11 Tips For Becoming Self-Employed
Here are some things that have driven me along my journey to self-employment…
1. Have nothing to lose
William the Conqueror, the only military commander to invade England in 1000 years, had his men burn their ships after they landed. When you have nothing to lose, and you make it do or die – you will find a way. I put myself in situations where I had no choice by having my life savings invested, living in third world countries or places I didn’t speak the language, and being on a self employed visa. Given a year or two, this mindset takes over.
Having nothing to lose also enables you to cut losses and move on quickly. I’ve shutdown companies with employees, scraped projects overnight, literally told business partners to get fucked and walked out, liquidated stock or plain dumped the business cold, just to move onto something new. Many small businesses get stuck in a rut and go nowhere, which is like a day job with twice the responsibility. Being prepared to liquidated at any moment, puts you in constant free fall, like a rocket in orbit.
2. Be comfortable, be humble
A great way to create the nothing to lose attitude is by getting your basic living costs tightly under control and having the cash to cover a year or two of food and rent. It’s a lot easier to have the nothing to lose attitude if you aren’t staring down bankruptcy and skid row every morning. Many businesses fail because they take on too much or go too fast. Acting like you have nothing to lose is very different to pushing yourself over the edge. Being self employed means taking responsibility and separating personal and business affairs yourself.
3. Enthusiasm, confidence and adventure
Someone working a day job just for money tends to live in a comfort zone - for their free time. They live to be idle or for their hobbies. If you are already working, this dreamy existence is an opium addiction you must break. You must challenge your comfort zone on an almost daily basis. You will have to live much more in the moment and be adaptable. You’ll have to enjoy all of what you do, even if it’s dealing with some aggressive client or sitting on hold to fedex to find a lost package. The days of time wasting in some day job are over.
When you read about Richard Branson, freezing his ass off at midnight, feeding coins into a payphone in a Swiss ski resort, phoning a bank in Canada to desperately refinance the $25 million he needed to sign Janet Jackson, then you get more of the picture of what being self employed is all about. With the worldwide comms. we have today, you have no excuse. If you love beer that much then go make a business out of it. Anything is possible and everyone has an edge and experience in something.
4. Don’t rely on anyone
Be nice to people, foster connections and associations, take on a partner if necessary but never lose time. Just like a girl that flakes on you, there is no one worth doing business with if they make you lose time.
5. Eyes on the road
Do your own accounts and keep a tight finger on the purse strings. Rupert Murdoch is famous for phoning up his managers at all hours of the day or night to request operating figures. Rockefeller kept a pocket book down to the last cent he spent. At the end of the day you can pipe dream and say you are not in it for the money, but in most businesses, money is the benchmark of success. It is also the gauge of how much gas you have in the tank. I always know rough balances for everything, right down to the cash in my pocket. It’s a useful mindset that enables you to take split second decisions.
6. Cash flow and credit
Google was started by maxing out a credit card. Credit card debt is a bane for those with day jobs, but it’s the lifeline of many small businesses. You can bounce balances for interest free periods, pay out balances and request limit increases. If you need cash flow 15-20% interest can seem very cheap. I’ve run up $250k in credit card debt, nearly gone bankrupt from it, but I paid it out – interest and all – because it was my lifeline.
Borrowing money, finding investors, even floating the stock in an IPO is all very important to keep a company liquid. At the same time, paying bills as late as possible, selling product before you own it, taking deposits upfront and being on top of tax rebates can keep you liquid. I don’t think I have ever paid my rent on time. A month late is standard until the landlord starts sending eviction notices, and sometimes those can be a convenient way to break a lease.
A capital purchase of real tangible hardware that you can resell should never be an issue. If you need that piece of equipment, buy it. Sites like Ebay make it easier than ever to resell things and although you might take a loss on fees, shipping and used value, you can estimate that before you make the purchase. The nothing-to-lose attitude comes from being comfortable, not from being flagrantly negligent or utterly foolish.
