Making the shift to self-employment or freelancing
Starting a business is a significant decision with a steep learning curve and a path paved with rewarding moments and hurdles. Looking back, I wish I could have kick-started my journey with the insights and knowledge I hold today.
Today, a wealth of guidance is available through books, podcasts, and articles, which, while immensely helpful, can sometimes overwhelm those new to the industry.
Over the years, I've had the privilege of working closely with many clients and peers and immersing myself in extensive research and reflection on business dynamics. In this article, I share some of my ideas and practical suggestions that may help you on your entrepreneurial journey.
The Initial Phase: Crafting Your Value Proposition
In the initial stages, I found myself without a clear product or service to offer—a valuable proposition that customers would be willing to pay for. And create value by delivering solutions that meet their needs. For a business to thrive, it must identify valuable solutions, determine how to sell them and provide them effectively to customers.
If you have expertise in a specific field, you likely have insights into the problems you can address. Even those still in employment might harbour potential business ideas they can manage with their expertise. However, without a clear plan, as was my case, initially, generating revenue becomes a challenge many budding entrepreneurs find themselves in.
Gleaning Insights from "The Right It" by Alberto Savoia
Before venturing into the business world, I wish I had found Alberto Savoia's enlightening book "The Right It". Savoia underscores that most new products falter in the market, often due to a flawed premise, despite being well-executed.
He advocates for identifying the "Right It" - a product that resonates with market demands. Savoia proposes validating ideas through market engagement hypotheses and pretotypes before full-scale development, emphasising the necessity of personal data collection over-relying on outdated information from other sources. If you are serious about business, this is the most important and practical book you could read.
Expert Advice: Aligning Your Business with Your Passion and Purpose
Mark Elliott FRSA, the Startup School for Seniors co-founder, accentuates the importance of aligning your business aspirations with your desires and motivations. He encourages entrepreneurs to carve out their definitions of success, steering clear of imitating others. Coaching emerges as a potent tool in this journey, aiding in discovering one's true passions and purpose.
Financial Planning: Navigating the Complex Landscape of Pricing and Outsourcing
Starting a business venture demands financial planning. Elliott suggests it is important to understand your current spending habits before setting a budget. This insight aids in realistically assessing your minimum income needs and anticipated business expenses.
In the freelance and entrepreneurial world, setting an appropriate rate remains a significant concern, with underpricing being rampant. There is a taboo surrounding open discussions about financial remuneration, making this problem worse, especially among women entrepreneurs.
The Five-Line Model: A Blueprint for Business Success
Entrepreneurship is dynamic, and it's easy to get lost in the many responsibilities, distractions and tasks. The Five-Line Model can guide you through the complexities of business operations. This model organises the essential elements of a business into a coherent structure, helping to unify diverse ideas and strategies.
Understanding the Five Lines
Revenue: This is the lifeblood of your business. It represents the total income generated from the sale of goods or services. A clear strategy to maximise revenue is crucial, which might involve setting competitive prices for your services based on prevailing industry rates.
Cost of Goods Sold (COGS): This line item represents the direct costs of producing your business's goods or services. Keeping an eye on COGS helps in maintaining a healthy profit margin.
Cost of Selling: This encompasses all the expenses incurred in selling your products or services, including marketing and advertising costs. Effective strategies in this line can enhance your business's visibility and customer reach.
Cost of Running the Business: This line includes daily operational costs. It's vital to manage these costs effectively to ensure the smooth functioning of your business.
Profit: The ultimate goal of any business is to make a profit. This line represents the financial gain obtained when the revenue from business operations exceeds the total costs incurred. A healthy profit margin allows for business expansion and innovation.
Applying the Five-Line Model
To effectively utilise this model, sketch the five lines out on some paper and play around by adding some numerical values to each line based on your business's current status and future projections. This exercise will help you visualise the financial health of your business and identify areas that require attention.
First, you will need to do a few calculations to see what revenue your business can generate and how much it may cost to make or buy your product or service (COGS).
Then work out what marketing and selling costs might be (COS), and then watch your admin costs (CORB)
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Moreover, the Five-Line Model can assist in creating effective pricing strategies by reflecting the actual costs that must covered to stay profitable. Remember, a higher pricing strategy affirms your quality and expertise and opens doors to exploring innovative avenues in your business.
Outsourcing to other freelancers
Consider outsourcing tasks outside your expertise and leveraging technology for automation. These strategies allow you to focus your resources on goal-oriented initiatives that propel your business forward. Outsourcing can take the load off your mind, allowing you to concentrate on what you do best. I do it when I get stuck and want to get things moving. Sure, it costs money, but it allows you to do much more with your time.
The Importance of Self-Care and Networking in Business
Maintaining your well-being will be important when starting a business because, for first-timers, it can be a roller coaster ride, both emotionally and physically. Focusing on diet, exercise, sleep, and staying in touch with your feelings will help prevent burnout and maintain mental clarity. Recognising when you are at your peak productivity during the day can help you make better-informed decisions and help with your progress. I'm a morning person, and others perform better later in the day.
A few years ago, I was burnt out and losing interest in my business, so I decided to step back and get part-time work in a liquor store. It was a good idea, as I enjoyed a fine wine. I could continue in my business, get fresh perspectives outside of it and make new friends. This break rejuvenated my energy, leading to a renewed enthusiasm for my business and the Wisepreneurs Podcast, deeper reading and writing about topics that interest me.
Crafting a Winning Strategy with Insights from Alex Smith
Business is dynamic. Crafting a straightforward, focused and actionable strategy is essential. Alex M H Smith, the mind behind "No Bullshit Strategy," emphasises that a business strategy should reflect the company's actions and operations.
He states, It's a statement of what the business actually does, and therefore has to be reflected in the actions the business takes.
Furthermore, Smith encourages businesses to focus on establishing a unique niche in the market, a space where they can offer value that stands unrivalled, something that competitors cannot mimic. I cannot agree more; he has a practical and enjoyable framework to do this in his book.
Differentiating Your Value Proposition
Smith delves deeply into the intricacies of crafting a unique value proposition. It's about transcending customer satisfaction and fostering a business that genuinely resonates with people. Remember this fundamental insight as a guiding principle for your business: "Your strategy is the value you give to your customers."
Utilise a Structured Framework
Adopting a structured framework like the five-line model can help organise and unify various business ideas, providing a coherent approach to successfully understanding and operating a business.
Product Validation is Crucial
Before fully developing a product or service, validate its market demand using pretotypes to avoid market failure due to the wrong premise—Utilise fresh, self-collected data to test your market engagement hypotheses.
Personalised Business Strategy
Before venturing into a business, consider your lifestyle desires and motivations. Define your version of success and align your business goals with your passions and purposes, avoiding mere imitation of others' success paths.
Financial Prudence and Efficient Outsourcing
Maintain a realistic budget by tracking current spending and understanding the minimum income needs and expected business costs. You can efficiently outsource tasks that are not your strengths and focus on goal-oriented strategies.
Do not neglect self-care while immersing yourself in the business. Maintaining a balanced lifestyle focusing on diet, exercise, and sleep prevents burnout and fosters mental clarity, essential for making informed business decisions.
- Mark Elliott FRSA, Wisepreneurs Podcast https://wisepreneurs.com.au/mark-elliot-business-coach/
- Alberto Savoia, The Right It, Why So Many Ideas Fail and How to Make Sure Yours Succeed
- Alex M H Smith No Bullshit Strategy: A Founder's Guide to Gaining Competitive Advantage with a Strategy That Actually Works