Out of Work? Start a Business

by Jamie Simmerman · 16 comments

While “experts” continue to speculate on the state of the Union and predict the future twists and turns of our economy, things are still pretty rough for many folks where I live. Jobs are around, but they’re scattered and most pay minimum wage or barely above that. A friend with two college degrees and 12 years service in the military was recently unemployed for over 8 months because he didn’t want to settle for minimum wage or factory work. It’s rough out there. If you’re in same boat, why not try your hand at starting your own business? Here are some tips to get you started.

Myths About Starting Your Own Business
1. You need a lot of money to start a business. FALSE! Depending on the type of business you choose, you may be able to get started with no upfront investment. Work with what you have and upgrade as your finances allow. You don’t always have to go into debt to start a business.

2. You don’t have what it takes to start and run your own business. FALSE! The majority of people have some set of profitable skills that can be turned into a business. If you’re crafty, sell handmade greeting cards and invitations. Got mad grammar skills? Try tutoring kids or editing term papers for college students. Love to paint? Offer your services to those who are remodeling or approach your local church about getting paid to paint the homes of elderly parishioners. Like to read? Write book reviews for a publishing company. Got a computer? Try out freelance work as a virtual assistant. Clean houses. Pull weeds. Type reports. Sell stuff on eBay. Find something you know how to do, then work on getting paid for doing it. There are many ways to earn more money.

3. I need to invest my time in looking for work, not starting a business. FALSE! You can still look for a day job while you work for yourself. You’ll be bringing in enough money to get by until a day job comes through, or you might just find you like being your own boss better. Freelance instead of going all out. Partner with others in a similar field to help balance your workload when your schedule needs a lighter load. It can be done.

4. I have health problems and can’t work a business. FALSE! If you have a sufficient IQ (i.e. if you’re reading this) you can work. I once had a patient whose body was so severely deformed, she could only move her head. She lived with severe pain every day and needed assistance to care for herself, but she still went to work everyday! She earned two college degrees online, and worked as a customer service rep with the help of a headset and motorized wheelchair. If she can work, you have no excuse. You don’t have to sit at home and feel useless.

How to Start a Business

While there is a wealth of information available about starting a business, my advice is to start small.

Look into the tax implications, government regulations, and safety considerations for your chosen field. Making sure your business is legal and vital. Next, learn as much as you can about your industry. Network with others, visit websites and blogs, and the local library. Find out what community resources are available to help you in starting and running your business. Lastly, learn about basic marketing. Marketing applies to nearly everything in life, and learning how to effectively present ideas, products, and services to the public is a must if your business is to succeed. Everything else can come later, as time and money allows.

Be sure to plan ahead with a vision statement, code of ethics, and a set of goals for your business – even if you’re just toying with the idea right now. These statements will help keep you on track when things get hectic or discouraging. Above all, don’t give up! Persistence will pay off and you’ll be investing your time in your own future instead of passing your laid-off hours with Jerry Springer or the couch potato crew.

What’s your business idea? What skills do you have that others would find useful or helpful?

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{ 16 comments… read them below or add one }

KM July 26, 2012 at 7:23 am

My current problem is that I would like to have a side business or freelance, but the market for my skills is oversaturated. It seems as though everyone and their grandma is trying to do web design and everyone and their grandma is writing books and self-publishing. I mean, I am still looking for my niche and haven’t given up yet, but I just don’t have enough time to invest in researching opportunities or marketing. I guess someone who is out of a job would be able to, but I imagine many may run into the same problem of oversaturated markets as more and more people start their own businesses and some may charge very little for poor quality, so those trying to make decent money with high quality products or service lose out on a lot of opportunities because people who can’t tell what’s quality and what’s not in certain fields will pay the cheaper price.

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Josh @ Live Well Simply July 27, 2012 at 9:22 am

Anything that has to do with the arts is a hard market to break into because of the competition. You’ve got to be the absolute best in your niche area. If you can find something that has a relatively high barrier to entry (aka 4 year degree, years of knowledge, or government certification), and that can’t be ‘outsourced’ to cheaper economies, you can make a good income. My 2 cents.

