So You Want to Run Your Own Business
Chapter 1 showed that a high level of confidence, a vision for the future and a belief that ‘it’ll work’ are essential for a successful business. But equally essential is a firm base upon which to start. This can only be achieved if you have asked yourself the following questions about your business: why, what, where, when and who (in no particular order).
The answers to these questions, as you will see in the following sections, will form the foundation upon which you will build. The final and most important question is: How do I start? This will be the topic covered in Chapter 3.
Why Are You Setting Up a Business?
The reason why you are setting up a business will have a big influence on its structure.
As we have seen, some businesses just set themselves up, with the proprietors reacting quickly to events as they play out.
But, no matter how unplanned the businesses appear, the proprietors at some stage will have to decide to take things forward on a business footing.
This involves seriously looking at the finances and resources available, and whether the outcome fits in with life plans.
Often, the rewards that the unexpected business offers are too much to discount, as the following examples show.
A good example of an unplanned business is that of Viagra (sildenafil citrate), which was originally developed as a drug for treating pulmonary hypertension and angina.
It was during Phase I of the drug’s clinical trials that the unexpected side effects in male patients were observed. Pfizer, an existing commercial organization set up to bring new pharmaceuticals to market, decided to develop a significant separate business for Viagra for treating erectile dysfunction.
A chance discovery that secured almost $2 billion a year in net sales for Pfizer before the loss of exclusivity.
Businesses have been known to evolve from a hobby or pastime (as happened to eBay – see Chapter 1) and are often driven by consumer demand for an underdeveloped product or service.
These days, social media can often be the driving force for such a startup, with the momentum of the enterprise outside the proprietor’s control.
The power of social media takes over, and the growth in demand is fueled by online chat, such as Twitter.
The best way forward for such businesses in this position is to call a halt, take a breather and come up with a manageable plan to progress, before physical and monetary resources are stretched too far.
If unemployment occurs unexpectedly, and without the benefit of redundancy benefits, there is often the will to set up a business, but also the lack of capital with which to do so.
But if capital can be acquired to fund the setting up of a business, it is likely that this option will be taken. This would not only be for the income benefit, but also to regain some purpose in life, as it’s difficult to accept a life of doing nothing.
Unemployment/redundancy can often evoke a feeling of victimhood, and if this can be utilized as a driving force with which to set up a business, it gives the business a head start. This emotion should be embraced by the new business owner.
Often, the business will be set up as an aggressive competitor to the one responsible for the redundancy, utilizing the skills of the ex-employees.
There must have been times in your life when you’ve had to wait for your orders to be dealt with, or you have noticed particularly bad customer service and said to yourself that ‘you could do better’. For most of us that would be the end of it, but there are entrepreneurs who see that as a business opportunity.
Or maybe you work for a business that is operating below par, and you think you could do better, as Howard Schultz did at Starbucks, where he identified a market that they had not considered.
If this is the position you find yourself in, you will have a better chance of successfully setting up a new business, as you have prior knowledge of the business sector, and you are not gambling on a new business in a new sector.
Often, people find themselves employed by businesses in which they have little respect, and they can get to the point where they do not want to be ordered about by someone who they think is lacking.
But only a few do anything about it and set up on their own. What makes them different from the rest? In a word, it’s confidence. You should always have confidence in your decisions.
There is a thin line between confidence in an off-the-wall idea and delusion, especially when the rest of the world is against you. But, it is having the ability to identify if you’re going off-plan and the ability to defeat your doubts that leads to success.
The following are a couple of examples of businesses that started following a chance discovery, where the thought of a business development could not have been further from the mind, the doubters were ignored and a business was formed.
Dr. Spencer Silver, working for the Minnesota, Mining and Manufacturing Company (The 3M Company), invented a low-tack, pressure-sensitive adhesive, which for years went unacknowledged until Arthur Fry, one of his colleagues, had a eureka moment in church and came up with a practical use for it. Arthur Fry was fed up with his bookmarks falling from his hymnbook and applied Dr. Silver’s adhesive to some paper to mark his pages.
