Are you unhappy with your current job? Have you always dreamed of being your own boss? Before you quit, you need to create a plan.
I had the opportunity to speak with Melinda Emerson, the “SmallBizLady” and America’s #1 small business expert, who took the opportunity to share with us her proven, step-by-step method to transition from employee to entrepreneur.
The full audio and slide deck are included above, and the full transcript can be found below:
Sabrina: Hello, everybody. This is Sabrina Parsons, the CEO of Palo Alto Software. We’re so happy to have Melinda Emerson, the “SmallBizLady” with us today. She’s got some fabulous content for all of you who are interested in becoming your own boss. I am going to let everybody finish logging in because we had a tremendous number of signups for this webinar, a lot of interest and so I can see the attendees joining at a very quick pace here. I’m just going to give everybody another about 30 seconds to finish logging on.
While we wait for everybody to get logged on I want to just give you guys some housekeeping, how we’re going to run the webinar, so you know what to expect. You can ask questions that will be answered at the end of the webinar, the last 15 minutes of the webinar, but you can go ahead and ask them as they come up, as Melinda’s giving her presentation. In the question section of your go to webinar control panel, you’ll see that if you look down there’s a little area that says questions and you can click on it and they’ll expand it and you can ask questions.
Go ahead and ask your questions whenever you want and then I’ll help moderate them for Melinda at the end of the hour. If you don’t have a question that’s answered throughout the hour, we’ll give you guys contact information, you’ll be able to get back in touch with us. We’ll also be sending out a follow-up email after this webinar and we will be recording the broadcast and making it available as well. I think that’s all our housekeeping and it looks like although we still have a lot of people logging on, I’m going to go ahead and introduce Melinda and make best use of everybody’s time here and give Melinda all the time she needs for all her great content.
Melinda Emerson, the “SmallBizLady,” is America’s number one small business expert. If you don’t know of her you definitely want to go find her on Twitter, SmallBizLady. You just want to check her out. She’s got so much information particularly for all of you entrepreneurs or just starting out entrepreneurs. She’s a seasoned entrepreneur, a professional speaker and small business coach, and she develops audio video and written content to fulfill her mission to end small business failure. As CEO of Quintessence Group, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business startup, business development, and social media marketing.
Forbes Magazine named her number one woman for entrepreneurs to follow on Twitter and she hosts hashtag small biz chat Wednesdays on Twitter from 8 to 9pm eastern time for emerging entrepreneurs. If you’ve never attended a tweet chat this is a great one to attend, great, great content. If you have attended one the small biz chat Wednesdays are fantastic, so I encourage you to do that. She also publishes a resource blog, succeedasyourownboss.com and Melinda is also the bestselling author of “Become Your Own Boss in 12 Months: A Month-By-Month Guide to a Business That Works.” With that, I will hand it over to Melinda.
Melinda: Thank you so much, Sabrina, and thank you so much to Bplans.com for having me today. My favorite thing to do is to help people get free from jobs, that is my favorite thing on earth. I am so excited to talk to you all today about how to become your own boss which is actually the content in my bestselling book, “Become Your Own Boss in 12 Months.” The second edition of this book just came out January 2nd, so I’m going to share with you all later on in this presentation how you can grab a copy of it today and invest in yourself and really change your life and hopefully help you get a roadmap to start your dream business, all right.
The first thing I want to do is just walk you through what we’re going to talk about today. We’re going to talk about what’s really involved in running a business. It is not for everybody and I’m going to tell you all about what you need to be thinking about as you want to make this transition from having a job to starting a business. Then we’re going to talk about life planning. Let me tell you about something, guys. You need to think about what you want out of life and why you want it before you start your business and I’m going to teach you why small businesses fail and you’re going to leave this webinar today with an action plan for success. I’m going to give you actionable tools and tips that you can take away today and use to start building your dream business, all right.
The first thing I want you all to do is I want you all to say with me out loud this phrase. When you are an entrepreneur you kill for your dinner every day. Now is there anybody that does not know what I’m talking about? When you put your shingle out and you say that you are open for business that is serious business because if you don’t work and you’re an entrepreneur that means you might not eat. I want you all to understand what we are talking about today as we talk about how to become your own boss.
