Tag Archives: beginner

Self-employment Tips: the Missing Manual

Normally when you start a new job, you get an employee manual that gives you rules, procedures and other useful bits of information. But when you’re self-employed, you get no manual. No one gives you tips for the newly self-employed.

Fortunately, we now have Google, and any specific problem (How do I register as an S-corp?) can be pretty easily answered.

The tricky bit is those things that Google can’t answer, because you don’t think to ask. Things that have changed from the world of other-employment, but no one told you that they changed.

So here I present my 10 most important self-employment tips: what I wish people had told me when I became self-employed.

“Productivity” is measured differently

This is really obvious when you think about it, but you have to stop and think about it.

When you were employed, someone else was measuring whether you were being “productive”. And just between you and me: I know that you weren’t always productive when you looked busy. At 3 PM on a Friday, you were just moving the mouse around, or fiddling with files, or writing useless memos. It’s OK – we all do it.

But there’s no need to do it now. Now you’re the one measuring productivity. And that means that you get to decide what counts as “productive”.

Surfing the web doing mostly useless internet “research”? Probably not productive.

Taking 30 minutes off to go for a walk / do some yoga / sip tea and contemplate the direction of your business? Probably productive.

Resources for Further Reading: What is Productive?

More is not always better

It’s easy to feel like you’re not doing enough. Like you’re not good enough. Like you can’t be charging very much for this, because somebody else does it “better”.

Odds are good that your old employer was intent on being everything to everyone. On shipping products with hundreds of features, that did everything you could possibly desire. Back in the days when a single doodad could cost a week’s worth of wages, and nobody could reach customers except through mass markets, that kind of thinking made sense.

But now you can make profitable products that cost as little as 30-seconds worth of wages. And you can target amazingly specific markets, like people who have WordPress blogs and want blue backgrounds with dark blue text or people who think that pictures of cats with misspelled captions are the very pinnacle of humor. So the one-size-fits all product doesn’t make sense any more. Their products are not better. They’re just bigger

Resources for Further Reading:
Opportunity cost: More Is Not Always Better
Who’s the Best?
Risky Compared to What?

Don’t sell to everyone

This is a corollary of the above. If there’s no one definition of best because everyone has their own opinions about what’s important, then there are some people for whom your product is the best. There are also some people for whom your product is not the best.

Ignore those people.

There is no obligation to try to sell to everyone. There is no benefit to trying to sell to everyone. It wastes your time and annoys the prospects. Don’t worry about people who don’t like your product; focus on finding the people who do. Everyone will be happier.

(Side note: it also follows that you’re allowed to fire customers. When you were an employee, your employer got the to make the decision about which customers were worth dealing with, and you had to work with whoever they sent to you. Now that decision is yours. Someone aggravating you so much that you don’t want to work with them? Say, “I’m sorry, but I don’t believe I’ll be able to meet your needs, so I’ll have to decline. I hope you’re able to find someone who can help you.” You don’t have to work with anyone.)

Resources for Further Reading
Target Market: Who are your clients?
Target Market: Segmentation
Target Market: Getting to Know Them

You’re now in sales

OK, actually, lots of people told me that. I even, at some level believed them. But not deep down. I still hoped that, somehow, people would just show up on my doorstep without being asked.

I don’t expect that my saying it again will convince you any better than anyone else’s has, so I won’t try. But when you wake up one morning and say “OMG! I’m in sales!”, here are some resources for you to browse.

Resources for Further Reading
The Hardest Thing You’ll Do
You’re Great at Sales
Are Marketing And Sales Unethical?
Do You Suck?

The decisions you’re making now aren’t actually that important

This attitude probably actually came from school; at least that’s where I got it from. In the US school system, you’re given one try. One essay on Pride and Prejudice, one guess on the history test. If you get it wrong, you fail. So making the right decision becomes hugely important. Your employer may or may not have had this sort of culture, but odds are good that they didn’t do much to discourage it.

Which is sad, because the real world works almost NOTHING like that. In the real world you get almost infinite guesses. There’s nothing wrong with guess-and-check: it’s called testing, and it’s recommended by every intelligent marketer, SEO, and business coach.

Experiment with your business’ name. Experiment with your products’ names. Experiment with your business model. Experiment with your web page. Experiment with your sales techniques. Experiment with your prices.

Don’t know what to do? Pick something and try it. You can always change it later.

Resources for Further Reading
Flickr used to be an MMORPG
Play it safe.. and experiment
Picking a name
This ain’t middle school

Lack of instant success is NOT failure

This is a corollary to the above. We got our definition of failure from school, where, if you’ve failed the first time, you’ve failed forever.

The real world, as noted above, works nothing like that. You try something. It doesn’t work as well as you’d like. Maybe it doesn’t work at all. You have not failed. Your first try failed. You get as many guesses as you want.

