Unemployed and Looking for Work?
For many people, self-employment might be an option
Many people dream of being self-employed or starting a business. With U.S. unemployment numbers reaching higher than during the Great Depression as a result of COVID-19, people with an entrepreneurial spirit are looking to strike out on their own, and governments and community organizations are supporting such endeavors.
Starting a business may be a good option, especially if you were previously employed in tourism, arts and entertainment, child care or even nursing. According to the Bureau of Labor Statistics, these are the industries that will see the slowest recovery. BLS reported that about 37,000 nursing jobs evaporated in May, when non-COVID-19 procedures fell off and struggling hospitals cut their budgets. In addition, companies across most sectors are cutting back, meaning many other jobs will just not be coming back any time soon.
As a nation, we are nothing if not resilient. Though not easy, starting a business can bring a variety of rewards. The following information will outline how to professionally set up your own business. But there is one critical self-assessment question to answer first:
Do You Really Want to Be an Entrepreneur?
Starting a new business involves risk, investing money, time and energy for the potential rewards of ownership, income and work satisfaction. In addition to the opportunity to create greater wealth, a business owner can make their own rules, help their community and do enjoyable work.
That same business owner, however, must be able to overcome unexpected obstacles, be prepared to work beyond a regular set schedule, and face the possibility of business failure and loss of the time and money put into the business.
There are businesses you can slide into with less effort and risk, such as consulting. This requires marketing your existing skills to a network of clients. I have worked for decades in this arena. But if you have loftier goals, want to make big money and build an empire, prepare to invest every day and most of your waking thoughts to building your business, at least in the critical early years.
The Hard Truth
“By failing to prepare, you are preparing to fail.” – Benjamin Franklin.
A fifth of new businesses that start in Minnesota don’t make it a year. Half won’t be around after five years.
The reason most businesses fail usually fall into three categories:
+ A lack of business knowledge and experience
+ A lack of thorough preparation
+ A lack of capital
Fortunately, all of these can be overcome with proper planning. We’ll walk through the steps of starting a business, then end with some great resources.
The key qualities of a successful entrepreneur (according to Inc.com) include:
+ Ambition and self-confidence (do you believe you can do this?)
+ Willingness to take a leap of faith (this includes comfort with a fair amount of risk!)
+ Ability to learn from mistakes (everyone makes ‘em, it’s how you apply the lessons learned from the mistakes)
+ Trust in and respect for the team (dictatorships rarely work out well)
You can arrive at your business idea in various ways. Some great business ideas have come out of nowhere. Perhaps in your previous work you have identified a gap in a product or service and can use your skillset to make it better or cheaper. Or maybe you just really want to become an entrepreneur. So, sit down and start brainstorming!
One of the best ways to determine if an idea is good or not is to turn the tables on yourself. Would you buy this product or service? What would you pay for it? You might also do a quick check to see if your idea for a new product has already been done. My husband is convinced he invented wasabi (horseradish) ketchup. Nope, a major brand has. Not all business ideas have to be original, however, they just have to be different, and hopefully better, than the competition.
Ideation involves some creative thinking. Check out Andy Puddicombe’s TED Talk, about the importance of taking time to stop and reflect in our minds, and why this is an essential part of the creative process.
Traveling is often a source of inspiration. What is being sold in another part of the country or world that is not yet in your community?
As part of the process of creating a new business, it is essential to write a business plan. I would recommend, though, that you first start by assessing market demand for your proposed product or service. Does it exist yet? If not, who will buy it? If it does exist, how will your business be better? Research competitors and get to know potential customers and their needs.
If you have a trusted advisor that has owned his or her own business, ask them if you can discuss your business idea in confidence and get their opinion. Even negative feedback can provide some valuable insight.
All of this information gathering will be incorporated into your business plan, but doing this step first will help you evaluate if you have a solid business idea worthy of pursuing, or perhaps you should go back to the idea stage.
