As your freedom fund grows, it’s great to consider what you might do after you get to financial independence.
One fun way to spend your time is to start a side-hustle or small business.
This may or may not make you a lot of money…you won’t know until you try. But, having worked hard to get to financial independence, the main thing is that a side hustle should not lose you money.
So you won’t want to risk a lot of money getting started. With this in mind, the best way to start a business is to do THE OPPOSITE of what you’ve probably heard before.
The traditional (and incorrect) advice on how to start a business goes something like this:
Spend 3 or 4 years at college / university. Get an MBA / some other official document that says you are allowed to go into business.
Write a big business plan complete with graphs, charts, 5 year financial forecasts. Be as detailed as possible. Pretend you know what will happen over the next 5 years. Like you are Mystic Meg or something.
Borrow as much money as possible. Go to your local state owned / supported bank (hint: that’s most of them). Something like The People’s Bank of China or The Royal Bank of England.
When you meet the nice men in suits, bend over and adopt The Position. Leave your house / spouse / children behind as collateral.
Lease premises for 10 years. Buy lots of kit / photocopiers / adverts / glossy brochures etc. Make large losses for the first 2 or 3 years. Hope to breakeven some time in the future.
Scale the business so you no longer know your customers personally. Take on fixed overhead cost. Employ lots of people. Invent rules.
Update your 5 year plan regularly. Get your employees to wear blue boiler suits. Write a little red book setting out your HR rules and procedures. Conquer the world.
That, Ladies and Gentleman, is not The Correct Way to start a business.
That is, in fact, Communism.
Communism does not end well. Communism ends with famine, death, thought control and oppression of the working class. And a limited range of novelty gift items in the shops.
Is there a better way?
A lower risk way that combines good old-fashioned British common sense with American “can-do” dynamism? A way that combines authenticity, flexibility and frugality with capitalism?
Well, it turns out that there is! Its built on The Principles of Lifehacking…as a quick reminder, these are:
- Optimise speed of response
- Think 80 : 20
- Don’t worry about failure
- Be resourceful
- Keep it simple
- Use crowd sourcing…and copy what works
- Look for alignment of interests
I know it’s possible to start a micro business, have fun and help other people…all at the same time…and without spending money upfront. This is how I started my coaching service.
And then a couple of years ago, I met a guy called Alan Donegan who runs something called the The Pop Up Business School where they teach people this stuff. The classes are 100% free to attend.
So I asked Alan to write a guest post to help show you The Correct Way to Start A Business. Enjoy!
“It takes money to make money.”
“The rich get richer, the poor get poorer.”
“It’s not what you know, it’s who you know.”
That’s what I hear at the start of every course we run.
After all, we’ve all been told how to start a business, haven’t we?
You’re told that you need to write a business plan as the first step to launching a business. Graphs, 10 year projections of sales and cash flow, listing your credentials (MBAs and degrees) and lots of text.
You’re told that the purpose of a business plan is to work out how much money you need to borrow to launch your business. You’re told it takes money to make money. So you list all the things you need to buy to get started. £1,000 for a website, £200 for business cards, £10,000 for a deposit on a long term lease on a flash building, £5,000 for online marketing and customer acquisition.
If you’re “lucky”, the bank then lends you the money. You then set up a company, sort out the legal stuff and get to work and maybe you make a profit in year 2 or 3 if you are lucky?
YEAR 2 OR 3???? Can you wait 3 years to make a profit? Can you afford to go into thousands of $£€£$ of debt? Are you happy with this way of starting a business?
Not if you are anything like me.
I started the Pop Up Business School 7 years ago because I believed there was a better way. We have spent the last 7 years travelling around the UK helping people to start up businesses and to make money doing what they love.
Can you start a business with no money? Can you make cash without spending any? Can you create your own work doing what you love?
The answer to all these questions is yes you can. Let me show you how and give you some of the guiding principles of the PopUp Business School that will enable you to get going quickly and without risking much money.
Start quickly (and if you’re gonna fail, do it fast and cheap)
This is the complete opposite to the traditional way of starting a business. Writing a business plan, borrowing lots of money and launching ltd companies is failing slowly and failing expensively. If it goes wrong when you have borrowed lots of money, you are in trouble!
We worked with a guy who had invested huge (for him) amounts of money into launching a dating website. He had invested years of his time and had nothing to show for it. He was failing very slowly and very expensively.