Now I have developed a six-step system to help people make that transition from employee to entrepreneur and I’m going to walk you through that throughout this presentation this afternoon. I want to tell you that I could not come up with anything as cool as the hedgehog concept, so I named my system after myself, right. It’s called the Emerson Planning System and it starts with what we talked about a second ago. It really starts with life planning. You got to figure out what you want out of life and then you got to build a business that aligns with that because the last thing you want to do is trade a sole sapping job for a business that feels like a noose around your neck. That is the last thing on earth you want to do, so that is something that I want to keep you from doing.
Now the second thing that I’m going to teach you about the Emerson Planning System is that you’ve got to develop a financial plan. Here’s the deal guys, the money to start your business is going to come from you and you’ve got to figure out how you’re going to tighten your belt and come up with all this money you’re going to need to start your business because really guys it takes a minute for money to start coming back in. For the first year or two money is going to go out and you need to figure out how you’re going to survive while your business is growing and so I’m going to talk to you about that.
Then we’re going to look at your business concept and we’re going to look at it from the standpoint of what skills do you have versus what skills do you need to run your particular kind of business, right. I don’t want you to start a restaurant because you like to eat. I want you to start a restaurant because you know what is involved in running that type of business, so we’re going to talk about how you can get that background information and expertise.
I’m also going to walk you through developing your marketing plan because I see too many people, they focus on their logo, they focus on their location, they focus on their invitation to their grand opening event and if their life depended on it could not tell you who their niche target customer is. That is a mistake and I’m going to teach you how to get to the nitty-gritty of that, so that you make sure that the day you open your business you know who your target customer is. We’re also going to talk about developing a business plan. Hey, guys, listen, I don’t want you to spend more time planning your vacation then you do how you’re going to support yourself and your family financially. I want you to have a plan for success, so we’re going to talk about that.
Then I want you to launch your business while you’re still working. I don’t believe in quitting your job and then starting a business, not unless you’re starting a retail business where you absolutely have to be there every day. Most of you are starting professional service businesses and Internet businesses and you can absolutely do those businesses on your evenings and your weekends. I believe in launching while working, so that you can learn on somebody else’s dime. I’m going to walk you through these things a little bit more in depth.
The first thing I want to ask you is are you ready to become an entrepreneur? Do you have a solid business idea? What do I mean by that? I mean do people other than your mom and your best friend like what you want to sell? You got to make sure that there’s an actual buying customer out here and that whatever you’re trying to sell has a customer willing to pay for it. A lot of people get caught up in this word passion. Let me tell you what I think about passion. I’m passionate about music, but I’m not auditioning for The Voice. I don’t believe I can make a career doing that.
You want to make sure that whatever you’re designing your business around that it actually has a profit center and a paying customer. That’s what I mean by do you have a solid idea. Then you got to evaluate whether or not you can even afford to become an entrepreneur. Let me tell you something, if you love Prada, if you have a daily Starbucks habit, if you’ve got something else that you do that you waste money on every week you might need to keep your job because when you first start out in business belt tightening is required, so you really need to evaluate. If you got a 3 or $4,000 a month mortgage and two brand new cars in the driveway that’s a lot to take on when you’re considering quitting your job. I want you to be really realistic about your personal financial portfolio and how you spend money before you make the decision to start a business.
Also you need to evaluate whether or not you have the energy and the discipline to launch your business because the reality is is we all know there’s lots of things that are pulling us. Do you have small children? Do you have aging parents? Do you have other things that pull at your time other than your business and your full-time job that you’re going to have to keep for a while, so you’re going to have to do both. You’ve got to figure out whether or not you have the organization and stamina to manage all of that.