Realizing what a practical item he had discovered, he ignored those with little enthusiasm for his idea and spent no time in letting the world in on his secret – the Post-it note. He became engrossed in bringing the Post-it note to market, working tirelessly with Dr. Silver to do so.
The reason they are yellow is that they found some scrap yellow paper when they were working on the prototype.
This is another example of a business evolving with no plan.
Although this example is the accepted tale of the invention of the Post-it note, a Swiss inventor, Alan Amron, claims he invented them first, but offers very little evidence to back his claim.
His claims through the courts for his rights have been dismissed.
While talking of the Swiss…
One day, George de Mestral, a Swiss engineer, took his dog for a walk in the woods. When he got back, he was annoyed by all the burrs stuck to his pants and how difficult it was to remove them. When he looked at the burrs under a microscope, he saw that they had tiny hooks that had attached themselves to the loops of thread in his pants.
George set about finding a practical use for this phenomenon, and in 1955 he invented Velcro. He was convinced that he had a useful product, ignored his doubters and set up a company to refine his product and bring it to market. The Velcro companies are still trading to this day.
There are still endless possibilities for new businesses as the 21st century has brought with it a number of challenges and opportunities. There are opportunities to develop new and cleaner sources of power, make our cities more sustainable and improve our communities with the latest technological developments.
Every technological advancement brings with it the death of old industries, and opportunities for new ones. The progress that is being made on personal transportation and the development of drones will lead to major changes in society, along with opportunities for new markets to open up.
You should look around and try to spot issues that are going to affect you and those in your community. When advances such as driverless cars become generally accepted, is there an opportunity for creating a remote taxi system?
Singapore has already started a trial of autonomous taxis, and driverless buses are already operating in Helsinki and Lyon.
Tesla boss Elon Musk believes that a fully autonomous car for general use is only 2 years away.
Plans for an autonomous car sharing company have already been mooted, where, rather than cars spending most their lives parked up and idle, they are shared.
Given the time and space devoted to parking cars, this is a valid concept.
Once you have identified a business opportunity, you need to develop a business plan. Plenty of agencies have been set up to provide assistance to potential new businesses, with drafting business plans as their main aim. Often, these agencies are government sponsored as part of their business initiative schemes.
A business plan turns an idea into a viable business, with revenues and expenses identified and forecast. Drafting a business plan will be dealt with in detail in Chapter 3.
Many business startups fail because the ‘idea’ was never formulated into a viable business plan. A business needs to generate income and earn a profit, and these basic requirements should not be overlooked.
Many failed businesses often concentrate more on publicizing their idea than they do on the income streams that they can produce.
If you are motivated by the idea of a fleet of wagons with your name on them, or your own Trump Towers, you will need to ask yourself if displaying your success is a valid basis upon which to build a business.
There are a few individuals with the talent, and often the funding, to make anything a success and they can set up numerous businesses for themselves and their families, to display their ability and wealth to the world.
If you are not lucky enough to be one of the talented few, may I remind you that the level of work necessary to make a business a success is high, as is the failure rate of new businesses.
(On this note, if you are tempted to display your newfound wealth, should your business succeed, by purchasing fancy cars and a big house, forget it. You will regret every pound you spend when, in your retirement, you calculate the amount of money you wasted. I say this from experience, as a previous owner of Range Rovers and Porsches. You don’t need to impress the people who matter.)
There is nothing wrong with dreaming that you can run your own business and become rich in the process, but there is a lot of hard work involved and many sacrifices to be made.
You need to decide whether you want to be a billionaire and incur all the penalties that will entail. Do you want the business to run you and risk losing family and friends, or do you want to control the demands that the business will make on you?
You will need to consider whether you will ever let the business run you, or will you run the business (and remember this decision when customer demands are encroaching on family commitments).