I mean, imagine you’re in math class and the teacher says that on this test, you can retake it as many times as you want, and whichever you want to count towards your grade will be the one that counts. Furthermore, you can have your previous graded tests with you when you take the text the next time. How could you possibly fail? There’s only one way, really, and that’s to quit while you’re behind.

That’s how the real world works. You cannot fail except by choosing to give up and stop trying. Hey, wait, other people have already said that.

I know that seems obvious at this point. That’s ‘cuz I’m very persuasive. After your first failure, it won’t feel so obvious. All the cultural and educational conditioning will kick in, and you’ll feel like a pathetic, suicidal, good-for-nothing loser. But that perception will be wrong, so try to remember that, and come back here if you need some inspirational reading.

Resources for Further Reading
Lack of instant success is NOT failure
Think You’re Not an Expert?

Your definition of risk has changed

The philosophy of US educational system and of US corporate culture can be pretty well summed up as follows: Don’t Make Waves.

We’re trained to shut up and keep our heads down. Write the same tired essay about how the fall of the Roman Empire was due to decreased democratic principles. Don’t nag the teachers about obvious exceptions to the broad statements they’re making. That’s how you avoid failing.

That doesn’t work here. Your biggest risk is not that you’ll irritate someone. Your biggest risk is that no one will realize you exist. That no one will think your product is good enough to bother with. That every single competitor will be a better choice than you are for some reason.

If you do something crazy, you have a chance of being awesome. If you do nothing crazy, you’ll drown quietly in a sea of mediocrity.

Resources for Further Reading
Who’s the Best?
Risky Compared to What?
Dangerous or Gutsy?
When More Volatile is Less Risky
Examples: When Predictable is Risky


In every organization, there must be someone who knows what’s happening and why. Employees can simply rely on the Strategic Planning department of their company, but your organization now consists of you. No more just muddling along waiting for someone to tell you what to do. It’s now your job to decide what to do, how to do it, and then to get it done.

So you really need to start planning. I don’t care if you plan your days out in a little hour-by-hour grid — that sort of planning seems to work well for some and horribly for others, and I trust you to make your own decisions. But you really need to have some idea of what you hope to accomplish in (a) your lifetime, (b) this year, and (c) this month. It serves all sorts of useful purposes: it helps you define “productive”; it helps you decide who to sell to; it helps you identify opportunities vs distractions; it helps you assess risk. It helps you actually to be productive. There’s really no substitute for it.

Trust me on this. Plan.

Resources for Further Reading
Annual Planning: What do you want to accomplish this year?
Monthly Planning

No Kamikaze Pricing

Hey, odds are good that you were getting paid a lot less per hour at your last job. “Standard market price” feels like a heck of a raise. OK, so it’s what your boss was charging for your time — which is part of why you decided to become self-employed — so you were always worth that much, right? But it feels like a lot, and maybe you don’t quite feel like you’re worth that much, and anyway if your prices are lower, you’ll get lots of customers, right?

Well…. no.

There are several problems with that:

  1. You can’t profit at that price There’s a reason your boss was charging that much for your time: it’s what they had to charge in order to buy supplies, pay overhead, and still pay you. By the time all the business expenses are paid out, you’ll be making basically the same amount as you did before. Did you really want to take a pay cut?
  2. Customers will think you’re sleazy If you’re significantly below market price, customers aren’t going to look at your prices and think Wow, what a bargain!. They’re going to look at your prices and think Wow, how is this guy staying in business? Is he staying in business? Maybe it’s just a scam; he’s going to take my money and skip town. Or maybe he just does shoddy work, so he doesn’t have as high of costs. Either way, I certainly can’t get anything good for that price. I’ll stick with the big-box corporate competitor.
  3. You’ll be locked into price wars If you do manage to make sales, you won’t have gotten them on the basis of your stellar workmanship or awesome customer service: they’ll be based on your prices. If you raise your prices, you’ll lose all your customers. You’ll be stuck forever at the bottom of the barrel.
  4. You’ll get the worst customers There are always customers who are willing to risk shoddy worksmanship and sleazy business in order to save a few bucks. But they’re not the people who will happily pay for good work. They’re the people who resent every penny they pay you. Who will ask for discounts on above-average work. Who, when you give them a 10% discount, will ask for 20%. Who will complain about your prices and your work. Who will demand refunds on “faulty” products that aren’t faulty. Who will put off paying you until you’ve asked politely 3 times and less politely another 4. Easiest way to avoid those customers? Raise your prices.
  5. You can’t out-WalMart Walmart The big box stores can always be cheaper than you can; they’ve got better efficiencies of scale. So all you can do is trigger a price war that you’re guaranteed to lose.
  6. Charge what the market will bear. No kamikaze pricing.

