Working for yourself

Carol Reed

In Memoriam
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Coolidge, AZ
With guys being laid off and needing to finding a new future for themselves, I find a lot of advice scattered here and there. Maybe we ought to have another forum for this topic. Just saying...

Back in the early '80's I was laid off by AT&T after 15 years. It took a while to appreciate all the things the company did that I did not have to do to keep the check coming every two weeks. One of those things was that someone else decided what my tasks for each day were. All I had to do each morning first thing was get to work on time.

So with regard to getting up in the morning, I discovered that having a to-do list so I know exactly what is on my plate first thing in the morning is a great incentive to get out of bed early.

There are many things I'd be happy to share with regard to working for one's self, if you are interested. I have been a self-employed woodworker since 1984. I've learned a few things along the way. A lot of them the hard way! Maybe I can save some of you some pain and trouble.
 
well carol,, as for the sub forum just having some info as to where to go, what to do and what to expect is a great help..coming from those that have been there.. just like the link darren sent me some time back of the 5 different phases that one will go threw.. as for the wood working aspect to get some income of any kind would be helpful in my opinion even if we dont look at it as a lively hood we can learn from it to make our hobby some what self sufficient perhaps.. i know i have looked at many avenues and still havnt got my plan of attack solid yet but i have learned a lot form those offering there input on this subject.
 
We can discuss having another forum, it's what ever the membership decides. But let me offer this...one thing I try to do when posting a new thread is to add the tag words using the tags field. Adding keywords of say "unemployment", "job search", "entrepreneur" (no quotes used, just for my example) will add some additional levels of search to make the threads easier to organize.

If you look at the bottom of the advanced search, there is a "word cloud" with larger and smaller font sized words. The size of the words is based on the number of threads using those tag words. There is a dozen or more ways to organize those tags so that they work more like an alphabetized list for easier navigation, and we don't have to have additional forums to contain them. In the near future we're considering a new front page that has some organization that will use the tags for categorizing content as a list.

So, how do you go back and add tags after creating a new thread? Any member can add tags to a thread, they are at the bottom of the page, just click the add/edit tags. The thread starter can add 5 tags, anyone else is limited to 3. I've added two to this one using my test account.

You can also view the tag cloud by clicking the "View Tag Cloud" link in that box. Clicking a word in the tag cloud returns a list of threads with that tag in it.

Sorry, not trying to hi-jack the thread, just wanted to address the question, please start a new thread or PM me if you have tagging questions or want a new forum ...back to the regular scheduled programming. :wave:
 
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Thanks, Darren. I had ignored that feature, unable to appreciate (before now!) how it could be used.

As for the thread to continue, depends on the readers. I'll watch and read. I am willing to help but don't have time to cast pearls into the wind. I have little desire to pontificate for the sake of pontificating.
 
I'd certainly be interested. Currently still employed.. but.. you never know!!

The main thing still keeping me from doing my own thing has been having a day job :D Its really hard to consider giving up something stable and decent paying for a higher risk venture. I'm thinking it may well be prudent to diversify my options if the opportunity arose though.
 
The other thing that makes it difficult to go out on your own is health insurance. When you go to buy an individual policy, you become a group of one. As you age, the insurance gets more expensive. And if you have any serious illness, such as cancer, the insurance cost will go through the roof.

When working for a company, you're part of the company group and if most of the group is healthy, the cost of insurance is reasonable. I was paying about $900/mo for an individual policy (just me, not a family policy) and I was healthy - but I was over 60 years old (and the policy didn't pay very much). But I was lucky to get that policy - other quotes were higher.

Reaching age 65 and getting Medicare was such a relief - Medicare is excellent health insurance.

Mike
 
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i am learning the hard way that to try a new adventure when the last one is gone is harder than doing a little at a time to start.. the insurance thing is big for sure..and the mindset is another obstacle to deal with.. but one thing i can assure you is,,, what you have now isnt permanent
 
I'd love to start my own business, but much like Ryan having a reasonably stable day job has it's advantages. I am however nearly fed up with the bureaucratic poo that has started to impact my job more and more. Like Mike the insurance is also a big consideration. Besides, I don't really know what sort of business I'd start. I've mulled over several ideas in the past but don't have any idea if they would be successful.

Here's a question for those of you who've started your own business. How did you choose the business you started?
 
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As one who was SE for a time, I never worried about insurance. I had it yes, but I ran the risk. I ran a high deductible and per occurrence policy. I have that now as well. I generally get a $2000 deduct, major medical and let it eat. We don't run to the doc every time we have a runny nose. Now per occurrence, if you break your leg and leave the e-room on crutches and trip and break your arm, it's another $2000. Risk I am willing to take. It is around $1000 per 6 months. That includes myself, wife and 2 kids. No dental, no vision, either. Just live within your means and it is all good. Pay cash when and where you can. Dentist are very nice folks when you flash paper with faces. They know they are going to get paid on the spot. Same with the local eye doc.