Identify at an early stage the level of income you will need to provide a good lifestyle for you and your family.
Once you establish the reason why you want to set up a business, you need to answer the other questions.
What Is Your Business Going to Do?
This may seem like a strange question, but many potential startups have failed due to their creators not being able to turn their ideas into a workable business format. This has become common in the digital age, where ideas for a radical website can be dashed when the costings are considered.
There are many new business formats that would not have been conceived a generation ago, such as Spotify with its music streaming services. There are also many occupations that had never been thought of when I was receiving careers advice.
Don’t be scared to be the first to do something new. Start with a blank sheet and invent something.
There must be a positive cash flow; you need to be producing something that people are willing to pay for, be it customers, or possibly, advertisers (willing to fund your YouTube or Twitter page).
Too many people are giving things away online and spending fruitless hours on projects that will never produce any income.
We have already seen that businesses can end up doing things far different from their intended purpose.
With regard to ‘what the business is going to do’, many businesses look for a unique selling point (USP) that will distinguish them from the competition, and they look for novel or new ways to provide the services they offer.
The USP can be seen as a factor that differentiates a business from its competitors, such as the lowest cost, the highest quality or the first-ever product of its kind. It can simply be thought of as what you have and your competitors don’t.
You can find reliance upon USPs in the catering sector where businesses concentrate more on the experience they provide than the product they sell.
The idea is that the memorable experience will distinguish them from their competitors and generate customer loyalty.
Interestingly, the product does not need to be different from that of the competitors. If a business is successful in its marketing, at pointing out some benefits of a product being sold that the competitors have not picked up on, that business will sell more of that product.
Making a product more expensive can give it a perceived superiority in the marketplace.
Where Should You Set Your Business Up (Both Virtually and Actually)?
Could your new business be run on a shoestring from home, will it need a retail outlet or will it need a purpose-built facility? The answer to these questions will have an impact on the finances needed to get the project off the ground.
If you are considering starting a retail business, the position of the operation can be of prime importance. The old adage ‘location, location, location’ still applies today, and I would advise that substantial research is undertaken into the location of the business. This will pay dividends, even if it means actually ‘staking out’ a spot and counting the footfall.
Don’t try and re-invent the wheel when considering a location; use your competitors’ research efforts and ask yourself why they chose that location. Watch how many customers visit their premises and establish if any benefits could be gained by locating nearby.
Bear in mind your customers’ traveling and existing shopping habits and consider how much they would need to alter those habits to use your business.
This advice applies to a physical presence, and a similar approach is needed for the virtual world. Your web designer is key to your online presence, and your use of social media will be important in attracting traffic to your website (there is further advice regarding Internet presence in Chapter 8).
Online businesses can be operated from anywhere, as long as local laws allow you to trade accordingly.
See Chapter 7 for further details regarding the location of a business.
When Should You Start Your Business?
You shouldn’t start your business until you have everything ready, and enough resources to deal with initial demand. Many businesses have raced to market, trying to beat their potential competitors, but have failed as they haven’t had the resources to meet demand.
There is also an ideal time to bring a business to market, which is sometimes governed by external factors. YouTube, for example, was released in 2005 and was an immediate success. If someone had tried to set up a similar business some years earlier, before there was the ubiquitous wireless Internet and video cameras in most phones, it might not have been such a hit.
Ensure that you have done all your marketing and have people waiting at your door the morning you start.
My advice is that you don’t start until you have double-checked your tick list that everything is in place and all eventualities catered for.
Who Should You Go into Business With?
Lots of good friendships and marriages have been ruined by ill-conceived business partnerships. They have been the cause of many a family rift too; the Dassler brothers being the most famous dispute, which led to rivalry between two of the world’s most recognizable brands.
In the 1920s, two brothers were partners in the Dassler Brothers Sports Shoe Company. Adolf (Adi) and Rudolph (Rudi) Dassler complimented each other; Adi was the designer and craftsman, while Rudolph was a natural salesman.
