In the last blog on 'So you want to start a business' we talked about the ‘enthusiastic hobbyist’, based on their ‘why’, ‘what’, and risk appetite. This time we introduce ……….
The Reluctant Entrepreneur
For the reluctant entrepreneur, starting a business is not their first choice career move. They would much rather be doing a job they love and getting well paid to do so, but circumstances and fate have conspired to create conditions whereby the reluctant entrepreneur simply cannot find such a role. The reasons why someone might find themselves in this position are many and varied.
Redundancy or a change of circumstances (e.g. the need for flexible hours to care for children or other family member) can be an initial trigger, with a lack of suitable vacancies making the move back in to employment an uphill struggle. Sadly, attitudes to employing the over 50’s can sometimes exacerbate the situation, whether it's concern over lack of up-to-date skills in their CV or simple ageism. Either way, the reluctant entrepreneur feels that their best shot at earning a decent income (& having some sense of achievement and self worth), is to start their own business. This is their ‘why’.
The ’what’ for the reluctant entrepreneur will revolve around the skills they have developed in their career, and their interest in learning new skills. Unless they plan a radical change of direction involving extensive re-training, the products or services they offer will be closely linked to their ‘what’. Unless there are certain activities that a reluctant entrepreneur simply cannot abide (or has convinced themselves they cannot do), no tasks are off the table. The need to make their new venture work (it is to be their only/primary source of income after all), trumps all but the most extreme distaste for any task or function.
Given that the reluctant entrepreneur needs their venture to work, they will typically invest significantly to maximise the chances of success (their appetite to risk). To do anything else, especially if there are funds available, drops the individual out of the reluctant entrepreneur category and into a sub-category of ‘Time Bider’ – doing ‘something’ to bring in a bit of income until something better comes along or retirement age is reached. There are plenty of these out there and for some it’s a good short term option, but as there is no long term intent, we’ll say no more of 'Time Biders' here.
So what are the options for the reluctant entrepreneur to start a business?
Firstly, they must decide if they are going to build their own business or take a shortcut by buying an existing business, including possibly buying a franchise. If the funds are available within the appetite for risk, buying a business or franchise can be a good strategy.
Buying a small business
Buying a small business brings a ready-made brand, customer base, revenue stream, asset set, resources and (if there are employees) skills. There are a huge number of considerations when buying a business (too many to go into in detail here), but the main ones are:
Reputation, strong financials, landscape (competitive, regulatory, etc), & risk (e.g. no hidden nasties in the background such as customer/supplier/employee disputes).
And finally, there is the deal structure itself – how much will it cost to buy the business and how is the transaction structured? It may be possible to reduce, or even avoid completely, any upfront fees and do some sort of earn-out with the incumbent owner(s). There is no limit to the type of deal that can be structured if both buyer and seller are willing to co-operate in good faith.
Buying a franchise
For a franchise, scope for doing deals is limited as the vast majority of franchises will have set structures in place as to how the franchise works, including buy-in price and on-going fees. As with buying a business, there are too many considerations to list them all but:
Reputation and landscape are critical, as are: Business Model (does the franchise do/offer a product / service that matches your skills); On-going fees (you need to be confident that you can generate enough revenue to pay these as well as earn your income); territory constraints (you’re likely to be one of many franchisees and if you’re hemmed in by others in surrounding towns/counties, your scope for growth is limited); support (does the franchisor provide on-going support and training); &, Lead generation (do you have to find your own customers or does the Franchise model help deliver warm leads).
Building a company from scratch
If buying a company or franchise isn’t appealing to the reluctant entrepreneur they will have to build their own company from scratch. The venture they start will be their main income stream and therefore needs to work from the off, so time spent planning is key – the reluctant entrepreneur can’t afford to go down expensive cul-de-sacs. Business Planning is a huge topic that will be covered in more detail at a later date, but the key thing to consider and work out is:
The Value Proposition (VP) for the business. Everything else (sales & marketing strategy, operational strategy, financial strategy, manpower strategy, pricing strategy) is derived from and informed by the Value Proposition: WHAT are you going to offer customers; HOW will they benefit from it; WHY should they choose you to provide it.
In a later post we will discuss some of the detail we’ve introduced here, but next episode we will introduce you to the Gung-ho Empire Builder.
If you can’t wait to know more about how to start a business, please drop a note to the author, Colin Hall, Founder of bizplansuk.com a business planning consultancy, specialising in helping small and medium businesses plan for growth
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