One other thing, when we had Gator, we had no maternity insurance. It was more in the long run, so much for so long before you could even think of getting pregnant. So when it happened, I talked to the doc, told him the issue. Got an extreme discount from him and the hospital for paying cash. Once again, live with in your means.
 
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How to choose your business.

Mine chose me. Call it serendipity.

What is motivating you to go out on your own? In my case, no choice. Age factor. It's a reality, illegal or not. We all know that.

Do a personal inventory. What do you know best? What are willing to do even when you don't want to? There is always plenty that needs doing that you may hate doing, but it is necessary, so it is good to have something you also enjoy.

What investment in tooling, inventory, etc. have you already made? In the case of woodworking, some of us have made a considerable investment in this area.

Get realistic. You are not going to make money overnight. Money is not going to come in regularly, especially in the beginning. You can't spend every dime that comes in on whatever. Generally every dime is already spoken for.

Got a spouse? Time for some serious talk. I was on my own. No net. Had to have a serious talk with ME! Develop a support system. Your spouse and family is good. They must be on-board or you are doomed. No spouse or family?

Find a business mentor. Also good if you do have an on-board spouse and/or family. I found my mentor at church. I simply asked him if I could talk with him from time to time about business decisions I had to make. He was a very successful businessman, one of the wealthier members there. He built shopping centers. I was no competition to him! But he always had words of wisdom when I needed advise. I didn't bug him. I always arranged for an appointment to speak with him to respect his time. He always gave me more time than I thought I needed. He was a goldmine of information and made me aware of things I needed to know to make good decisions. I can tell you for a fact that when I ignored him, it cost me big time. I learned!

Attitude check. No time for anger or pity or complaining. Disastrous to insist on 'your way.' Develop a positive attitude. It is hard at the beginning. Go back to the supportive spouse, family, or mentor.

Food on the table reasonably regularly is the first goal. Roof over the head places a close second. Everything else is optional. Reality check. You will want to add stuff here, but don't. This is the bottom line. You may think transportation is necessary. It is but what is up for interpretation is the 'type' of transportation. Example: Stu's delivery transportation is a bike with a trailer, not a truck. Huge difference in costs.

OK, now the rest will seem like, duh! But having these things clearly in front of you at all times is very, very necessary. They become the mantra for all you do.

First order for a business is to have customers. The business provides something, product or service, that the customer is willing to pay for. There are customers for everything and at every price point. No customers, no income, no business. No but's. Simple.

Second, customers don't come to you. They don't even know you exist. You need a plan to find them. That means you need to be able to describe them, everything about them, including where they are and how they can be found. You also must learn 'what' and how much of 'what' they are willing to pay for. In other words, what you see as necessary and good, they may find irrelevant for them. It's their checkbook, so that makes them 'right.' Of course, if what they want places your liability in an unacceptable range, you have two choices; successfully education them or walk away.

Third, you must know all your costs. Unless you plan to work for nothing, or even pay for the privilege. Ignore this and fail, every time.

Hard core stuff.

Two areas need attention at all times. Customers and costs.

You can start with "I want to make widgets. I have the tooling, some experience, and I enjoy it." Now you have to find customers that want your widgets. Or, better, you can begin with, "I see customers want this kind a widget. I can make those. I have the tooling, some experience, and I enjoy it."

So, first choose the area, product or service. You can do both but they have different customers. Learn to do one thing first. Second, sit down and figure out how you will get by while you work your business into a viable business. Third, determine the first year's necessary gross income. That means every dime that comes in. Keep it as low as you can. Trust me, unexpected expenses will pop up on a regular basis. Fourth, examine your market. Begin with the local market. It costs money to go beyond your local market. You may have to but let's figure out the local market first. Lot's of details here, so I will stop here for now. You have plenty to do to catch up to this point.
 
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Id like to add one small tidbit.
Its great like carol stated to have a good support system, a mentor, and this is very important.
There might be alot of things that are not to be discussed with a loved one or familly because, well, business is business, and sometimes harsh decisions have to be made, and family members arent the always the best since they sometimes think with their hearts, not their heads.
My "rabbi"(no, not that rabbi), the guy I turned to for 25 years whenever I felt lost or had to make a big decision, meaning a huge change in my life, was my wifes uncle. He was an extremely successful restaurant owner who owned a chain of high end burger places, as well as some restaurants. He knew nothing about my business, but what he did know, was how to deal with partners, attorneys, govt people, so whenever I felt like my back was against a wall, Id speak with him first, never burdening my wife with my business problems.
Id always let her know what I was about to do, but Id sit down alone with my uncle and hed set me straight.

