Life as a sole trader is a liberating and, usually, fulfilling one. By striking out on your own, you are freeing yourself of a boss in order to put all of those great ideas of yours into action, free from interference.
But with this freedom comes heightened risk. The official stats show that the fewer employees a business has, the shorter its life expectancy.
As a soloist, you could well be just one significant error away from business failure. Your high wire act needs safety nets in place if your entrepreneurial dreams aren’t to perish.
Luckily, many of the safety barriers between you and complete disaster are common sense measures that shouldn’t cost you the Earth. Find the time to implement the following and you will, hopefully, be able to survive an unexpected downturn.
Here, global serial entrepreneur, educator, author and angel investor Tom McKaskill provides 10 essential tips that every soloist should pay heed to.
1. Have a business plan
Your business plan will be out of date even before it comes off the printer. You will be lucky if anyone reads it and the most likely outcome is that it will gather dust on a shelf somewhere – so why bother?
Even if all this is true (and it probably is), a business plan is one of the most useful documents you will ever produce in an emerging firm.
It is most likely the only time when you take the time to look at the whole business as an integrated system. To be effective, the business plan must coordinate every part of the firm.
The sales volumes are checked against the inventory levels which in turn are validated with manufacturing and then back into procurement. The operational levels are tested against the employment, recruitment and training numbers and so on.
The reason why venture capital firms want a business plan from you is because they want to see that you understand how every part of the business works and can show how it all works together.
They might then dive down into the marketing plan and so on, but they need to see that you understand the implications of changing any part of the plan.
The good thing about putting together the business plan is that you have to dig into every part of the business and produce a plan for each part which is integrated into every other part of the business. One of the major benefits is the insight you get into the firm itself.
You will uncover problems which need to be fixed and will discover risks which need to be addressed. This is why it is better to write the business plan yourself than have a consultant do it for you. The exercise is well worth the time and effort.
2. Document your processes
One of the major problems of selling services is that the customer can’t see and touch what they are about to buy. They often see the purchase as an act of faith. Because of this, their perceived risk is usually quite high.
What we need to do as the vendor is to find ways in which we can provide greater certainty about what is being sold.
We need to provide greater clarity and certainty around the outcomes which will come from the purchase and work to substantially reduce the perceived risk.
We can achieve a lot through documented case studies and testimonials. If I can see or hear the outcomes which other customers have achieved, I can have a greater degree of confidence about what I am about to commit to.
However, many intangibles are highly customized during the delivery process and so the precise outcome is not known at the outset.
In this situation, the process which is used to deliver the service is critical.
A well-documented process which allows the customer to see how you will undertake the activity can often allay their concerns.
This is especially effective if the process is broken down into stages with each stage having its own planning and review components.
Instead of seeing a long-term commitment with uncertain outcomes, the customer can see incremental outcomes over which they have some influence.
3. Obtain the best advice
There are many risks to manage in a business and the last thing you can afford is to be exposed because you failed to address a problem correctly or to ensure you had adequate protection in an agreement. Basically, if you pay peanuts for advice you will get monkeys doing the work for you.
The difference between smart advisors and very ordinary ones is not just a few percentage points, it is counted in multiples.
Really smart people pay for themselves over and over again. It is worth taking the time to track them down and ask them to do work for you.
You can tell the difference immediately. They ask different questions. Their questions are insightful, penetrating, challenging and often uncomfortable as they expose your own lack of preparation.
They think about your business first and the problem you are trying to solve rather than giving you an off-the-shelf solution.
Whatever extra they might cost is recouped many times over in the difference they make to your business.
4. Wait until the money is in the bank
You could count on more than a few fingers – maybe even several hands – the number of times I thought I had a deal closed and signed to not have the cash turn up.
Given that my business was large-scale projects; that is quite a lot. What I learned to do was to keep chasing even after the contract was signed.
However, if they don’t pay, you are left fighting in court for the money, which is perhaps not a great way to spend your day.
So you end up walking away. But the lesson is obvious. Even when you have a signed contract, until the money turns up in the bank, you don’t have a deal.
The lesson which follows from this is that you should never spend the money until it is in your bank. Further, be careful how much resource you commit to the customer until you see proof of payment.
If they are not paying on time, be careful how long you leave it before holding back on delivery. If you get too far into a project without seeing the money, you may end up writing off whatever you have invested when they don’t pay.
If they become insolvent, your chances of recovery of your debt may be very slim, especially if you have failed to fully document and have signed off what you have delivered to date.
5. Be accountable to a board
It is very easy in business when you are the founder, president or owner to become complacent and make decisions on the fly because you cannot bother to explain or justify your decisions – because you have the authority to do what you like.
Big mistake! We all need the discipline of explaining what we are doing and why to someone.
It is important to have a reason to think things through carefully, consider all options and control the knee-jerk reactions. Being accountable for your decisions and actions, even when you don’t have to be, is a very worthwhile discipline to develop in business.
If you can’t explain why you are doing something to an intelligent and industry knowledgeable individual, you should take a step back and rethink your decision.
Whether you have a formal board of directors or an informal coach, the discipline of thinking through the decision and how you will present it to gain approval and support is a very useful mode of operating.
Consider that if it is the right decision you should gain support from them. If you can’t convince your board or your coach, are you really sure you are making the right decision?
At the end of the day, it may well be your judgement call, but it is worth gaining the feedback to ensure you have thought it through carefully.
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