What do you need really to start a business? What does everybody think you need? Honestly, guys, you need a plan, you need a 12-month plan which is the reason who my book is called “Becoming Your Own Boss in 12 Months” because I give you a month-by-month guide of what you should be doing to prepare yourself for the transition. I don’t believe in cold turkey transition. That’s a good way to end up back in corporate America, so the number one question that I am asked as the SmallBizLady is why does it take 12 months, SmallBizLady? Let me tell you before you even ask me in the question section of this presentation. You need to make sure that you are an industry expert.
Please do not start a business that you don’t know anything about because that is a recipe for disaster. Get your industry experience even if that means you may need to go work for a company like the one you want to start. Just make sure that you study your craft and study your industry because you want to make sure that you’re going into a business where the industry is growing and not shrinking. That’s why you really want to do your homework and go to your industry conference and meet people in your trade association because people, once you get to know them they’re going to tell you the real deal about what’s going on and probably will open up their kimono and tell you what’s going on in their business, too, but you got to show up and you got to participate.
You also may need to reconnect and expand your network. Listen guys, 90 percent of all small businesses get business referrals, so if you are somebody who doesn’t have a network you’re going to have to build one because that’s going to be the lifeblood of your business. You also need to have exceptional credit and I’m going to explain a little bit later in this presentation what I mean. You may need that 12 months to reposition yourself financially if your credit is not where you want it to be because guys let me tell you something. You are your business’ credit when you first start out. I have been in business 16 years and I couldn’t go into a Staples today and open a Staples credit card without them running my personal credit. You need to understand that your personal credit is key to you eventually having business credit and you must, must, must validate the market, you must make sure that there is an actual paying client for your product or service.
Now let’s talk about how you look at yourself. You need to figure out, depending on what kind of job you have, whether or not you’re known internally or externally at your company. If you’re a salesperson you have an external network, but most of us are not salespeople, so you’ve got to figure out how you’re going to get known because if all you are is known internally at your job [inaudible 00:13:25] that’s going to be only one potential customer and that is not enough. You got to force yourself to start networking because your network is your net worth when you start out a business and that’s really where your initial business leads are going to come from because people do business with people they like, know, and trust.
Your initial networks usually are at your job, so you got to make sure that you spend some time paying attention to people and following up and learning people’s names and remembering the names of people’s kids. Just build up your network because you want to build it up before you need it. The last thing you want to do is start calling people who haven’t heard from you in three to five years and start telling them about how you started this business, that you want them to do business with you. That is the wrong way to build business relationships. You want to have relationships frankly before you need them.
What do you need before you start? A solid business idea, industry experience, and a credit score of 750 or higher and zero debt. Now let me describe what I mean by zero debt because people always freak out when I say this. I don’t mean your mortgage has to be paid off at your house and I don’t mean that your student loans have to be paid because those tend to be some of the biggest bills that we have. I do mean no credit card bills, I do mean no car payment, no extraneous bills that are unnecessary. You need to get your personal debt under control and the reason why is because you’re probably going to need to use that credit capacity in the early years of your business. Most people who bootstrap their business do it on their personal credit card and if yours are maxed out from the day you start your business you’re going nowhere fast.
All right, so what do you need to have in place personally? If you don’t hear anything else I’m saying in this presentation, remember this, an unsupportive spouse can kill a business faster than a bad marketing plan, so you want to make sure that your spouse or partner is bought into what you are doing. Because let me tell you something guys, it is really, really, really hard to run a business and if you’re coming home to a bunch of drama and stress every night, to a spouse that’s like what are you doing with your time and what are you doing with your money, you’re not going to make it because you just will not be able to withstand the pressure and the initial heartache that always comes with starting a business.
You also want to make sure that you have a family meeting, that you get family buy in. If you have kids, particularly the teenager variety that are always, “Mom, mom, can I get $40? Mom, can I just borrow the car? Mom, can I get …” You got to stop all of that and how you do it is by having everybody understand what you’re doing. Sit down with your family, explain to them about your business. If you have kids that are of age give them a job in the business, so that they can get invested. I have a nine-year-old son and I give him little jobs in my business and I pay him. Those of you that follow me online and follow me on YouTube, you probably have seen my son, Joe-Joe in some of my videos because I need him to understand that mommy is the SmallBizLady.
