Many people would like to
try self-employment but fear taking the risk. Or they don't
know where to begin. Here are some tips to get you started
and minimize the risk.
Successful self-employment is all about controlling
risk. How do you do that?
Keep it simple: Offer one simple
product or service that requires low investment and offers high
profit margin, and, ideally, that doesn't require partners.
Go for big profit: If you're going
to sell a product, it must have a very high profit margin.
Unless you're a Wal-Mart, it's hard
to make money on a 100-percent gross-margin item. I'm talking
1000-plus percent. What sort of product has 1000-plus percent
markup? Have you had a $3 latte at Starbucks? It costs the
company about 25 cents. My wife just spent $17.50 for an Estee
Lauder lipstick. What does it cost to manufacture? Twenty-five
cents -- it's just colored wax. Ever paid $75 for a pair of
eyeglass frames? It costs under $1 to produce. Think about
it: How much could a simple piece of plastic cost? You must
think that way: What should this cost to manufacture?
Work at home: Especially
avoid having a store: the costs of rent, utilities and theft
usually will break you.
Don't spend on image: A
nice office, let alone an expensive address, fancy furniture
or the latest and greatest computer is rarely worth the money.
Image also substitutes sizzle for steak.
Spend time, not money, on marketing.
- Cross-promote. A personal coach cross-promoted
with a weight-loss clinic. Each offered discount certificates
for the other's business.
- Teach a seminar at an adult school, library,
service club such as Kiwanis or university extension. For
example, if you're a retirement coach, teach a seminar called,
"7 Things Everyone Must Know About Retirement That
Most People Don't Know." At the seminar, distribute
a useful handout that includes your contact information
at the end.
- Phone potential customers. Especially make
follow-up calls to your existing customers to ask, "How
are you doing?" Often, without even asking for more
business, they'll give it to you.
Forget about being on the leading edge:
often, the leading edge turns out to be the bleeding edge.
Let someone else be the guinea pig. You copy an already-proven
successful business in a slightly different geographic location.
If a burrito truck is successful in North Berkeley, it's relatively
safe to create a facsimile of it in South Berkeley, less safe
to do it in New York.
Here are three self-employment opportunities
that meet the above criteria:
- Espresso or soup from a cart next to or in
a train station, hospital, stadium, supermarket, movie theater,
office high-rise or other high foot-traffic area. This business
requires minimal rent, offers high profit margin, is a simple
business and isn't a fad. Coffee and soup aren't going out
- Dull-normal businesses: Sell sandblasting,
broker used truck parts, maintain mobile home parks, whatever.
Few college students graduate aspiring to run dull-normal
businesses, so the competition is weak and therefore the
profit margin, if you do a good job, is high. You say, "But
I don't have any passion for dull-normal businesses."
Most owners of such businesses didn't either, but their
success in these easy-to-succeed-in businesses got many
of them passionate quickly.
- Computer tutoring. Millions of people still
need help in using computers. My favorite market: senior
citizens. They have time, money, are often computer-resistant,
yet would love to e-mail their kids and grandkids. Plus,
using a computer makes them feel young and hip. You do the
marketing, hire the tutors and make a piece of the action
on each tutor.
Avoid partners. Most of my female clients
refuse to go into business without a partner. They say things
like, "I draw energy from other people." Alas, the
battlefield of businesses gone bad is littered with partnerships.
Even if you don't kill each other, your business has to make
twice as much money. Need company? Hire a consultant or low-cost
Don't get expertise. Don't buy expertise.
Rent expertise. To become experts, many people go to school
for years, yet you can buy their time for just $20 to $40
an hour. Better you be the entrepreneur and rent the expertise,
whether it be an engineer, a graphic designer, whatever, on
a just-in-time basis.
Know when to quit. Many motivational
speakers extol the virtue of persistence. They don't tell
you that for every person who succeeded by persisting, dozens
failed. The art is in knowing when to persist and when to
give up. Rule of thumb: Your risk increases with every reasonable
person who tells you to stop.
All the business plan
1. What's the product or service?
2. How is it better than the competition?
3. Who is your target customer?
4. How will your product or service be delivered? (Internet,
come to their house, your home, storefront?)
5. How much of your product or service at what price would
you need to sell to make a decent living?
6. How will you market your business?
7. How will you finance it?
If you follow this column's
advice, you'll greatly boost your chances of being successfully