    Resources for Further Reading
    Are you using kamikaze pricing?

    Most businesses fail.. but most jobs succeed

    When you decided to become self-employed, or possibly when you very first brought up the possibility, some “friend” said to you: “You know 95% of businesses fail in their first 5 years, right?”.

    Subtext: Who the hell do you think you are? How dare you think you’re good enough to move out of the employment hellhole? Stay here and suffer with the rest of us, like a Real Man!

    The statistic is accurate, but the conclusion drawn from it (that you should just give up now and not even try) is entirely false.

    First off, we use definitions of “failure” for businesses that we wouldn’t use for anything else.

    Secondly, “failure” of a business doesn’t mean that the owner went bankrupt and starved on the street: it means that the owner had to make another guess and try again. Remember the infinite math tests?

    Thirdly, many “failed” businesses supported their owners & their owners’ families for years before they “failed”.

    Fourthly, that statistic conflates true “Business” ownership with being self-employed, and so the 95% failure rate is a purely meaningless number. It’s not only lumping in apples and oranges but also bananas and pears and pineapples in an attempt to scare you out of making an intelligent, challenging, fun, and generous choice.

    Maybe you can’t do this. But maybe you can. Don’t let some loser scare you off with an invisible mallet.

    Resources for Further Reading
    Most Businesses Fail… But Most Jobs Succeed
    80% of New Employees Fail Within the First 5 Years
    You’re Not In It For the Money
    The Invisible Mallet

    What do you wish someone had told you when you became self-employed?

You can’t risk XP

I talked a couple weeks ago about the RPG metaphor for improving your abilities: the more you practice, the more XP you spend.

But if spending XP is identical to “practice”, why don’t I just say “practice?”

Because practice is a verb — it’s something you can choose to do or choose not to do. But experience point is a noun — it’s a resource that you have and want to use wisely. It was for that reason that I treat it as a thing, and asked you to track where you spend your XP: I want a poor use of XP to feel as painful as a poor use of money.

The difference between XP and money

There’s an important distinction, though, that sometimes gets overlooked, and that’s that you can lose money. You can lose it gambling, or on a bad investment, or on a good investment that had bad luck, or simply falling out of your pocket.

But you can’t lose XP

You, like everyone else, get 24 hours a day; 960 waking minutes to do with as you see fit. Whatever you spend that time doing, that’s what you’ll get better at. Your XP always turns into greater skill at something.

You can take more chances with XP

That means that you can spend XP on ventures with much greater uncertainty, without worrying about actual risk. You can start a blog with no idea what you’re doing, and the worst possible outcome is that you learn something about blogging. You can start a freelance business by setting up a profile on elance and pick.im, and the worst possible outcome is that you’ve learned something about freelancing and online marketing.

You can risk money; you can risk pride; you can risk relationships. But you cannot risk XP. Practice is the only investment with a guaranteed return.

Resources for Further Reading
Homework: Where are you spending your XP?
The best place to invest your money

Reminder: If you like to run your life on the calendar year, it’s time to schedule a time for your annual planning retreat.

Resources: Making big changes

I’ve provided a lot of information in the last couple of weeks on how to select a new year’s resolution — that is, how to decide which major change(s) you want to make in your life. But I haven’t talked at all about how to actually make those changes.

I was going to write a blog post on this, but as I thought about what to say, I realized that others have already said it.

Christopher Penn talks about the three questions to ask yourself before you jump off the cliff towards your aspirations.

Steve Pavlina talks about using the first few days of your motivation to set yourself up for success. He also explains the structure of a habit change (hint: it’s not 1. decide to change 2. change easily 3. live happily ever after), and gives an example of that structure in one of his habit changes.

Basically, it comes down to this: if you decide to make a change, you have to think about other changes that go along with it. Deciding to change your spending habits means also changing your eating-out habits and your spare-time habits and your grocery-shopping habits and your clothes-decision habits. Changing your eating habits means also changing what you order at a restaurant and which aisles you go down in the market and which foods you stock in the cupboard.

So think about all of that, and put together a plan to make it happen.

And since there wasn’t much value added to this post, you’ll also get your regularly-scheduled Thursday post this afternoon.

“Habit is habit and is not to be flung out the window by any man, but must be coaxed downstairs gently one step at a time” – Mark Twain

Case Study: Should this business proceed?

One of my projects this year is helping a friend of mine start a business that he’s always wanted to run. The business centers around a common interest, and we have very complimentary (ie non-overlapping) skill sets, so it’s a good partnership, and one of his other friends is the partner in charge of the practicalities of business/legal aspects and of developing an online presence.

The first step of starting a business, of course, is to determine whether or not you actually want to start the business. We got a team together and discussed everything from location and possible promotions to the details of which products to sell and how many employees we’d need. Then we put together financial projections to figure out how much money we’d need to start, and how much money we’d need to make in order to pay that back, and whether that seemed possible. The numbers come out right in the middle: success isn’t obviously impossible, but it’s not guaranteed either.