I need him to understand that if I’m on a conference call I don’t need him to bother me, right, and I pay him for his silence and cooperation. You need to figure out how to do that to get your kids invested and what you’ll find is that they may become extremely interested in what you’re doing, but you want to make sure that everybody knows that it is a family sacrifice because otherwise your family can become major saboteurs to your business. You also when you’re dealing with your spouse, you want to give your sweetie a realistic timeline for how long you are going to chase your business.
Be careful with this now because they love you, but they are going to hold you to the timeline that you give them. If I were you I’d give yourself six months longer than you actually think you need and I would never do less than 24 months. You definitely want to throw out there your timeline, so that they can feel comfortable that this isn’t a boondoggle or a never ending thing. You also want to make sure that you have what I call a kitchen cabinet of advisors and this is a group of five people that believe in you, that are already invested in your success and they’re willing to give you advice.
The first person in your kitchen cabinet of advisors should be someone who is already an entrepreneur, somebody who’s been there, done that, and can help you sidestep all the booby traps that are out here waiting for you as an entrepreneur. The second person in your kitchen cabinet should be someone who is a client or a potential client because you’re going to need an internal advocate, so you can find out what the real deal is on the budget before you submit your proposal. You need someone who can give you that inside information.
You also want to have someone in your kitchen cabinet who is just a mentor.
Maybe not somebody who has industry experience or maybe they do, but you need someone who can give you frankly personal and business advice. This person’s role is really going to be to give you emotional support on those days when you feel like Chicken Little, right. Most days you’re going to feel like the chicken, you’re going to get up in the morning, you’re going to race for the sun and then other days you’re going to feel like somebody put you in a meat grinder. You’re going to need that person to pick you back up.
If you do not have a mentor in your life, there is a wonderful organization called Score.org that will give you a free mentor either online or in person. Depending on what city you live in there are Score chapters all over this country. I live in Philadelphia, we have an amazing Score chapter here, so you want to seek out someone to help you to just … Sometimes you just need somebody to help you think through things and I have found that the Score chapters around the country are amazing resources.
Sometimes you might have an informal mentorship relationship with someone and you might need to just ask them formally to be in your kitchen cabinet. Those of you that have had the opportunity to go to college, I am quite sure that you probably know someone who is a CPA and someone who is a lawyer and you want to add those two people to this kitchen cabinet as well because you need professional advice. You should not sign any legal document that a lawyer has not looked at and you want to use your accountant as a business advisor. You don’t want to just talk to an accountant at tax time. You need to know what’s going on in your business financially prior to when you’re trying to see how little you can pay in taxes.
Now the reason why I call this group of people a kitchen cabinet of advisors is because these guys will work for food. They are not trying to send you a bill every time you call them and ask them for a question. I find that this group of people might actually like to meet each other, so I like to tell people to pull together their kitchen cabinet quarterly and feed them. That’s all they want, feed them, give them some good lunch, pizza, salad, whatever, but make sure that you understand how to utilize this group of people because if you ask these people for advice and they give it to you and you do not take it, you could be destroying a relationship. It is extremely important that you use this group of people carefully in your business.
Now let’s talk about what the elements of a small business are. First of all, you’ve got legal, then you’ve got accounting and then you’ve got the things that you manage. What do you manage? You manage people, you manage money, and you manage your brand and then you have what I call your business practice. Your business practice is really where the heart of your business lives. It’s your operation, it’s your banking relationship and your processes and what goes into your process? Things like your secret sauce, things that are specific to how you do business and they are very, very important that you think about them as part of your business and not just things that are done eventually when you’re busting at the seams and you finally want to hire people. You need to be thinking about your processes from day one.
Let’s talk about what does it really take to be a successful entrepreneur? There’s lots of things that I find common in successful small business owners, but these are the ones that I think stand out more than any of them. First of all, you need to be a visionary, you need to have a vision for your company, and you need to be able to articulate it to anyone; to your employees, to your banker, to your interns, and certainly to anyone you want to get to invest in your business. You also need to be a leader and a lot of times in a small business you get to be the bad guy, you get to make the hard decisions, you get to take the hill and you have to be willing to do that. You can’t hide in your office when you know you need to fire somebody.
