Adventures in micro-business
National surveys show repeatedly that around one in 10 adults would like to be their own boss. But just how easy is it to quit your job and start your own business? Actually, it's very easy. What's difficult is making a new business sustainable, since more than half fail within three years. However, those that fail usually do so because of poor planning. So it follows that it's a really bad idea to quit your job and then start a business. Much better to start your own business first and then quit your job. But this doesn't necessarily mean that you need to start trading. Planning is an essential part of enterprise – the process of running a business – and this is where you should start.
The Army has a motto: "Train hard, fight easy." In business, that translates as: "Plan hard, work easy." A simple, three-step approach to the business planning process helps. Step one is to plan exactly what you are going to sell. Step two is to calculate what it will cost to make the product or to deliver the service. Step three is to do market research in order to ensure that you will be able to sell enough products and/or services in order to cover all of the costs. If your plans forecast that you can make a profit then, quite literally, you are in business. If not, then you need to think of a new plan. People who can do this are called entrepreneurs. People who can't are called employees.
In truth, step one is down to you – it's your business and you can sell what you want. Remember that there are only two things that your business can sell: a product or a service. Think also about how and why people will buy from you. And also consider the place where they will buy (from a shop or via the internet), the price at which they will buy (cut-price or "luxury") and the promotion needed to get them to buy (your marketing plan).
Step two is daunting but, luckily, there are sources of help of which the most obvious is an accountant. All businesses need one. These professional advisers are not just there to fill in tax returns – they can be of most use to you in your planning phase since they will think of things that you will not. If funds don't permit the use of a professional adviser then visit a high street bank to get their business start-up pack. These guides usually include a budget spreadsheet that will help you to forecast costs.
The spreadsheets are also used to illustrate the need for any start-up funds (a bank loan or overdraft) which is why the banks provide them. Make sure that you include in your costs a reasonable salary for yourself as many business owners fool themselves into thinking that their business is viable by drawing too little.
Once you've decided what you will sell and what it will cost you to make those sales then step three is where you calculate what sales you'll need to make in order to generate a profit. This is where many people come unstuck: either by being too optimistic about sales or by failing to charge enough. Objective market research will allow you to estimate what customers are prepared to pay. You can find much of that from adverts in the local press and from competitors' brochures. Measure yourself against these local competitors – how can you make your products or services better than theirs? But don't be afraid of competition as it shows there is a market for what you propose to sell.
Now is also the time to start learning about the formal side of running a business. And the easiest way to do that is to visit the Business Link website ( www.businesslink.gov.uk) and download their "No-nonsense Guide to Government rules and regulations for setting up your business". This national organisation offers impartial advice and access to a wealth of business information and training courses. Business Link will be exhibiting at the One Life Live event in the Be Your Own Boss zone, sponsored by BT (see page 6). The Business Link website also explains how to get help from one of their offices local to you. Make your local Business Link adviser your new best friend.
Only when you have satisfied yourself about the financial viability of your business idea should you consider dipping your toe in the water. Try testing out your idea in the evenings or at weekends. Look to make initial sales to friends and family. In this early phase get as much feedback from customers as possible. And always listen to customers and be prepared to refine your offering. Running through these steps will help take the risk out of your business idea and create a new job for you. And that's the time to quit your current job.
Russell Smith is speaking at the One Life Live event (see page 6). His column appears in The Independent's 'Business Monthly' supplement, published on the first Tuesday of the month. Business Boffins delivers support programmes to small businesses nationwide. Independent readers can enrol on the Oxford Brookes University-accredited programme at a discounted rate. See www.business boffins.com/independent
Buy into an idea
Want to branch out? Purchase a franchise
You don't have to come up with a new business idea to run your own business. Franchise businesses offer access to a proven business model and the purchased package usually includes training and ongoing support; an ideal compromise between the uncertainty of a new business venture and the dead end of employment. The British Franchise Association website ( www.businessfranchise.com) is a good place to start. You can search their online directory by location, business sector or by how much initial investment is required to acquire a franchise.
The franchise model is an increasingly popular method of developing a business and long gone are the days of franchise businesses being boring! For example, Reading-based MAD Academy was launched in 2004 and offers music and dance classes for pre-school children. Their website ( www.madacademy.com) is a classic example of how to engage with potential franchisees.
It lists the key messages that any would-be franchisee should look for: "a strong brand; complete package of proven class and business materials; full range of professionally developed marketing tools; on-going training and full support available every day."
MAD Academy is suited to people with a passion for music and a willingness to engage with youngsters; a similar franchise opportunity is "Stitchclub" ( www.stitchclub.co.uk) which offers sewing skills for boys and girls. Launched in 2007, Stitchclub franchises provide great flexibility since franchisees are only required to run classes for a minimum of two afternoons and/or a Saturday morning.
That franchise businesses do not need to be a full-time commitment is a key reason for their increasing popularity. At the other end of the franchise spectrum, Coffee Republic offers franchise opportunities for those interested in a more traditional model (www.coffeerepublic. co.uk). With three levels of potential franchise engagement (Espresso Bar, Coffee Republic Deli and Deli Chain of six outlets) the company offers options that suit a range of more significant investment levels.
There's no doubt that a franchise can be an effective way into business. But do your homework before purchasing a franchise. Make sure that you understand fully any ongoing costs that a franchise will incur post-purchase. Be clear about whether you have to purchase supplies only from the franchise company. Look at a range of franchise opportunities before taking the plunge. Good franchise companies will always encourage potential franchisees to speak with established franchisees – something that you should always take up. RS
To find out more about franchising, visit the Be Your Own Boss zone sponsored by BT at One Life LiveReuse content