Starting A Business? - Is It Right For You?

This handout is for people who are just taking the first steps to starting a small business in the UK. Here are some of the most important things to think about. Making the move from an employee to employing yourself is an increasingly popular choice in a recession. The growth of the internet and the lack of mainstream jobs means that more people are seeing a chance to design a new kind of life.

You can start a business that works, one that gives you what you want, without having to change your personality. All it takes is the right information, used the right way. Perhaps you want to…

Turn a hobby into a business and make it your main source of income…
Use the creative skills you have and get paid for them…
Use your pension or early retirement as a springboard to having your own business…
Use your redundancy payment to launch a business…
Create a portfolio life, combining a job with online sales…
Or finally build a life that enables you to do interesting work and earn the money you need…

Whatever your reasons for wanting to become your own boss it’s worth taking the time to think through what it would really mean for you.

First, Why Do You Want To Employ Yourself?

Research shows that despite the stereotype, most businesses are not started by entrepreneurs pursuing an opportunity, most are started by craftsmen or technical specialists who are fed up with being managed and think that the grass would be greener if they managed themselves.

Do you love your craft and long to be left alone to pursue it to the very highest standard? Are you fed up with the daily grind of a job or find that it doesn’t allow you to express your ideas and plans?

If so, you are not alone but be warned. This idea of moving away from being an employee can be dangerous.

Firstly, it can blind you to the need to find people who actually want to buy your product or service. Starting a business is not the cure for anything, it’s only worth doing if you can take advantage of an opportunity - perhaps you see a gap in the market or a product no-one else can supply. Secondly, you can overemphasise the supposed freedom of the independent business person. A common misconception is that you will work less hours for more money. It frequently proves the other way. It can be lonely, hard work and requires constant mental, emotional and physical focus to make it work - particularly in the early days.

Write Down Your Reasons

Write down your reasons are for wanting to be your own boss. Then take a careful look at them. How many of your reasons are because you want to move away from where you are now? How many of your reasons are because you see a clear opportunity to move towards?

The best and most successful traders are people who see an opportunity and act on it. The early failures are people who start trading because they don’t like their job any more.

Writing down your reasons for starting will help you keep going when you hit the inevitable rough patch.

What Does Starting A Business Involve?

Research shows that there are three main things you need to have in place to start a business that works:

Mechanics

You need to understand the mechanics of how it all works - tax, national insurance, expenses, VAT, whether to be a partnership, sole trader, limited company or one of the other business structures you can use. This area needs constant attention and you’ll need to create systems, structures and new behaviours to manage it. You may well end up having to pay someone to help you with this. The biggest problem with all the mechanics is that it will cost you time and money while not actually building you a business - it’s just mechanics. Our Planning Your Business Course covers these mechanics in detail.

Marketing

You need to know how you are going to make sales by bringing together your customers and your product or service. This activity enables you to take money from their pockets and put it in yours.

Again, this requires you to learn some new skills, learn to manage sales and get used to asking for money for what you do. It is also the time you spend doing what you love and getting paid for it.

You need to know some things about yourself - have you got the DNA to start, pursue and run a business? It’s very different to working for someone else and needs a different approach. You’ll need to make sure you regularly take a step back from the mechanics and the day to day activity to take a helicopter view of you and where you are going.

See Are You A Driver? below:

These three areas are three balls that you need to keep in the air. Drop one or forget one and you’re soon in trouble.

Above all they require a willingness to actively manage your life from now on, making the move from subservient employee thinking to independent free agent thinking. Do you have the appetite for this?

You Have To Fish Where The Fish Are

If you want to catch fish there are two basic approaches you can take.

The first is to worry about the gear. What equipment do I need? What type of rod? Do I need an umbrella? and then, when you have all the right gear, go and look for fish. For a new business this will result in struggle and probable failure. The most common mistake new start ups make is to worry about their product / service, spend loads of time and energy on it and then set about looking for customers for it.

The second approach to successful fishing is to answer the only question that’s really important - Where are the fish? And then fish where the fish are. The fish will tell you what gear you need and in most cases, if you are fishing where there are lots of fish then you could use almost any gear and you would catch something. The best fishermen are students of the fish. They know all about them. They could talk about them all day. Be a student of your customers. Know all about them (and their fishy habits!) so that you know the best way to catch them.

For a new business this is the route to success. It’s a three stage process:

Find a crowd of customers who want something
Find out exactly, in detail, what they already want
Give them exactly, in detail, what they already want

Instead of looking for customers for your product or service, get close to your customers and set about finding products and services for them.

How To Succeed In Your New Business

Here are some general principles that will increase your chances of success.

Marketing

Start with your customers. If you want to grow you need new customers and if you want new customers you need three things:

A group of possible customers you can identify and reach
A group with a problem they want to solve using your solution
A group with the desire and ability to spend money to solve that problem

Make sure you have the first one. Have you identified a group of customers who you can reach easily? It’s no good waving madly at the market. Unless you can reach groups of customers easily, you might as well be invisible and will have to resort to waving madly at the market to attract attention. This is slow and painful. Just because it is a good idea or an excellent service does not mean that anyone will buy it. Increase your chances by making sure you start with a group that meets the criteria above.

