business, using your experience and any capital you may have been able to put aside. While just 9% of small business owners are under 35 (though this percentage is growing year by year), 56% are aged between 35 and 54, many working in the field in which they were previously an employee. So running your own business might just be part of your future career plan.
Self-employment – a life-changing choice
Many people choose self-employment because it offers a different quality of life – a key benefit to set against the hard work and dedication essential to success, and a factor to take into account in any plans to expand. So the last words in this chapter go to Gemma and Katie.
‘For the four years that I have been running Gemixin, I have been making enough money to support my own salary and freelance staff when required. This is great as it means that I have spent four years doing what I enjoy doing, working for myself during the days and hours that I choose. However, I want to take this further and become a large company with full-time staff, creating our very own mobile apps and games. This is my ambition.’
Gemma, BA (Hons) Multimedia Computing (Multimedia Development Company)
‘Whereas before I was out of the house at least 22 hours a day, I now work from home and am flexible, so if I go for lunch with a friend I can make up the hours in the evening. Financially the company did well in the first year, billing just over £115,000. I enjoy managing my own time and not having so much pressure from managers, though I still set myself targets. The next decision is whether to grow the company or keep it as just me. Some days I want to grow the company by recruiting more recruiters and giving us a bigger presence, other days, like today, I realise that I made the move for a better quality of life rather than for the money!’
Katie, BSC (Hons) Psychology (Recruitment Company)