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Persepone July 30, 2012 at 7:13 am

Starting a business is not about “you”–it’s about what you offer your CUSTOMERS that is valuable and important to them! I’d agree that the markets are all oversaturated with purveyors of crap–but if you have something distinctive and valuable, then people will pay for it–and they will pay what it is worth.
Think about a big box bookseller (or Amazon) and all the titles they have for sale. Which ones would YOU pay $19.95 for? If you can’t write something that other people will shell out $19.95 for, then you shouldn’t be wasting your time writing. If, on the other hand, you have something that people will line up to pay $19.95 for, start writing… You may have the next Harry Potter series… And yes, people will be lining up at midnight to buy copies….
Again, there are all sorts of crappy web designers out there. Crappy sites are all over the internet. And then there are fabulous ones. Generally they are designed by people who specialize in that particular type of website (see the websites of your favorite authors to see examples of websites designed by people who specialize in designing websites for authors of romance novels or authors of police procedurals, etc. Look at specific industries if your expertise runs more to something like electricians and plumbers.
If you are going to write crappy books or design crappy websites, don’t bother. You’ll just spend time and money and not end up with a business. Find something else where you do have talents, etc. that provide value to your potential CUSTOMERS. Again, it is not about “you” and “your wants and needs.” Starting and running a business is very hard work. And yes, in order to do so successfully, you need to be very, very good.

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ChrisCD July 26, 2012 at 7:45 am

KM, in your case, I wouldn’t look to compete online. I would get involved with some local organizations and try to network and meet people and find those that want a face and someone they can touch to help them.

Tutoring can’t be done very well online. If you have good English, Math, or other school related skills that can be a great place to start.

A local company may need some writing done. They may not have time to search the internet for the cheapest writer. They want quality and they want to meet you. There are people out there that don’t just care about price.

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Jordan July 26, 2012 at 8:19 am

If you’re looking into a design related or otherwise “creative” venture, I’d highly recommend Kickstarter.com for initial funding for your project. Spend a little time browsing through other projects to see what works and what doesn’t, and with a little effort, you should be able to get your upfront costs taken care of.

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Persepone July 26, 2012 at 8:41 am

KM (and others). Be ruthless about determining what you are best at, and then narrow down the field so that you are serving a tiny niche market. The smaller your target, the better when you are starting out. This allows you to clearly define your business and your services. Don’t worry–it will “widen out” pretty naturally as you gain a reputation as the “best” in your specific area of expertise.
You don’t want to be a “web designer”–you want to be a specialist at designing websites for businesses that serve the ____ industry in _____ (name of town or county or other geographical area). For example, suppose you focus on weddings. You do websites for florists who do flowers for weddings, people who sell wedding dresses, wedding photographers, wedding musicians, etc. Target the “small” jobs, the “small” businesses and price your services so that your customers can afford you. Price a la carte. Be careful, however. Set your prices so that you make “enough” money. You need to set it so that you make “enough” with 20-25 billable hours/week because that is about the maximum number of hours you can actually bill for in a 40 hour week. Publish your price sheet so customers have no surprises. Note that you do not want or need to be the “cheapest”–you just need to be the “best” and the “best value overall.” Never, ever compete on price. Someone can always undercut your prices. Cheerfully send them to the cut rate guys. You want the reputation as “best” not as “cheapest.” Be willing to work with other vendors. Do not “lock in” your customers. Treat your customers, many of whom have new small entrepreneurial businesses like yours, as you want to be treated by their businesses. For your own sanity, focus on the smallest geographical area that is practical for you. If you do a good job, you’ll have “too many” customers rather than too few and your business will expand naturally.

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KM July 26, 2012 at 12:42 pm

Thanks! I will have to try that approach. I honestly don’t care what industry to make sites for (as long as it’s professional and not creepy, of course), so it will be tough to specialize and I will feel as if I am missing out on an opportunity that I could do if I didn’t limit myself.

Can you explain the limit on the billable hours per week though? I am not sure I understand why there is a limit when you freelance.