I’ve bought $50k of hardware knowing that if it didn’t work out, at least I could ditch it for $30-40k, meaning my purchase is not outright dead money. I have nothing to lose and everything to gain, provided I can afford the hit if things don’t work out.
Buying used can be good, but remember the disruption, stress and hassle of faulty gear can be far more costly than having new gear with warranty and support. I have learned the hard way that I am not rich enough to buy cheap junk. Major brand names are there for a reason and in many cases professionals use software and hardware you might not have heard of, so do your research well and spare no expense, especially if the resale value is high. The bitterness of poor quality is felt long after the sting of high price, especially in business. Think military. Go into battle with the best you can buy, not what you think you can afford.
8. Separate ‘tech’ from ‘sales’ and ‘managerial’ from ‘entrepreneurial’
Many small businesses from restaurants to online publishing fail because the owner is too passionate about his product and ‘enjoys’ what he does too much – meaning he doesn’t put the hard yards into sales. Sales is a high pressure and stressful business. Much like cold approach pickup, there is constant rejection and exposure to negative opinion, but if you want to work for yourself, in almost all business, you will have to plug away at sales and build exposure. This means being nice to people, learning how to get what you want when you want it, being positive, energized and interesting (i.e., game). You also have to learn to cut the time wasters and flakes.
An excellent book called The E-Myth by Michael E. Gerber lays out the structure companies like McDonald’s use to run their businesses. The self employed guy goes bankrupt because he loves what he does but is hopeless at sales. At the same time he has great ideas as an entrepreneur but runs into a wall of laborious managerial responsibility.
9. Time off and benefits
They say you don’t have a business unless you can take a couple of weeks off. Laziness has been my best friend in self-employment. Hiring people to do jobs I don’t feel like doing is very important in every area aside from sales. Munitions workers in WW2 made less bullets on seven-day shifts than on six. If you don’t take a break from time to time and treat yourself right, you will be working on about 50% efficiency. The only way to be able to take time off and still have a business, is by hiring people to do the daily grind for you. Many people see business owners as free wheeling types and this is true, but the business is never far from their mind – even on vacation. Some of the best business I do is at the bar or on the beach. As it grows, a business owner has to be hands free from the grind.
10. Start with the right practices and structure
It’s hard to do this at the beginning, because there are so many facets to a new business, but you must have a good structure in all aspects, especially if you involve other people. The command structure is paramount, as is the incentive structure for both yourself and any staff. If you do involve partners, don’t give them too much control and be clear about who is the decision maker. Obviously others need to exercise freewill, but frankly 50-50 business partnerships can be crippling as neither of you can make a decision without the other to baby sit. This was one of my biggest youthful mistakes. Much of the success of Silicon Valley companies is they start out with a clearly defined command structure.
11. Be realistic
Most business fail because they do too much too fast and are spread too thin. Take time, set easily attainable goals and congratulate yourself as you go, even if the success would be laughable to more accomplished people.
Guys that have never cold approached girls before can’t expect to go home with a 9 the first night out. Just asking her for directions and saying good night with a smile might be a great result. More importantly it’s a realistic result that leads to a longer conversation next time. Google was a private company less than 10 years ago. When you take baby steps and keep compounding those, it’s amazing how far you can go. A successful step today might be a $100 incorporation and opening a bank account, but in 10 years time that step could be a $10 billion IPO.
In engineering, failure is a function of putting a material or structure under too much pressure. On the other hand, leaving something sitting is guaranteed to cause decay. This is your life we are talking about. Self employment is not for everyone, but if you want it, then go do it.
As a final note, I’ll just say that I have noticed dozens and dozens of business ideas I’ve had in the past 20 years, coming to life all around me. From a friend’s rock band that was a couple of years ahead of Oasis, but never made it because they quit, to better designed office furniture, computer animations, cheap quality sunglasses, more variety of soft drinks, the list is endless. People think in more or less the same way, and the younger generation knows the way forwards – you just have to have the balls to be the one on the frontier. I was trying to learn about computer animation when a 386 running MS Dos cost $5000. The way forward is always dark until someone lights it up. It might just as well have been Ray Wolf instead of Pixar.
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