Nothing is as difficult as starting up a business, especially in todays economic climate.

If you enter it with realistic projections, you might have a chance.
 
Carol, your comment about having customers applies even to those who work for others. For example, I occasionally have a young person talk with me about career choices. Some have a field they really like, such as history, but I tell them to think about what they're going to do with the degree. With history, I tell them they can teach or sell insurance. I always encourage them to think about matching what they enjoy and what other people want. For example, if you get an accounting degree, you can usually find a job because people need accounting done.

It's the same when starting your own business. You may like to make period furniture but if you can't find customers who want period furniture, you aren't going to be successful. You have to find that intersection of what you like to do and what people want.

Mike
 
Good point, Mike.

For those of you thinking about working for yourself, allow yourself the realism that maybe self-employment isn't for you. Then bring all your resources to bear to help someone else willing to take the risk to provide you with a job. That's OK. It's your reality. Deal with it.

I didn't feel I had a choice at the time. I was in a field that was shedding nearly a million employees with my job skills. I was over 40 and unwilling to clean houses, wait tables, or work in a gas station. Even if I could get a job in those places. Employers don't hire people they think will jump ship as soon as a better deal comes along. That is the risk of being over qualified.

Allen makes the point that "with realistic projections, you might have a chance." Without them you have NO chance. There is a lot of work ahead, but it IS doable.

When looking for a mentor, don't accept one who is a negative person. Find the person who lifts you up and shows you how things are possible, who leads you to the other professionals you will need from time to time, who offers choices with the wisdom of consequences to those decisions. Even to customers occasionally!
 
another key point in the mentor part is one that will be candid with you as well and be ready to take some hard licks on your shoulders from them..dont take aggression towards them just listen to them and learn..

ok carol, what your methods of finding these customers?
 
http://en.wikipedia.org/wiki/Guerrilla_marketingCarol your post nailed it all in one. Wish i could be as concise as you are.


Mike makes a very very important point that i think way too few spend time to think on.

We live in a free market economy. That means you need to accept that you will only earn for a product what the market is prepared to pay you for it. Regardless of what it cost you. Now think about this.
Just because you can make a great cabinet out of great plywood does not mean it will be cost competitive.


But then read Carols words again when she says "There are customers for everything and at every price point" realize what this means. You have to be prepared to accept that the area you live in might not have customers in it that are willing able or want to pay what you want for your product. So you need to adapt your ideas to your market or move.

Both the above points bring up the aspect of doing realistic and thorough research. And you have to do that research without rose colored glasses. That means you might like a specific idea but when you look into it and determine its viability then you see its got potential problems and reliant on some elements that are just too thin to go with. Be prepared then to ditch the idea. Dont blindly continue thinking you going to change the status quo. You not.

Recognise you starting a business at a time when you have no income and no matter what, businesses require capital. Shortage of capital is one of the key elements for small business failure. So my first rule is dont spend a penny unless you absolutely have to.

You see guys go out build a shop, buy machines and then say ok now i am going to open my woodworking business. Yeah and who you selling to and what you making. AT this stage they got no money for marketing or product development or even raw materials. The logic we apply to a hobby is very different to what you apply to a business. In my hobby i have loads of things i have spent money on that i dont need but wanted. Not the same in my business.

So before you do a thing.

Learn some basics on the financial side of a business. Do a budget.

Create what is called a pro forma Profit and Loss statement with a spread sheet. This is just the same as learning google sketchup in order to do a drawing.

Learn to make up a basic profit and loss statement. Forget for the moment the balance sheet.

Just start out with sales, cost of sales, gross profit, overhead, and profit before tax and interest.


Use an excel spreadsheet and if you dont have...Excel or if you dont have MS office download the free open office suite from here. All the open office suite files can be opened by MS office etc.


Take the time to do a little what if planning.

The best venture capitalists in the world that i have dealt always look to loads of details in the sales/income section of the P&L and i learnt with darn good reason too.

Work out on a sheet within your spreadsheet a page for sales. On it list all the items you gonna sell. Then next to each item list all the costs you will have to make or buy that item or deliver that service.
Then put down what you believe from your research you can sell that item for. Note. YOu should be thinking here of perhaps 3 prices for the item. What i like to call the good the bad and the ugly.

Dont get fixed on a set price you may end up finding that you need to cut a deal and if you set your yourself no wiggle room mentally then it becomes hard to allow yourself to wiggle.

