You may dream of quitting the cubicle, but are you really ready to start your own business?
Many people dream of forging out on their own, taking control of their careers and finances and never again working for “the man”. Maybe you’ve always had a dream to start your own business?
The sad truth, though, is that many small businesses fail in their first five years of operation.
Knowing When to Make the Leap
Like any major life commitment, there’s no such thing as that “perfect” right moment. At a certain point, you take a leap of faith and commit to figuring things out as you go.
However, that doesn’t mean you should boldly jump into something without preparation or consideration. Work your way through the following questions – the accompanying articles will equip you with information that will put you at an advantage!
1. Do You Have a Business Plan?
If you’ve been freelancing on the side, you probably have very realistic ideas about:
- How much money you can make
- Your production capacity, and
- The other work (invoicing, accounting, time management) that goes into running a small business
But there’s a difference between running a side hustle – where everything you earn is gravy to your main income – and relying on your own income.
Having a business plan will help you set realistic goals and get a grasp of the cash you need to operate for the first year. It will also force you to think through how many clients you need and how you’ll attract business.
Being good at what you do is a given, but don’t confuse talent with automatic success. Take the time to write it all down before you take the leap.
2. Have You Established Your Market?
“If you build it, they will come”. It worked in Field of Dreams… Sadly, however, it’s not the case for most products and services on the market today.
You may have figured out a new twist on the creative agency model, or an innovative new approach to content marketing. But if it doesn’t resonate directly with a market – if it doesn’t speak directly to their needs and pain points – you’re unlikely to get traction.
If you have a side hustle, maybe you already have a few clients and you’ve had time to prove your concept a little. That’s great! But still be cautious about overestimating how easy it will be to secure additional clients.
One practice that will really help you establish your market is to develop a buyer persona. Book some informational meetings with people in your target market (start where it’s easy: friends of friends). Start to develop an objective understanding of what your market looks like, how they articulate their needs and even what would resonate with them.
3. How Will You Manage Billing?
This is usually an afterthought for most small business owners. But one of the major reasons so many small businesses fail is that they struggle with this aspect of running a business.
So spend some time thinking about how you’ll manage the paperwork that powers your business. Look for a solution that’s:
- Easy to use and accessible
- Mobile-friendly, so you can do things on the go
- Allows for as much automation as possible
- Generates reports and dashboards that help you know where your business stands at all times
If you’re thinking Word and Excel are the tools for you, think again! That’s like lugging around cassette tapes for your music. In this day and age, there are better options on the cloud.
4. How Will You Report Financials and Manage Tax Time?
Beyond day-to-day invoicing and expense management, you’ll also want big-picture visibility into how your business is performing.
It’s easy to see every invoice paid as automatic income, but if you don’t track the cash flowing in and out of your business, you risk sailing into stormy seas. Plus, if you’re not tracking what’s happening in your business, you can’t expect to manage or change it.
Think of it like healthy eating: Any time you want to lose a few pounds, it’s a good idea to keep a food diary for a few days. That helps you identify where there might be “empty calories” you can eliminate. It’s just the same with tracking your small business finances.
Having those reports and knowing where you stand will make tax time a LOT less daunting. It won’t be a black hole. You’ll be in control and you’ll know what you owe.
Psst: You know where we’re going… Yes, FreshBooks tracks all of this for you too!
5. How Will You Market Yourself?
We talked about building personas to establish who your market is and what their needs and pain points are. But how will they find you? This is marketing.
There are lots of options here:
- Build a website or portfolio site (and make it Google’s best friend with great SEO)
- Start a blog
- Maintain social media channels
- Build an email list
- Build a referral program
- Spend money on advertising
These are all good options. Our advice? Don’t think of marketing as a one-and-done. You need to commit to ongoing management of your marketing channels.
So, think clearly about what channels are the right ones for you, which ones you can actually maintain and build a following on:
- You might personally love Instagram, but your market might be on LinkedIn instead
- Somebody might tell you blogging is how they get all their new business, but if you’re not really a writer, it may not be for you
6. What Rate Will You Charge?
Many small business owners undersell themselves. In the creative field, it’s not unusual to even be asked to work for free in exchange for “exposure”.
Getting super crisp on your rates will set you up for success. Don’t wait for that moment when a client asks “what will this cost?” and you start plucking numbers out of the air.
Do some research and establish a clear rate card for your services. You can always – at your own discretion – offer discounts or incentives for volume or recurring work. The key here is to not be passive. You don’t want your clients telling you what they want to pay.
In your first year, you might decide to offer a rate that’s lower than a more established competitor. This might help you establish yourself and build up your portfolio of clients and work.
Remember: Rates can be changed. Once you have established yourself, regularly review your rates. Don’t be coy about increasing your rates once you’ve established the value you provide.
7. How Much Working Capital Have You Saved?
Working capital are the funds that you fall back on when your business goes through a seasonal lull, when clients are late paying invoices, or even (more exciting) when you need to spend money to grow your business.
An example of that might be when an exciting job comes along, but you need new equipment, or to take on a contractor to help. Working capital will help you fund those scenarios.
Ideally, you would have 3-6 months of operating expenses in your reserve before you start your business.
8. How Good Are You at Managing Your Own Time?
If you’re in traditional employment, your days are very structured: 9-to-5, lunch and break times, established rituals and meetings.
Left to your own devices, you’ll suddenly have to do all of that for yourself. Many thrive with this freedom: They’re even more productive working for themselves, fuelled by increased passion and focus.
But for others, it can mean things start to feel a little loosey-goosey:
- They can spend too much time noodling over one aspect of a project that’s not actually the most profitable use of time
- They can be so overwhelmed by the options about what to do next (administration, actual work, marketing, billing) that nothing gets completed on time
One way to ensure you manage your time is to track it, so you know exactly how productive you’re being and can find any deficiencies.
9. How Will You Find Your Tribe?
This is another big change from traditional employment. If you work in an office, you’re surrounded by people sharing the same experience as you. You may not like all of them, but the work bonds you.
When you go out on your own, loneliness can strike. So think now about how you’ll connect with others. Clients, of course, are great for this. But you also want to find a community of people who do similar work (yes, you might even befriend some of your competitors!)
As you go through this journey of running your own business, you’ll want to lean on others who are in the same boat, experiencing the same challenges as you are. You’ll also want to share your triumphs with people who really “get it”.
Social media is great. But get out into the real world too. Have a regular coffee date with somebody in your space, find a mentor or even become a mentor! Your success depends on it.