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Kiwikid July 30, 2012 at 4:35 am

If you take a scenario of working a 40 hour week (just for the sake of argument) you will not be able to bill for the whole week. That is because you will be doing other things that cannot be billed to clients. Things like talking to customers, tax accountant. Purchasing hardware/software. Strategy thinking time. Doing the dreaded paperwork (even if it is all electronic). You can usually bet 40-50% of your workweek being taken up by non-billable hours. So, if you need for example $500 a week to survive then working on a 50% billable hours scenario then you would need to charge 20 hours x $25 per hour to make that $500 per week.

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Persepone July 30, 2012 at 7:00 am

Thanks Kiwikid. I estimated a maximum of 25 billable hours/40 hour week, (within your estimate) but 20 billable hours/40 hour week is probably more realistic at the beginning unless you have a lot of experience running your business as an “employee.”
You need to estimate–before you start your business–how much you must charge to survive and turn a slight profit–and then determine whether there is a market for those services at those prices. Tweak your business plan until it works on paper. It will save you a lot of heartache once your business is open.
Also, even if you will begin the business as the “only” worker, plan and price your goods/services as if you will have a paid employee. For example, set your pricing structure for not only “business hours” but also overtime rates, holiday rates, etc. if it is that type of business. You may well only need $500/week to “survive,” but if the going rate in your area for an employee who does what you do is $25 and hour, you need to be charging more like $50/hour so that when you do pay an employee (when your business grows, etc.) you will have the money to pay your share of their taxes, pay for insurance, workman’s comp etc. for them and still make money. Remember you may be doing this to “survive,” but if you are going to start a business, make sure that it is “businesslike.”

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John Schmoll July 26, 2012 at 11:37 am

Great points! My wife started her own business several years ago and we’ve experienced some solid growth with it. A key we’ve found is to be focused on the product itself and not necessarily the cost. There is always someone out there who’ll be willing to do whatever it is for lower. The question has to be asked though, why are they cheaper. If you provide a quality product, that’ll speak volumes and will create great value for the client.

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Persepone July 26, 2012 at 1:52 pm

KM: some answers to your questions:

The easy one first. You bill “man hours” spent actually working on your customer’s work. You do NOT charge for coffee/bathroom/lunch breaks. You do not charge for taking a call from another customer, etc. Be scrupulously honest about this and if in doubt, under-bill your customer. Nothing loses you customers faster than those who feel you are “cheating” them. If you run a business, you’ll find that over time/average, you get about 25 productive hours out of a 40 hour week. Your other time in spent on sales calls, billing, administrative tasks and assorted other work that is essential, but “non-billable.” And of course (again, on average) you need bathroom visits, lunch breaks, dinner breaks, sleep, etc.
Having said that, if you are selling 25 hours/week on average, you are pretty much “at capacity” unless you subcontract work or unless there are 2 of you…
Yes, here and there you may have “busier” weeks–but then you’re working well over 40 hours–and you should not “plan” a business on working overtime. Working too many hours generally leads to fatigue, burnout and “working stupid” and that will really kill a small business.

Your second question concerns my advice to put a very tight focus on your small business. You voice the “but I might miss out on something else if I do that” concern. Think about why you probably don’t buy “one size pantyhose.” My experience is that one size pantyhose does not fit anyone very well.