You need to show leadership skills because the things that you’ve got to understand is that everybody else in your company is going to queue off of what you do. If you come late to work, they’re going to come late to work. You’ve got to realize that you are setting the standard and the example for your company as a leader. You also need to have business experience. I cannot stress it enough, starting a business that you don’t know anything about is a great way to learn a lot of expensive lessons, so I want you to make sure that you take the time to learn your industry.
You also need to have a sacrificial attitude and what do I mean by that? Listen, there’s going to be plenty days where you have to give out paychecks and you can’t take one because there’s not enough cash flow and you can’t be throwing paychecks at your employees. That’s what I mean by you are going to be responsible for your employees and their families and you’ve got to be willing to take that on. You also have to have high energy and optimism. Listen, if you don’t believe it nobody else is going to. If you go to a networking event and you’re looking down at your shoes talking about your business, I’m going to believe that you’re scared to death and you’re probably barely in business. You want to fake it until you make it, you want to walk in there like you own the room until you do.
Let me tell you guys something. Back in 2007 when I wrote my book Becoming Your Own Boss in 12 Months the first time, I started calling myself America’s number one small business expert all the way back in 2007. Let me tell you guys, let me let you guys in on a secret. It was not true until 2010, but I owned it from the very beginning and you need to do that, too, for your business. You also need to have a competitive attitude and you’re probably thinking what do I mean by that? Listen, if you don’t believe that you are worth the price you want to charge, you will fold and let people beat you up on price every time. I don’t do that. If you guys want a copy of my book it is $12 on Amazon today, that’s how much it is. I am not going to waiver from that and if you want an autographed copy of it from my website, it’s the full price, it’s $16.95.
Listen, I don’t negotiate with people on fees. My fee is what it is and you have to have the confidence for your fee to be what it is and be willing to walk away from business even if you need business really bad because sometimes you will become known for the business that you turned down. People will respect you and they’ll know not to come at you looking for what I call the hookup humbug deal trying to slash your price. You also have to be confident. Your self-confidence is extremely important. Ninety percent of business success to me is confidence. You got to be strategic especially with your time, with the partners that you align yourself with and even with the hires that you make. You want to be able to see people’s long-term positions in your business and you got to be focused.
A lot of entrepreneurs get messed up because they fall victim to what I call bright, shiny object syndrome. Oh, I think we should do this, oh, I think we should do that. No, you need to focus on one specific niche customer and that is it because that is how you’re going to build a reputation as a specialist. You’ve got to have strong interpersonal skills, you got to like people. If you don’t like people, you must get a partner who does because you are really not going to have a good experience if you don’t like people and you’re mean to people that come into your store or need help when there’s a problem. You know this about yourself, get a partner, do yourself a favor.
Now I want to talk to you about the entrepreneurial job. I know many of you on this call right now, you guys probably still work corporate jobs and you probably think you work for a slave driver and you work so hard. Let me tell you something, when you start your own business you’re going to figure out that you’re the one working for a crazy person and because you’re taking on 10 jobs at one time and it’s a lot, it’s a lot to manage. The number one job you’re going to have is as a sales and marketing guru.
Nobody should be able to sell your product or service better than you and guess what? You’re going to get the chance to type the letters, put them in the envelope and take them to the post office, too. You are your own secretary. You’re going to be your own business planner, you have to write your business plan. I do not believe in hiring consultants to write your business plan because you’re the one that actually has to use it to run your business, so you need to do that for yourself. You are the R&D and resource department, so you’ve got to do the market research, you’ve got to listen to the competitors in social media and look at your competitors’ websites to figure out what’s going on.
You also got to be your own technology expert because when the printer breaks there’s no longer an IT department to call to fix it, so you’re going to have to learn how to fix it or you’re going to have to be really nice to your IT guy before you leave your job to see if you can hire him on the side moonlighting to come fix your printer when it breaks, when you’re working out of your house. You also get to write the checks and sign them on the front and the back. You are the bookkeeper, you’re the CFO. You’re going to write the checks, you’re going to manage who you owe money and who owes you money.