Fail fast and fail cheap is the exact opposite of this. The idea is that if you are going to fail, then let’s make sure that we do it quickly and without investing large amounts of money first.
This way you get to try again with other ideas, no harm done. If you do it the other way round, you could be saddled with debt you have to pay off for years to come.
Could you put up a free website where customers can register interest and you can test demand for the service or product before committing money to suppliers / employees etc?
Could you start by start selling a basic version of the service or product? This is the concept of minimum viable product (MVP). Could you start selling an simple version MVP immediately and start funding your business from sales with cash taken upfront rather than from debt?
Our suggestion is to start selling immediately. The market will tell you if your idea is going to be successful or not; if no one buys your product or service then you haven’t lost anything but you have learnt what works and what doesn’t. If you do it this way, there is no failure…only feedback.
If someone buys it straight away, then you have your first customer. Congratulations! you are now in business. The first paying customer provides validation of the concept. After that, it’s about gradual improvement. Things should get easier as you refine and improve your process.
Start with sales not a business plan. The market will tell you if your business idea is going to work or not.
Start for free
Start for free Alan? It takes money to make money! You can’t do that!
I get told all the time you can’t start a business for free, but the truth is you can.
Traditional manufacturing businesses required significant capital expenditure upfront. You used to have to buy expensive machines to make widgets. But in the modern services sector, that’s usually not the case.
You could start a restaurant without borrowing money. You don’t have to start with high street premises leased at vast cost. You could start by selling food from a bike and trailer, from a food truck, from a stand at festivals or markets or from your house.
You can start pretty much any business without borrowing money and one of the primary reasons for this is technological advances.
I could not have written this article 10 years ago and told you that you could build a website for free, use Twitter and other services to find customers for free or get shop space for free, but now you can.
With services like Weebly or Wix you can build free websites and launch the immediately. We have built websites in an morning and got people sales by the afternoon.
You can use services like Twitter and other social media platforms to find customers for free. We worked with Jeff in Newport a couple of weeks ago and I set up a twitter account in front of the audience and started tweeting for him. By the next day we had two prospective gigs for him. (You can find Jeff here and ask him: https://twitter.com/erbietheclown).
The services that are available to you today for free are fantastic and easy to use. You can use them to build offers, start sales and find customers online.
Start flexible, stay flexible
Katie and Andrew wanted to launch an escape room gaming business (They lock you in a room and you have to solve the puzzles to escape!).
Their stumbling block was premises. If you were to launch this business the traditional way you would borrow tens of thousands of pounds (or dollars or euros) to get the premises right… before you open and hope that customers come along! This is dangerous and I have a friend who did exactly this and took several years to pay off the debt from his failed business.
Katie and Andrew did the exact opposite. They started for free by using flexible space. They started with a 2 day PopUp version at the Fringe Festival in Reading and learnt so much and got some great initial success.
They then went out and found an empty room in a Victorian themed bar which they could use to launch their business and did a 6 week PopUp version which earned them enough money to be able to get their own premises. They are opening very soon! Check out the website here: www.timetrapescaperooms.com
In a start up, you have to deal with uncertainty. You can’t know with certainty if the business idea will work. You may not know who your customers are going to be, what aspects of your idea they value, how they will make their purchasing decisions, what price they are prepared to pay.
So you have to stay flexible, conduct experiments and get quick feedback from paying customers so that you learn and develop the offering over time. As you go along, you can adapt, improvise and overcome obstacles. Flexibility and adaptability are key.
There are so many way to start a business. You don’t need to write a business plan, you don’t need to borrow money, you just need to come up with a good idea and start with sales. So get out there and provide something of value to someone that is prepared you to pay you for it.
ps For face to face support in the UK, come to one of our free events www.popupbusinessschool.co.uk/events or you can catch us on our YouTube channel
pps Want to see what an event looks like? Check out an event we ran recently.
If you are considering starting any sort of business, no matter how big or small, and would like to dive deeper and learn more of the principles introduced here, check out the book The Lean Start-Up by Eric Ries.
This is one of the “go-to” books for tech venture capitalists and entrepreneurs in Silicon Valley and elsewhere.
And, if you’d like to hear more from Alan, check out this podcast interview by The Mad Fientist.