Do you really have a business?

What shall I do?

Leaving jobs

I see many small business owners during the course of a year. Some are ongoing clients and others need advice but not a continuing service.

In the current economic climate there are many people who have been made redundant. Some have received quite substantial redundancy payments in recognition of long service, or they have been able to draw down a considerable amount of cash from their pension pots. Many recognise they will not be able to get another job if they are over 45, or at least they will not get another job they will feel comfortable taking.

Fields of dreams

So many of us, and I include myself, have had dreams of running our own business. We may have some cash from our former employer. Now must be the time to start a business, surely, if we have just finished employment? Even with a recession, there must be an opportunity to realise those dreams?

Often there is a niche if we can just find it. Perhaps it is something which has not been done before. It may be something which can be done from home, such as drop-shipping in a particular specialised product. Such a business is capable of expanding considerably to the extent that it may need premises, but the business will not be limited by the premises themselves. If we have the knowledge and skill, we can make a lot of money.

Confined spaces

However, some businesses are limited by the premises; that is the shop or retail outlets they have. In particular, catering businesses have particular challenges. If a café is in a busy thoroughfare, the rent is likely to be high and the competition fairly fierce.

I was once consulted by the owners of a sit-down diner in a seaside town, but with many other cafés in the immediate area. There were very obvious problems:

  • The rent was considerable because of the location and the size of the unit.
  • The heating bills in the winter were large because of the size; they were on two floors.
  • They were not getting in enough people because of the competition and because they were not better or different from the others.
  • They had to employ a number of staff because of the requirements to wait on tables.

The café was losing money fast and their current model couldn’t survive. The solution I offered was to sub-let their first floor as an office for which there was already planning permission in place, and to get rid of most of the tables and (unfortunately) their waiting staff. They needed to run as a fast food and sandwich bar for the many people walking past. There was only one potential competitor doing that.

Train wreck

Sadly the café proprietors ran out of money before they could follow my recommendations and they went out of business. They lost their life savings. It need not have been that way if they had thought in advance about their business model. They didn’t need a sophisticated plan. All they had to do was to add up their outgoings and do some research as to what sort of café would have been most lucrative with a higher margin. In busy business and seaside streets that is generally sandwich bars and hot food takeaways. At the seaside you can combine the two if you do it right.

Planning is everything, isn’t it?

Photo credit: seq Jehane

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Snake oil and the knitted woollen cat

Clark Stanley's Snake Oil Liniment. Before 1920.

Image via Wikipedia

In my early days in business I was offered, at the price of a considerable investment, an opportunity to have a very successful business. At the time it really seemed the way to go and I borrowed what was a lot of money to me to pay to have the opportunity.

Guess what! It tuned out not to be the money-spinner I had hoped for. Subsequently I found out that it was not just a failure on my part to grasp an opportunity. I know many who invested their time and money and none who had the success that was held out as a near certainty if we worked hard. And we did work hard!

Ultimately the investment was not a total disaster. I did make some money out of it and in fact still do, though it has not been without considerable application. It is one of the tools I use but was not the get-rich-quick deal I fell for in those days of extreme naivety as an ex-employee trying to survive on his own in the business world. If I had known then…

Context

Of course I had no context when I went for the deal. I believed that I was being told the absolute truth about the opportunity. With the benefit of hindsight that was particularly stupid of me. The joke is that the same “salesman” is now offering a similar great deal to his past “customers”. However, there is an old saying “Once bitten , twice shy”. I doubt there will be many sales this time.

Lesson

The lesson is that there are many offers out there, and particularly on-line which promise great wealth, sometimes for only working six hours a week. They sound tempting, but may well be snake oil with no substance. If you have a great offer or see one, always speak to others who have tried it. Find your own and don’t rely on testimonials from stooges of the sales person and especially not from those on the get-rich-quick website. You need proper context.

The cat

What about the cat in the title? Well, I had a dream in which our cats were playing with a green-and-white knitted woollen cat which was every bit as lively as they were. It was ridiculous, but it was a dream where of course I could place no context or knowledge that the concept was impossible.

Snake oil

If you are offered a dream, check the context and the facts behind the offer, and do proper research before committing. There are a lot of people with redundancy money wondering what to do with their lives and how to earn a living. The sharks are circling. Beware!

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Budding entrepreneurs should take care of their redundancy payments

Cheque sample for a fictional bank in the Unit...
Image via Wikipedia
With many firms downsizing there are many people, often in their late forties or into their fifties who find themselves unexpectedly with time on their hands and also a fat cheque as part of their compensation package. Some may have several tens of thousands in their bank accounts.

Few are happy to retire and put their feet up. Spending more time with the family may be a convenient euphemism for politicians who have been kicked out of office, but actually for people with active minds, boredom soon sets in. It is then that there is a danger of being lured into something which may eat some or all of that redundancy payment without any lasting benefit.

There may be an attractive offer for a franchise with “guaranteed income”. There may be an alluring advert in a weekend newspaper offering training as a “consultant”. There may be an offer of high returns from a property business. All should be viewed with perhaps not suspicion, but at least with healthy scepticism.

If you are looking at an opportunity to start a business:

  • Think whether it would suit your skills
  • Consider whether you can meet the demands on your time
  • Ask for references from other people who have gone down that road
  • Check that the income suggested in the blurb is being received by those other people (they may be embarrassed but if they are you have your answer).
  • Consider whether any turnover-based levy from “Head Office” will eliminate any profit unless you work 24/7.
  • Remember that if something seems too good to be true….

You may find just the right thing, but do be very careful and choosy. Keep your money until you are absolutely sure you are doing the right thing. Remember that very plausible scammers roam amongst us. Have you tripped over any?

(C) Jon Stow 2010

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