Jewish World Review Dec. 12, 2002 / 7 Teves, 5763
The World's Shortest Course on Self-Employment
Many people would like to consider self-employment but are scared of the risk. Or they don't know where to begin. This column should help.
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.
- 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% gross-margin item. I'm talking 1000+%. What sort of product has 1000+% markup? Have you had a $3 latte at Starbucks? It cost them about 25 cents. My wife just spent $17.50 for an Estee Lauder lipstick. What does it cost to manufacture? 25 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. For example,
o Cross-promote. A personal coach cross-promoted with a weight-loss clinic. Each offered discount certificates for the other's business.
o 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, give a useful handout that includes your contact information at the end.
o Phone potential customers. Especially make follow-up calls to your existing customers to ask "how you're doing?" Often, without even asking for more business, they'll give it to you.
- Forget about being on the leading edge. Too 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 a train station, 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 of style.
- 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 email 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 part-time assistant.
- 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 $20-40 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 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 You Need
1. What's the product or service?
2. How is it better than the competition?
3. Who's your target customer?
4. How it will be delivered? (Internet, come to their house, your home, storefront?
5. How much of you 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 up your chances of being successfully self-employed.
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JWR contributor Dr. Marty Nemko is a career and education counselor in Oakland, California and hosts "Work With Marty Nemko," Sundays 11 to noon on KALW, 91.7FM. He is co-author of Cool Careers for Dummies. Comment by clicking here.
12/05/02: Men as Beasts of Burden
11/21/02: Beware of going back to school
© 2002, Dr. Marty Nemko