There are no special characteristics that make you a successful business person but it does take a certain attitude and frame of mind. Here are some things you see over and over again in successful people:

They have a clear and specific focus. They know what to aim at and they pursue it.
They measure what they do and adjust. They are willing to take feedback on how they are doing.
They are willing to change their behaviour over and over again until they get the result.
They take full responsibility for their results and can motivate themselves to get on with it.

If Your Life Was A Bus, Who Is Driving?

The surest route to success in a new business is to think like a ‘Driver’. People who think like a driver will tend to make a success of what they do. People who think like a passenger won’t.

Here’s how to think like a driver.

You are a driver if…

You take full responsibility for results
You can control your emotional reaction to to events and circumstances
You’re good at thinking up lots of options and choices when you face a problem
You can face the discomfort of owning up to your own role in creating situations
You don’t let others lead you unless you choose
You don’t blame others for the choices you make
You know that if you are flexible enough, you can get anything
You’re often heard asking yourself “How can I change or improve this?”

Thinking like a passenger, on the other hand, can make it very hard to start a new business:

You’re a passenger if…

You won’t take responsibility for results
You act like a victim of circumstances
You have little self control over your behaviour or reactions to what happens
You invent villains to blame for your results (your history, other people, your family, the start, your genes etc.)
You see life as fate / inevitable
You hope someone will rescue you when things go wrong
You’re often heard asking “Why is this happening to me?”

It’s easier to have a successful new business if you think like a driver.

How Is This Useful?

As you grow your business you are going to run into brick walls; times or circumstances where someone or something appears to be an obstacle. At such times it is very tempting to think like a passenger but the solution is usually to sharpen up your driving. This means taking complete responsibility for where you are now (even if not your fault) and then looking for what to do differently. This is not easy but it works a lot better than whinging. A great question for those challenging situations is “What is my role in creating this?” Once you begin to see how your choices have affected the situation, you’ll begin to see ways to change it.

You’ll Be Wearing Many Hats

Becoming your own boss means getting used to wearing many hats. Here are a few of them.

Marketing Manager - in charge of presenting your business to potential customers and creating the context for the Sales Manager to get the business
Product Development - in charge of keeping you current and fresh so you always have something to offer
Operations Manager - makes the trains run on time and the figures add up. A systems guru who makes sure that customers stay impressed by how slick you are
Client Service Director - the customer champion in your business who makes clients your top, explicit, priority
Sales Manager - sells, sells, sells. Brings money in so that you can eat. Anticipates and plans for future sales
Information/Information Technology Manager - makes sure you can deal with the thousands of pieces of information out there and that you have the tools and systems to make delivering results easy
Strategy Director - looks after time management, planning and anticipating the future. Has to look ahead all the time to see what’s coming and what you need to do

It’s a lot isn’t it? Becoming your own boss makes you CEO and also the accounts receivable clerk. Do you have the appetite to become a seven headed marvel or the willingness to manage others to do them for you?

Getting To Grips With Money

Starting a business requires you to focus on money a lot more clearly than employees ever do. It’s worth remembering that the route to success is to have more money coming in than going out. Although this seems obvious and banal it is astonishing how many people forget this basic approach. Even very big businesses occasionally miss the self evident truth that they must have more money coming in than going out.

Here’s the calculation you’ll live by:

Negotiated prices minus costs equals profit.

You’ll pay tax on the profit and be able to live on what’s left. This means that two things need managing all the time - your prices and your costs. Do you have the appetite to explicitly manage money in this way? Without it you would probably be more comfortable in a job.

Quite soon after trading you will need to register your business with HM Revenue & Customs so that you can deduct your expenses properly. You’ll be paying tax on your profits (not your sales) so you’ll also need to keep accurate records of what you sell and what you spend.

Who Can Help Me?

BDS is your local support centre for people interested in starting a business. We offer a free consultation with an experienced adviser and a Planning Your Business Course.

Inland Revenue Workshops. A search here will take you to the booking details for free workshops run by Revenue and Customs in your area. These workshops cover a number of the mechanics of starting a business from registration to payroll and offer a chance to meet directly with their Business Support Teams. This may be useful research as part of your decision making process.

Our Planning Your Business course is a comprehensive guide to all the mechanics of starting a business and is considerably cheaper than seeing an accountant or solicitor. Book a consultation for more details.

Find a model

Perhaps the most useful source of help though is to find yourself a model, someone who has trodden this path before you. Most people who have made a similar change are only too glad to help someone else who has questions and you will often find them to be generous with their time and attention. Think about who you know who is already doing the kind of thing you want to do - friends, ex colleagues, family, customers, suppliers, other traders you know. Think about what you would like to ask them and then buy them lunch. If you know others in a similar position with similar questions, make it a bigger meeting. You can find out a tremendous amount by asking someone who has done it already and since the alternative is learning by trial and error you may well save a lot of time and money too.

Use A Checklist

We can give you a checklist for starting your business together with a business plan template and help with predicting your income. Book a consultation with one of our Business Advisors.

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