At this point we face four possible options:
1) Drop the project entirely.
2) Modify our plans and assumptions to make success more likely
3) Proceed with caution, and see what develops
4) Damn the risk and full speed ahead!

Let’s examine them each in turn:

Drop the Project

The big and obvious advantage to this one is the lack of risk. If we don’t even try to start the business, we can’t possibly lose any investment. Just how advantageous that really is depends on how much investment we’re putting in. In this case it’ll take $20,000 – $50,000 to start up the business, and $10,000/month to run thereafter. So we’re looking at potential loss of several thousand dollars (although it’s unlikely that we would fail to make a single sale, it is possible, so that’s the worst-case scenario), which could be guaranteed not to happen if we simply stop here.

The big and obvious disadvantage to this one is that my friend will have to give up running the business that he’s always wanted to run. Just how disadvantageous that really is depends on how much he has always wanted/still wants to have this business. Despite illusions/stereotypes of coolly logical CEOs, this business decision has to be made emotionally: how much does it matter to you?

Modify our plans and assumptions to make success more likely

The financial projections provide for a salary for each of the partners; if we could get by on a smaller salary, or support ourselves in other ways while the business gets going, that would lower the financial risk, and make it easier to break even. Obviously that won’t help unless we can then increase the business’ earnings so that we can take salaries, but it does help smooth out the start-up/transition period.

We could also figure out some way to test the market: by selling our products in another store, which would provide some information on demand in the area; by getting hard data on the walk-by and drive-by traffic in our proposed location, which would help us estimate the required conversion rate; by doing surveys in the neighborhood to estimate demand; by spending some money now to start our proposed promotions and measure the resulting demand. These would let us get a better feeling for how accurate our financial projections are, and to revise them as necessary.

We could change our business model to one that’s less capital-intensive, such as online affiliate programs, online drop-ship options, etc.

The advantage of this method is that it gets us almost as little risk as option #1, but without giving up the dream.

The disadvantage is that there may be really long delays while we tweak and measure and brainstorm and adjust, in order to get the risk within acceptable boundaries.

Proceed with caution, and see what develops

This is fairly risk-intensive: it involves starting up the business as proposed, albeit making as few expenditures as possible until we have a feel for what kind of income we can expect to receive. The partners should discuss what situations we might face and how we would respond, so that we don’t get caught completely flat-footed when something comes up. We should also define the limits of our experiment: under what circumstances (number of months, certain level of income, certain number of sales, etc) will we declare ourselves finished and take steps to dissolve the business?

The advantage is that we have this plan in place, so we can proceed immediately (well, as soon as we raise the capital, anyway). And although it is risk-intensive, we know what we’re getting into, and we’re prepared to make course adjustments

The disadvantage, obviously, is the possible loss of $30,000 – $170,000.

Damn the risk, full speed ahead

Or we can proceed just as we planned, bet it all on one roll of the die and see if our current business plan is perfect.

There are no advantages to this plan; it would be stupid.

The only reason I bring it up is that most people, when they’re deciding whether or not to start their own business, create a blog, write a book, or look for a new job, think that it’s an all-or-nothing proposition. Either you drop the project entirely or you implement your ideas without any room for reassessment and adjustment.

Remember that you got this far by experimenting, observing, and learning. You can continue forward the same way.

And your final answer?

There’s no way for one person to make this decision. There’s no clearly right or wrong answer.

When deciding whether to proceed with your business, you have to consider all of the above: what’s the risk? How much do you want to do this? What could you do to adjust? How would that affect the risk? What would happen to you if the works-case outcome occurred? What would happen to your partners? What would you do in that scenario? What’s the probability of that outcome? What’s the probability of success?

And given all that, what do you want to do?

Homework: What do you care about?

This is a follow-up to a guest post I wrote for The Finance Geek: You don’t care about money. I argued that you only care about money because it helps you get what you actually care about.

So what is that?

    What would you do if you were going to die tomorrow?

    What would you do if you were going to live forever?

    What would you do if you knew that you could not fail?

    What would you like to do before you die?

    If you could change one thing about your life, what would it be?

    If you could change one thing about the world, what would it be?

    If you rubbed a lamp and a genie offered you three wishes, what would you wish for?

    What one thing — object, event, or change — would be worth having, even if you couldn’t get anything else for the rest of your life? What would be worth living on oatmeal in a one-room shack if you could only have that?

Journal about this. Discuss these questions with your BFF. Answer them on your blog. Post your answers in the comments. Don’t stop until you know what you care about.

Resources for Further Reading
You don’t care about money
Homework: Figuring out what to do
What would you do if you could live forever?
What do you want from life?