Now guestimate how many of the various widgets you think in your market you can sell. Again market research is something you need to have done before hand.

With these basics you can then put together a plan the more conservative you make it and the more realistic you make it the more likely you will succeed.

Add in to the basic budget the overhead costs you will have. Things like insurance telephone hydro etc. But dont forget marketing costs.

Carol mentioned the issue of customers and them not knowing you exist. This in my view is the single most important aspect to get to grips with in your new business. Its the least understood.

Most have a pretty good technical knowlege, so making or sourcing a product or service no problem.

But getting it out there i see companies who waste tons of money on ineffective marketing.


Your market research element should have you get to grips with exactly who these people are that are going to buy and pay for your product. You need to get out of your shoes and put yourself in their shoes as much as you can.

This is not easily done when you are without a steady income. Its hard to see the world from anothers perspective. So you need to avoid using your current mindset to examine your products.


Next learn something about selling. You may have been brought up in a very frugal manner and be a person or family that is very utilitarian in their purchases. Try to realise that the bulk of consumers are not.

Consider for a moment the whole "kitchen refurb project". A utilitarian person will say i have a kitchen or i dont have a kitchen therefore i need a kitchen.

But a kitchen refurb is not being undertaken because the person needs a kitchen. They have one. Their motives and reasons for buying a refurb have nothing to do with "needing a kitchen". Their need has everything to do with how they percieve their current kitchen. They may be a person who will never ever cook in their kitchen. Yeah hard for some of us to fathom logic like that but its real it exists. So you need to learn to get used to understanding on a individual and then group basis why the person considers they have a need for a new kitchen. For if you can make the best cabinets in the world, at the cheapest price, you will still not sell them to that person when you have not addressed their needs.

This same logic applies to each product or service you may offer.

As a new business spend some money on a few books for your marketing rather than spend money on a flyer. You are not a corporation and you need to become a guerrilla marketer. This term has become generic with getting your marketing for zero dollars or as close to it as possible. You can start at your local public library for the books but later on you will find just like woodworking ones some you want to keep and refer to more often.

Consider getting your paws on one of these there is a series of them and second hand will always do. remember the aim is to be frugal.:)


Like woodworking ask questions if you dont know. Heck i learnt a great deal here about woodworking i am more than willing to impart what i have learnt in my business career. Just remember though you dont learn by only reading you need to also get doing.

Go out and talk to people about what you want to make sell or provide. Just remember the old story .........THE CUSTOMER IS KING and THE CUSTOMER IS ALWAYS RIGHT. :D even when they wrong. ;)


Its also easier to abandon an idea when its still on paper. Its more difficult to do when you have committed all your resources to it.

Also go see your local SBA unit. You will find folks that are very willing to help and give you loads of free resources.
 
This thread is chock full of exceptional advice. One other thing I might add, instead of being a dedicated, single, do it all shop, look into a niche market like Al has with trim. Maybe a cabinet company needs one extra person a week installing cabinets. Maybe they hate installing hardware. Look into all avenues.
 
Defining your customer is key to finding your customer. Another absolute truism.

Defining your customer is contingent upon your intended product. Let's do an example. People are always needing bookshelves. Yep, IKEA has scads of them! But, they are shabbily made of inferior materials, and they are all the same size. There are two kinds of bookshelves - stand alone and built-in. There are gazillion designs.

Your desired customer wants custom bookshelves. Custom size, custom materials and custom color. Your customer is motivated to buy to get what he/she wants. There are bragging rights with custom stuff. Your product in not bookshelves. Your 'product' is custom.

Example: I make custom furniture and remind the customer they have my undivided attention in that I take on one project at a time. Their project is not sandwiched between other customer's projects. That doesn't mean you work on it with no regard to other aspects of your business. Other aspects of your business include marketing for new business, doing the on-going paperwork in a timely fashion, etc. But then those are things they are not interested in so don't bother explaining. What they are interested in is having your exclusive attention to them and their project.

Exclusivity costs more money. They already know that, so they are already prepared to pay for it.

Quality materials is a given, but one you have to point out. For bookshelves, I always pointed out that quality plywood is the best choice in that it is stronger than solid wood. No one wants shelves that sag. Solid wood is used where appearances are important. And, yes, they will match. Example: ledger edges of the shelves, face frames, edge trim covering any plywood edges, and additional trim defining a particular style/design. In other words tell them where the quality is, even if it is not apparent.

Quality of design and construction is also a given for a custom piece you build. Shelves may or may not be adjustable. If they are adjustable point out the quality and aesthetics of the hardware used. If they are fixed, point out the joinery and show how strength is built in as a result. Books are heavy.