Due to family tensions they fell out (allegedly their wives fell out), and while Rudi was on active service and subsequently a prisoner of war during the Second World War, Adi was left to run the business, which he did with much success, and prospered.
Rudi resented Adi being left with the business, and his own lack of prosperity. He blamed his call-up and capture on Adi, and a conflict ensued between the brothers.
The conflict escalated dramatically, and the brothers split the business in two in 1948, dividing the assets and the employees between them.
Adi named his company ‘Adidas’, a combination of his first and last names. Rudi attempted the same by first naming his company ‘Ruda’ but eventually changing it to ‘Puma’.
The conflict grew, with the town where the brothers’ factories were located taking sides in the dispute. Local businesses served only one brother or the other and dating or marrying across company lines was forbidden.
The negative cost of this dispute was that while they were focused on each other, they were unable to react to Nike, who began to dominate the market they were in.
A common reason for disputes in businesses is where the key employees don’t think that they are getting adequately remunerated. This is common in the catering trade, where an individual sets up a restaurant or eating establishment, which becomes very popular, and often the chef is an employee.
When the chef realizes that the success of the business is mainly due to his/her culinary skills, he/she requests a share of the profits. This request is often a cause of friction between the proprietor and the chef, and in a number of cases results in the cessation of the business.
This can happen in all types of business, so the lesson to learn is that the business should work as a team, and the profits should be shared with those who have a significant role in generating them.
When you realize that it can’t be done on your own, and you need to collaborate as a team, you will get more from the staff as they are more motivated to make it work.
You really do need to consider carefully before you try to do it on your own or take a partner on!
You will see in Chapter 3 that a number of business models do allow for the sharing of the business profits, and the options are endless.
So, if you decide at this stage that the business is going to be operated by a number of individuals, the format to allow for this can be finalized later.
The format for JT’s Restaurant (a fictional business startup that we will refer to throughout the book) is interesting, as the proprietors decide to take their agreed shares in completely different ways.
JT’s Restaurant is operated by an entrepreneur (myself!) as a sole trader, employing a chef on an agreed (generous) salary. The reason for this setup is due to various factors that are explained in Chapter 12.
(Further details regarding JT’s Restaurant can be found in the section ‘Example of Business Plan/Finance Application’ in Chapter 12.)
What Should You Call Your Business?
This is one of the most important decisions you will make about the startup, as the name will identify the business. It is important, therefore, that the name identifies what you do, and that it is a name you can live with for a while.
Search engines and the like need to be considered when deciding on the name, because if you want your site to appear first, you will need a name higher up the alphabet. Many businesses do this by including a number of A’s before the major business name. You will need to think about how your customers would view this approach before using it! It is popular with taxi firms wanting their telephone number to be ahead of their competitors in the phone listings.
Also bear in mind what it will look like as an Internet address. Pen Island didn’t realize that their Internet address would read as penisland.net, and Speed of Art didn’t realize that their online presence could be misconstrued as a site for Speedo wearers with wind problems.
You should check on the company registers that someone else hasn’t already taken the name you have chosen; another way is to Google the name and see what comes up.
If you decide to use a name in another language, you will need to check what it means first. Powergenitalia.com is an Italian power company that needs advice on its company name.
Keep the name short and think about a logo and branding at the same time. Think of the image that the name will portray.
It is possible to change the name at a future date, but you may lose confused customers and incur additional expense in printing costs, redesigning your website, etc. So, it is important to get it right first time.
I have been director of companies called Cooking the Books Limited and The Money Laundry Limited, both of which traded within the law, I may add.
A sense of humor is allowed when considering a name.
Going through the thought processes and asking yourself the foregoing questions will help enormously when undertaking your initial business plan.
If, after reading this chapter, you decide that you are not ready to start your own business from scratch, you could always buy an existing business that may be for sale. This option is explored in Chapter 4.