There’s a lot involved in the accounting side of your business and it’s not something that can be ignored and you cannot let your fear of math be the reason why you’re not on top of your finances in your business. You’ve got to be the payroll manager. Even if you use a payroll service, somebody’s got to keep track of the hours and call them into the payroll service every other week. Those of you that have the opportunity to manage people already, you already know the HR role is kind of a therapist role. People have problems and you’ve got to manage that and figure out how much of that you’re willing to deal with in your business. Social media is no longer an option, you must be a social media expert, too, or have some budget to hire somebody to help you.
The second most important job you’re going to have is bill collector and the reason why is because everybody thinks they can pay a small business last. You are going to have to make sure that you get your money and giving somebody a discount for paying you net thirty is crazy. You give people discounts for paying you net 10 in 10 days, not 30 days because they’re supposed to pay you in 30 days. Try as much as you can to negotiate and make sure you completely understand what your customers’ payment processes are. I find the bigger the client, the slower they pay. Those of you chasing Fortune 500 companies, good luck with that because it’s hard to get your money out of those guys.
Now true or false? Most small business owners do not plan to fail, they just fail the plan. I think you guys know after listening to this presentation so far that that is absolutely true. You must plan for success, guys, it will not just happen to you. I want to talk to you now about the five reasons why small businesses fail. The number one reason is because people don’t have a realistic idea of what it really takes to run a small business. For some reason people think they’re going to have more time or be able to have Fridays off when they start a business. Fooey, that’s ridiculous. In the first few years of a business your business owns you, you don’t own your business, so you want to make sure that you really understand what is involved in running your business.
The second reason why small businesses fail is people have no network to sell to. It is astonishing to me how often people with no friends will start a business. People that are bad at keeping in touch with people, who don’t return people’s phone calls, don’t send out holiday cards and they want to pop up and start a business. It’s like really? Okay, that doesn’t work. You are going to get your first client from people who know you, so be nice. If you want friends you must be friendly. You also want to make sure that you don’t just let people walk into your store, plunk down $50 and leave. You need to have an ongoing communication strategy with your existing customers and frankly, guys, email is simply the best way to do that.
You do not want to chase anybody that you think has money. You need to have a specific niche target customer. I tell people like this, who do you want to be, a cardiologist or a primary care physician? I don’t know about you guys, but I want to be a cardiologist, I want to be the specialist in my industry because when you’re a specialist, guys, you can charge more. Look at it like this, does the world need another graphic design company? No, it does not. Does the world need a graphic design company that specializes in educational materials? Yes, it does.
The last reason why small businesses fail is because people lack fiscal discipline. You should not spend a dollar that is not in a budget. You need to make sure that by the 15th of the month you know how well your business did last month. You need to learn how to read financial statements, statements of cash flow, balance sheets, a profit and loss statement. These are things that you need to learn how to read and that you need to be on top of, so that you can make adjustments in your business.
Now I want to talk to you a little bit about life planning. I want to talk to you about this because I believe that this is a step that most people skip over. People immediately want to start talking to you about business plans and I don’t think that that’s what you really need to focus on. I think you need to clarify what your goals and dreams are, so that you know what lifestyle you want and what you will and won’t do. You need to make sure that your business fits with your personal goals and ambitions because what can happen is you might start a business, it might even be a good business, but it might not be a good business for you and your family.
Let me give you an example. Let’s say you want to be a photographer and you want to specialize in weddings. What that means is from April to October, depending on what part of the country you live in, you’ve now tied up most of your weekends. If you have small children and run around and do a bunch of activities on Saturdays, that is really going to be extremely difficult for you, especially if you don’t have a spouse that’s willing to pick up the slack for you. You’ve got to think through the impact that your new business is going to have on your life and that’s why it’s important to think through your life plan first.