Summary: Your intended customer values exclusivity, quality, and custom design/sizing. You can further develop this list, but you should get the idea by now.

Next up, where do you find such customers? Well, where do they live around you? Like tossing a pebble in the pond, follow the ripples out. Prepare some samples and marketing brochures with lots of pictures highlighting the above. It is time to find some sales partners to help you find your desired customer.

Go visit interior designers and show them what you can do. Call and make an appointment. Have your presentation down pat. Make a cut-away miniature sample. For a bookshelf project, make it about 18" high and proportionally deep and about 4" wide. Don't forget about the quality finish. People determine the quality of the piece by what their hand tells them as they rub it across the top. Encourage that. Point out to the interior designer you put the same quality features, hardware, materials, and construction into all your pieces. Now here is the kicker. The interior designer also sells exclusivity! See how you dovetail together?

Now what are the problems interior designers have with regard to custom builders. They don't show up when they are expected. They don't get the job done when promised. They have shoddy business practices. That's just three. When you talk with one and don't get a positive response, ask them what they are looking for in a custom builder. Tell them you are really appreciative of them sharing that information with you.

If you do get a positive response, they will want to know your pricing. You will have to know your total costs for a sample full size piece. But custom has many variables. You will need to point them out. Keep the list short. So don't directly answer that question just yet. You will first want know what they feel their customer will pay. Receive this information positively. It is very easy here to get negative and decide the price is too low. You don't know yet if you can build to that price point. The interior decorator will also have a commission built in. Find out that commission. What's left is your 'wholesale' price. It is what is coming into your bank account.

Remember at this point, you are not selling your piece to the interior decorator. You are selling your ability to supply their customer with the piece of the customer's dreams. You are recruiting the interior decorating as your salesperson. If you are successful at this, point out you need to have direct contact with the customer in order to keep the customer delighted with your work. Have a work-in-progress process lined out. Show them how you will keep them informed of the progress of the construction. Emailing pictures with some commentary is cheap and easy. Don't be anal here. An update every week or 10 days is enough, depending on the scope of the project and the completion deadline . Decide at which points the customer would be interested and make contact only at those points. Include the interior decorator in those updates. Those updates will continue to market for you.

Find out how the interior decorator contracts with the customer. Be prepared to show your contract with the customer as well. Your contract includes the specifics of the project, the time frame, and the sample board. The sample board is the color and finish that is signed by the customer and is part of the contract. My sample boards have three intensities of color and three sheens of finishes. The customer signs the one you will build to. This helps make your customer your partner in the project. Remember exclusivity and custom is your product.

Enough for now. You get the idea. You need partners. In this example, an interior decorator and ultimately your customer for a piece of furniture. If you have a different product in a different field, figure out who can become your partner in getting you before the customer you desire. There is a ton more, but this is a beginning and you can only do so much in the beginning.

Next up, tracking costs. Have to know those before meeting with potential partners.
 
Please correct me if/where I'm wrong here (I often am :D) but I'm seeing a handful of key points:

  • Sell people what they want, not (necessarily) what they need. This is a subtle distinction, but it seems people usually pay more for want than need and are more willing to seek a craftsman for it (the kitchen example is a good one). Creating "want" by highlighting quality/differentiation is a key part of the marketing strategy.
  • Find a niche, competing on the general market is hard for a soloist because you get lost in the crowd
  • Leverage other companies pre-existing advertising/marketing chains where possible (need to think more on this.. seems like there are a lot of innovative possibilities here).
  • Figure out your cashflow, can you survive/pay the food/rent. This seems obvious but is - for me - one of the harder items, as I really have difficulty imagining sales prior to them happening, especially in a market I'm not 100% familiar with (I've done some sales before and it usually vastly exceeded my expectations, so I suspect I'm getting caught up on my inherent pessimism). I suspect that this is one reason for the "toe in the water" approach many take; I'm beginning to believe that that has problems with follow through though...

The last one is interesting to me for a follow up question I have... It seems that many entrepreneurs suffer (?benefit?) from what I'll call "irrational exuberance", I've seen this in a number of areas where people know literally nothing about the business but truly believe in the product and go forth and prosper. This still sort of boggles my mind, my current theory is that they don't spend all their time thinking of ways to fail and instead only think of ways to succeed (as a computer sysadmin this is sort of the inverse of my current job description where I mostly look at possible failure modes to try to anticipate/prevent them).

How important do you feel irrational exuberance/bone headed stubbornness is in eventual success overall?
 
"How important do you feel irrational exuberance/bone headed stubbornness is in eventual success overall?"

Never rule out dumb luck. Never plan on it either!
 
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