It’s the same with a small business. When you need a car repair, do you call a place that repairs cars or do you call your local “jack of all trades handyman” who probably repairs cars as well as lawnmowers, sprinkler systems and screen doors. Most people, most of the time go to the garage mechanic. (Note: I used to have a great jack of all trades handyman shade tree mechanic when I was young, poor and had an old car. I was happy. But I would not recommend that for any car made in the past 25-30 years nor would I recommend just any “handyman.”)
We started our small business about 2 1/2 years ago with a very tight, very narrow focus and trust me, our customers have “expanded” the scope. But our focus is on our core business and our core customers and generally we refuse those distracting jobs and general refer jobs outside our area to other local businesses even though we “can” do the work and can actually do a very good job.
By focusing on what we can do very, very, very well we have more customers than we can handle! We are eating our competitors’ lunch because they are like the one size pantyhose–they sort of do an okay job. We do an excellent job! Word spreads quickly!
If you pick some way to tightly “frame” your business–at least while you are getting up and running–you can quickly make a name and a reputation for yourself and because there is a sort of “economy of scale” there, you quickly can become the expert in a way you won’t if you just do “websites for everyone.”
If you do choose something like “websites for wedding providers” or “websites for auto mechanics” or “websites for plumbers” you’ll be asked very quickly by your customers to do the websitestheir friends–for photographers who photograph children–not weddings, websites for boatyards (assuming you’re near water) or websites for electricians and HVAC guys… But if you try to get all of those groups of customers out of the starting gate you’ll expend too much time and energy trying to reach your target customers and you won’t be able to tailor your offerings to “their business needs.” By choosing a narrow group of related businesses you’ll be able to get up to speed on their specific needs very quickly and you’ll save a ton of money and effort on marketing, you won’t have to do much if any advertising, etc.
We started from zero–and sent out one marketing promotion to announce to our target customers that we were in business. We planned to do this regularly (we expected to need to) yet we’ve been so busy that we’ve never advertised again–and we are booked solid…
Choose an industry/area based on what small businesses are in your area who have no websites, crappy websites, etc. Remember you don’t want to be driving all over to make sales calls. Think about your own experience as a consumer. The craftspeople often have lousy websites (plumbers, electricians, HVAC, carpenters, landscapers, etc.) and they are usually difficult to contact because they are out serving customers. A good website can make a huge difference for them as it can answer a lot of questions consumers have about such services…. In an ideal world you can choose something where you have some knowledge/expertise, even if it is only as a consumer of those goods and services.

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KM July 27, 2012 at 8:10 am

Thanks for clearing up the billable hours. My initial understanding was that I should limit myself to a certain number of hours per week, which couldn’t have been true, but now I see that it’s just what to plan on. Obviously I won’t even be able to bill that many hours because this would be a side gig for some additional income, in addition to a day job and raising a child (so very little time left).

Also, I can sort of see what you mean by specializing now, and I actually have some ideas. I did try your approach of calling up the businesses who have crappy websites, but was shot down most of the time. But I like the idea of specializing in what I have some prior knowledge (or passion) in. I think maybe some upfront time investment may be good to present the target customer with an “this is what your website could look like” picture instead of “are you interested in redesigning your website?” – at least while still building up a portfolio.

Thanks again for the ideas!

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PadgettshCom July 28, 2012 at 3:20 pm

An important tip we like to pass on to folks who are looking to start their own business for the first time: cash flow is not an indication of how your business is doing. Remember that, and you’ll be that much closer to keeping your business up and running. Good luck!

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Kiwikid July 30, 2012 at 4:41 am

Lack of cash flow, or inadequate cash flow is DEFINITELY an indication of how your business is doing. Either one of those will ultimately kill your business.

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Persepone July 30, 2012 at 7:28 am

I agree with Kiwikid in the sense that lack of cashflow or inadequate cashflow is absolutely an indication of how your business in doing. Both of those will kill your business.
Do you perhaps mean that you should “start slowly”? Do you mean that you need to make some upfront investments that will pay off down the line? Then you are probably correct. I think writing a coherent and honest business plan (even if no one sees it but yourself) and updating it frequently will show you whether you are on the right track. You need to make something on each and every sale and you always need to cover all your expenses (which means that you need to track them carefully).
Back in the early 1970s I started a business (I was in graduate school and had a small baby) that required a good typewriter. I bought an IBM Selectric II, a couple of reams of good paper, some carbon paper, some basic office supplies, a roll of stamps, had some business cards printed and bought some business insurance (errors and omissions were important to my business) and got a town registrtion, etc.) and when all was said and done I had spent/committed to about $1,000 in “start-up” expenses–a lot in those days. I also paid the entire $1,000 out of “profits” from my first job (I got to keep a little more than $1,000 as my “paycheck” but I also paid myself back for the “start up” expenses with that first big check. So yeah, initially the cash flow was “negative,” but it went positive once I was paid for that job. (Note that I did not commit to the start-up expenses purchases until I had that signed contract to pay me $2500 upon completion of the job).

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Marbella July 31, 2012 at 2:51 am

Try to start a business while working at your current job. It may take some time before the money starts to come into a new business. You must be prepared to work a lot more in the beginning.

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