Write your business plan
Creating a business plan will help you in many ways. It will further refine your idea and help you decide if it is truly feasible before proceeding. A business plan is necessary before presenting your idea to a funding source like a bank or to apply for a grant. Most of all, it will put a guiding framework around your idea and start to form it into a company.
The following outline comes from the Minnesota Department of Employment and Economic Development (DEED). See the Resources section below to get assistance writing your plan, or watch this 30-minute tutorial on business plans developed by the Small Business Administration.
+ The Executive Summary. This is your business in a nutshell, a concise overview of the key elements of your business plan, placing special emphasis on your strengths and how you will make the company succeed.
I would actually suggest writing the Executive Summary last. You will find it much easier to capsulize your business once you have completed the other sections of the plan. Your summary should be compelling- imagine you have 30 seconds to explain what your new company is about to an investor. This is also called an elevator pitch. People have short attention spans and you must be able to convey your most important points concisely.
+ The Company Profile. Also called the company description, this section provides basic background about the company, its organizational structure, what you do and what makes you stand out from your competitors.
+ The Product or Service. Provides a detailed description of product or service lines, including the importance of each to the company.
+ Project Financing. If you’re seeking financing, this section describes the project, its purpose, its cost, and the amount, form and use of financing.
+ Ownership and Management. Details the principal management and non-management owners, areas of expertise, and outlines key management responsibilities and employees.
+ Marketing Strategy. Also called the market analysis, this section describes the industry and industry outlook, identifies principal markets, major customers and competitors.
+ Technology. Is your product in the idea stage? In development? Ready to market? This section lays out the technical details and includes important patents, copyrights, and licenses.
+ Production and Operating Plan. This section spells out how you will produce and deliver products or services. It includes descriptions of your plant, equipment, and labor supply.
+ Financial and Administrative. This section lays out detailed financial projections, provides essential financial documents, and identifies key advisers, including auditor, legal counsel and bankers.
Other Business Start-up Tasks
+ Deciding Your Business Structure. Your business can take many forms, which vary in complexity and expense. This includes sole proprietorship, general partnership, limited partnership, corporation, limited liability company or specialty organization. Discuss with your CPA or attorney the best type for your business.
+ Accounting. Even if you plan on hiring a bookkeeper, every business owner should have a good understanding of basic business accounting and how to forecast revenue, expenses and profit. Understanding these principles will help you maintain financial oversight. Many a business has gone under because the owner was not keeping track of financial information. A good accounting system will also help communicate your financial position to creditors, lenders, and investors.
+ Business Financing. Businesses are financed using various sources of money, whether to start-up or expand. It is important to review the positives and negatives of using your own funds, loans, grants and other financial resources.
+ Licensing and Permits. Your business needs to be registered with the state, and sometimes there are additional licenses and permits required for regulated industries.
+ Taxes. A necessary element of every business, determine what, where and how to pay your business taxes. Most of all, put all deadlines in your calendar. There are hefty fines plus interest for late payments.
+ Employees and General Management. Be well versed in employment regulations and postings before hiring employees.
Entrepreneur and Small Business Resources
Minnesota’s Small Business Assistance Office has advisors to help you understand more about all the factors you’ll need to consider before you start a business. They also provide a wealth of publications targeted specifically at Minnesota entrepreneurs. You can also tap into the network of Small Business Development Centers located in nine main regional offices and several satellite centers statewide. If you are seeking a business loan for a new venture, many lenders require you to work with a SBDC first.
There are also private foundations that build communities through business grant making. One example is the six Minnesota Initiative foundations spread out throughout the state. Each foundation is independent and serves its region with unique grants, business loans, leadership programs and donor services.
The Minnesota State education system has an excellent resource page for self-employment, both locally and nationally. The site includes planning resources, strategies for financing, training and consulting. You can also take a career assessment and review credit and noncredit courses on a variety of topics.
Decide What is Right for You
If jumping in with both feet on a new business seems a bit overwhelming, consider starting small. Develop a side gig providing a service or making something of value while you work or look for work. Work on your business planning a piece at a time. You might just end up with a successful business venture you want to pursue full time.