Now what are some of the key life planning decisions you need to make? One, how much do you plan to work? Two, is day to day variety important to you? Three, how much money do you need to make to be happy? This is specific to the men out there because you guys tend to place your worth on what’s in your pocket and in the first few years there may be some butterflies in your pocket. You got to understand that and be okay with that and not go through some melodramatic midlife crisis because you’re working in a struggling startup business. You also need to look at whether or not you need to update your technology skills prior to you leaving your corporate job. That might be a good thing that hopefully you might be able to do on your company’s dime if it’s something that you can tie into your existing job.
Now I actually have a tool that I have developed to help people develop a life plan and really I made this just so that people can have a place to have quality time with themselves. This is a 76-page PDF, you guys can grab it for $10 off of my website is succeedasyourownboss.com and it’s my life planning journal. I can tell you that if you’re trying to figure out what’s going on, if you’re just unhappy everywhere, you need to make sure that the reason why you’re starting a business isn’t because you really hate your job and you need another job or that you just don’t have a job. You’ve got to have a purpose behind it otherwise you’re going to trade a job you hate for a business that will become a noose around your neck.
Now I wanted to share this with you. This is my vision board and I made this vision board in 2007 when I first became the SmallBizLady, when I first wrote “Becoming Your Own Boss in 12 Months.” You got [inaudible 00:35:01] way back before anybody ever knew my name and I am so proud because almost all of the things on this vision board have come to fruition. These are things that I manifested for myself. After I developed my life plan I developed my vision board, so that I could have a physical manifestation of what I wanted for my business.
I strongly suggest that you all do the same because it may seem like a silly exercise, but I can’t tell you how many days that I have woken up and did not feel like being your SmallBizLady, okay. I wanted to put the covers back over my head. Then I looked over at my vision board and said, “You know what, all right, I remember why I do this. I remember that my mission is to end small business failure,” and it gives me that extra push to keep going. I share this with you all because I want to encourage you that you really need to develop a physical manifestation of your dream for your life and for your business.
Obviously, mine just had business stuff on it, but you can put your dream house, you can put your dream car. There’s all kinds of stuff you can put on this vision board, so that you can really understand why you work so hard because there’s going to be a lot of days that you’re going to be like Lord, why did I quit my job, right. You need something to help you. When you need to develop your financial plan after you get clear about your life plan and the first thing you got to do is calculate your net worth. If you don’t already have a household budget, create an annual household budget. Get to zero debt, figure out how much capital you can access; your savings, home equity, 401K, crowdfunding is now an option out there.
Then look at how you’re going to cover your health and/or disability insurance. If you’re the sole provider of income to your household, you really need to consider disability insurance. I say that to say that when I became pregnant with my son I ended up with a high-risk pregnancy and on bed rest for six months. I was 32 years old. I never could have imagined that I would have ended up on disability, but I did. At the time my family’s sole source of income was coming out of my business, so disability insurance is something important particularly if you’re the head of household or the sole provider of income to your household.
Like I told you all at the beginning of this presentation, the money to start your business is going to come from your right or your left pocket. You’ve got to have an emergency savings account for your household. That should be six to nine months of salary. You need to be able to go for a year or two without a paycheck because that’s how long it’s going to take for your business to break even let alone replace your corporate salary. The first year of working capital you also have to come up with because guys, banks do not loan money to startup businesses.
The most you’re going to get is a microloan for $35,000 unless, of course, you can raise the money via crowdfunding, but guys look, the average crowdfunding campaign raises about $10,000 and that’s a hard way to raise $10,000, so the money is still going to come from you. Let’s say you’re not there, your credit isn’t there and maybe you got some credit card bills that you need to clean up. I’m going to talk to you a little bit now about how you can fix some of that stuff. The first thing you got to do is find out what your credit scores are. Annualcreditreport.com is a great place to go to get a free credit report.
You also should track your expenses for a month and look at where you spend money and for ways that you can cut back. Consider hiring a debt consultant if it’s really bad and then start using your budget and eliminate unnecessary expenses. Guys, drinks are much less expensive when you pour them yourself at home. Think about things that you do. If you like to hit the bars with the girls, how about you hit the liquor store and have them over to your house. Those are things that you can do to still enjoy yourself, but you definitely want to have a way to conserve and save money, but still enjoy your friends.
