Will my own business work ? Testing self employment ideas

As you've seen, being your own boss has a few skills involved. A business has to be able to find its market and be sure of sales to be successful. There are ways of doing this which are cheap and cost effective. For people who know their business, it's pretty straightforward in theory, but you need to cover all the angles.

The IT guy in Part One had everything going for him, knew where to find his market, and was exactly what his market wanted. He didn't have to do much, if any, marketing, and had his costs down to pretty much his living expenses.

That's rare in business.

Most businesses fail because they don't plan, don't look ahead, and think business will somehow take care of itself.

That just does not happen.

Any business can be expected to be 24/7/365.

Either sales or costs will sink them, sooner or later, because they simply did not know what they were getting into, when they started.

You must plan for the following:

  • Business structure
  • Marketing plan
  • Financial plan
  • Business plan
  • Operations plan

Sales and marketing are critically important.

They're the main drivers of your business. This is the really deadly part of being your own boss, and you have to start thinking like a boss.

Before you even pick up the phone, you have to be absolutely sure of market viability, and have a trustworthy idea of projected revenue.

Don't guess.

Imaginary revenue isn't much help when you need real money. Your bank and creditors won't be too impressed. Doesn't pay your bills, either.

Sales are where the money comes from, and you need to be very clear on what's realistic and what's not, in terms of sales for your business.

To find a market you need to conduct market research.

There are quite a few ways of doing this.

Primary research is research where you actively go and get your own market information, either personally or using a market research agency. This is raw data, and you specifically go looking for the particular information you need.

The information required is very much like part one, but you tailor it to specifics:

Who's your market? literally means who wants your products/services.

Say you're opening a pet shop. You've been in the industry for a while, retail and wholesale, and you've done a lot of time in customer service.

You need to know:

  • How many people in the area own pets?
  • What sort of pets?
  • What services do they want for their pets?
  • Are there any other pet shops in the area?
  • What do they provide?
  • Are they profitable?
  • What are their prices?
  • What don't they provide, that people want?

Local surveys can be done by several different methods:

In shopping malls, asking people questions,
Using focus groups commissioned by a market research agency, (this is how franchises operate)
Door to door canvassing in the target area

Note: If you're selling to businesses, you can conduct your own survey pretty easily, asking the same questions, directly to the businesses. They're easier to find than consumers, and have definite opinions on what they need for their business.

You can also get a pretty good idea of how well they're doing, which tells you how your line of product is likely to go in the area.

IMPORTANT: Remember: You're using up people's time while you're getting this information. Always ask permission and be courteous when conducting a survey, thank them for their time and input.

When you've got your figures for your pet shop, you discover that:

  • How many people in the area own pets?

Everyone in the area has pets, and it's a big potential clientele, because lots of people live in the area.

  • What sort of pets?

Pets are quite diverse: Dogs and cats, mainly, but lots of rabbits, birds, goldfish, white rats, hamsters, ferrets, and horses.

  • What services do they want for their pets?

Just about all of them. They want pet food of a better quality than the supermarket, and specialist food for the more exotic pets.

  • Are there any other pet shops in the area?
  • What do they provide?
  • Are they profitable?
  • What are their prices?
  • What don't they provide, that people want?

Only one other pet shop, and it seems to be the problem for the pet owners.

It stocks basic goods, but nothing particularly useful for horses, ferrets, and birds. The owners have to go miles away to get feed and even basic horse blankets and riding fittings. Owners of the more exotic animals just have to put up with the lack of things they want, and try to get them elsewhere. Dogs and cats get a choice of three different kinds of food, all dry biscuits.

The pet shop has a virtual monopoly, and they're not looking exactly hot.

The shop is fairly shabby, the goods on sale are very ordinary, and the consumers are right when they say the shop isn't giving them a very good service. Most of what they said they wanted isn't there. Even the kittens in the window are now nearly half grown.

Apparently the shop has only survived because of the lack of modern competition. The business doesn't advertise, and being the only shop in the area seems to have made the owner lazy.

That isn't helping, because he's turned off his customers. Sales are obviously low, because not much stock seems to be moving on the shelves. The place is smelly, sort of a sour smell, and not too well maintained.

He seems to be selling at a healthy profit for himself, too. The stock is expensive, overpriced by any standards. You know that because you've been in the industry, and know the current wholesale rates as well as your own phone number. The guy's doing a minimum 50% markup, which is probably taking some of the sting out of low sales volumes, but he still doesn't look anything like profitable.

Your other competition is the local supermarket, which sells some very average pet food, canned, mainly, some bird seed, and not much else but kitty litter and bowls. It's a semi-competitive competitor, not a specialist.

The consumers don't seem to like what they buy, either, because you have definite indications they're sick of the low quality stuff. It stinks, it's messy, and they really have learned to loathe it.

They'll buy it because they have to, but they don't have to like it.

Everybody in business has competitors, and they affect you directly, whatever line of work you're in. Competition splits the market, and it also splits sales, meaning it splits revenue.

So- what have you got from this market research?

  • You know you've got a good potential market for your pet shop.
  • You know your competition's weaknesses.
  • You've got an idea of what good prices would be for your customers.
  • You know the services your customers would want. (Which is more than your competitor seems to know, or can be bothered to find out.)

Yep, it'll work.

Well, it should.

It'll be a big commitment of time and money.

What are the risks?

Business Expenses- preliminary estimates.

This is the other form of market research you need to be able to do well, being your own boss, before starting any sort of business.

Costs are the threat, always. Bills don't take holidays. You've researched where the money's supposed to be coming from, now you have to research were it will definitely be going, whether you sell a dog collar or not.

Retail was chosen for the example because retail is really tough, in terms of expenses. You're either selling well ahead of your costs, or you're not in the game.

Retail, for opening a pet shop, involves:

  • Shop rental
  • Electricity
  • Phone and Internet connection
  • Refrigeration of foods
  • Air conditioning for pets' health (You weren't wrong about the smell in the shop. Sour smells, from animals or humans, mean sick animals.)
  • All the needs of the different animals
  • Storage of feed (Which has to be safe, because spoiled food is toxic.)
  • Shelf space
  • Employees wages
  • Security
  • All your own private costs

To find this out, you need to check:

Shop rental: Local real estate agents, business owners. Commercial leases aren't like residential leases. You need to know costs and conditions of the lease.
Electricity Shops eat electricity. You need to know what your costs are likely to be.
Phone and Internet connection These are deals you might be able to work out pretty easily. They cost money, though.
Animal care Equipment, food and stalls for the animals have to be costed.
Shelf space What can you put on your shelves, how much is it worth?
Security Never cheap.
Employee wages Major outlay, lots of paperwork. Has to be worth the cost.

All of this is for what is actually a fairly simple business, compared to some.

If you've figured out that this sort of thing is only for people who know what they're doing, you're dead right.

Never get into a business venture where you don't have a good working knowledge of the business.

This is strictly for people who know their stuff.

The pet shop will work, provided it's run by somebody who knows how to handle the business.

If you know how to:

  1. Get good prices for your stock,
  2. Know how to handle the management and administration,
  3. How to handle costs so you can make money in your business and pay your bills,

You've got the basics right.

You can be your own boss, so far.