As we explore the relative merits of several kinds of self-directed careers, let's start with an in-depth look at starting your own business-the new American dream. Starting a business is first among self-directed career options because it's actually a foundation for all the others: buying a business, starting a consulting practice, buying a franchise and becoming a freelancer or project manager. Don't skip this chapter, even if you've already focused on one of the other alternatives. You would be missing a few important building blocks.
Let Your Personality Shine
Establishing an enterprise, particularly one in your own name, is the ultimate opportunity to make your mark in the business world. However humble at the outset, and however small you might stay, this business will bear the unique mark of your personality and will reflect your values as clearly as the mirror you look into each morning.
Some people are intimidated by that burden. Even those who aren't will occasionally become uncertain of their ability to create or decide on a necessary next step. In this chapter, we'll learn how to deal with those problems, among others. For now, it's enough to know that you've cast your fate with the self-directed, have a rough path in mind and are ready to pursue your business dream. We'll begin with a few truisms about starting a business and see how well they hold up. These are based on conclusions reached in a terrific Wall Street Journal article entitled, "Nine Myths About Starting a Business," written and reported by Dave Kansas.
A Business Plan Is Essential
You have to have a solid plan for any kind of business. This is an accepted fact of business life, and no responsible adviser will tell you differently.
"Without a plan, and a good assessment of a new business's needs, it's unlikely that someone can succeed at starting a new business," says Peter George, director of the Small Business Development Center at the State University of New York at Albany.
Risking heresy, my view on this sacred cow is at odds with conventional wisdom. I believe that a business plan is simply the best available means for demonstrating that a venture is likely to succeed. It must be formal and complete in order to obtain financing. And it should be at least semi-formal for enterprises that immediately involve employees and other significant obligations, such as a lease. But plenty of successful sole-proprietorships are born without a 50-page supporting document that projects monthly cash flows for the next five years.
Granted, more businesses without plans fail than do those with them. But it's definitely possible to start casually. I believe success results from the merit of the enterprise itself, along with a healthy dose of good fortune. A business plan simply gives us the best possible opportunity to evaluate the merit of the enterprise and choose not to participate in it (this includes yourself if its conclusions indicate a strong possibility of failure).
My business plan is a Manila file folder called David A. Lord, filled with notes to myself-in pencil, on lined yellow pads-that I made before leaving my job at a small business-information publishing company, and during the first few of months on my own. There's a working list of envisioned services and products that's been whittled down, added to and refined again as I've gone along, appearing more formally in letters of introduction and promotional materials I've published during my start-up. There's a list of potential clients-people I've helped in the past who know me to be a reliable writer, market analyst and adviser. There are pages of budget notes: the capital costs of opening an office at home and operating expenses (where the writing practically goes off the page with little things I hadn't thought of earlier).
Then there's my $100,000-a-year plan-a humble attempt at income forecasting. As I weighed the question of what to project for revenues in my new business, I asked myself what my personal income goal should be. Though our family lives modestly in rural New Hampshire, I have three children soon to be in college and am motivated to work hard for that to become possible. I also hope to be prepared for years further down the road after my prime. (Right now, I can't imagine retiring, and I am not sure retirement as we currently know it will even be possible for baby boomers and beyond.)
I felt that net (after tax) income of $65,000 would meet our minimum needs and even provide some discretionary spending with which to celebrate the long hours I'd be devoting to my business. Then I plugged in the estimates of operating expenses I'd made:
All of this added up to about $40,000.
The business would require gross revenues of $105,000. It seemed to be an achievable number, given indications from prospective clients of their intentions to use me. If I could earn more, wonderful, but despite the current spate of news stories about executive families suffering with incomes of $150,000, I felt we could survive at $105,000 (net $65,000). My wife, who freelances on arts and special-events projects, would be kicking in an occasional paycheck as well.
Next question: How many full days of consulting and writing work could I expect to bill for in my first year? My answer: Income from writing is so unpredictable-and often low-I should assume I'll have none and see if I can construct something based on consulting fees alone. Any writing revenues will be a bonus; mad money. I'll write for show and consult for dough. The latter will feed the former.
I budgeted 270 workdays for the year: Monday through Friday plus Saturday mornings, with two weeks of vacation and five essential holidays. Of the 270, I made an educated guess that I might be able to bill for one-third of them. For every day of billable consulting work, I'd be spending two days developing the business, going the extra mile to ensure my work's full value, conducting the on-going affairs of being in business, and filling in with writing projects.
I'd learned from other consultants over the years that this was a reasonable ratio (though there are really no widely applicable formulas for the wildly varied world of consulting). At 90 billable days per year, what would I have to charge per day to attain $105,000 in gross income? $1200 a day would generate $108,000-a worthy goal.
Next, I asked a few consultants doing similar work what their rates were. My magic number-$1200-came up immediately from the consultant whose practice most closely matched my own projected work. All the other answers were higher-all the way up to one fellow at the top of our field who charges $9000 a day. I decided I was safe starting at $1200.
It became my pricing plan and the basis for my final income and expense projections. I made additional informal calculations of what our personal assets and liabilities might look like at the end of such a year, and decided to go for it.
That was and is my business plan. It's worked because I was able to get the kind of work I thought I could, execute it and get paid for it-not because I did or didn't have a formally prepared document. I recommend business planning appropriate to the nature of the enterprise.