Now I want you all to read this aloud, but I want you to shop around for a business banking relationship and your personal bank and your business bank should be different banks. The reason why is because many businesses go under. If your personal bank and your business bank are the same bank, your bank can seize your personal assets to satisfy your business debt. You never want that to happen, so do not have your business bank and your personal bank in the same place.
Now what are your basic startup costs? Rent, your marketing budget, business licenses, insurance, equipment inventory, payroll, transportation, phones and utilities and absolutely your professional services. You need an accountant and you need a lawyer, so these are things. Now rent, I want you to hold off paying rent as long as you possibly can. I believe in being a [inaudible 00:40:09] tycoon, being a home-based business is cool again, everybody’s virtual anyway. Start out in your house until you get to the point where you got over three employees. I think you can work out of your house as long as possible.
Now how much money do you typically need to start a business? The average is $25,000 and if you’re going to go into a franchise business triple that number, it’s at least $75,000. Think very carefully about what you’re doing. Even if you’re starting an Internet business, you’ve got to have a great website with a great shopping cart experience and really good photography of your products. Know that you’re going to have to invest some real money in your website and probably online advertising as well. This is not that much money and you will go through it very quickly. That’s the reason why you’re saving the rest of your money is going to be so important.
Where do you find business ideas? Certainly you can buy an existing business, you can do an Internet startup, you can sell information like me, you can expand a hobby into a business. One of the things that I like to tell people is that they should look at the supply chain in their business where they’re working now. See if there’s something that your company that you work for, outsources that you might be able to turn into a business. You can walk out the door with a million dollar contract in your pocket if you play it right. Certainly you should be looking at franchises. Franchises are 10 percent more successful than other businesses people start from scratch and food franchises are the most successful and the most popular.
Now what are the things that you need to consider when you are evaluating a business idea? Number one, you need to think about can you achieve it. Do you have the time, experience, or money, or know where to get it in order to achieve your business. Also you need to look at relevancy, has the market been exhausted? Even if you’re trying to be an Avon lady, you got to find out how many other Avon ladies are in your neighborhood or in your church. Is there a massively dominant competitor? Are you really going to start a company that competes at Microsoft? Probably not. Then you got to look at whether or not there’s going to be a need for your service in three to five years and then you got to look at the industry trends. Again you want to make sure you are going into a business and industry that is growing and not one that is shrinking.
There’s all kinds of businesses models out here, you can start a business organically, Internet businesses, buy a franchise or buy an existing business. You really just have to evaluate … This is the thing I want to say about buying an existing business. There’s always a reason why they’re selling that they’re not going to tell you, so you really have to do your due diligence in their books and in their industry, to find out the real reason why somebody’s selling a book, selling their business, excuse me.
Then you’ve got to look at marketing. Who is buying from this business and why? You’ve got to make sure you understand the market and the customer. You’ve got to have a secret sauce, you’ve got to have something that helps you stand out in the marketplace. Nobody wants a me to business. You also need to understand who the competition is. The scariest thing in the world to me is to meet an entrepreneur who wants to tell me that there is no competition for them. Your customer is being serviced by another product and you need to figure out what that is.
You need to make sure that you have a good idea of what your price positioning is. It can’t be five cents less than the competition. You need to know your numbers, so that you can figure out pricing where you’re actually making a profit in every sale. You need to understand how much budget you need on a monthly basis for your marketing effort. Too many small business owners market with what’s left at the end of the month versus making it a top line expense. Make sure that you set aside budget specifically for marketing every month.
Here’s some marketing myths. They wrote you a check once, they’ll call back when they need you or if they did business with you once, they already know all the ways they can do business with you, right. Wrong, you got to keep in touch with people, you got to stay in front of people, you got to make sure that your customers keep you top of mind. The best way to do that is by providing them with valuable information. Now I believe that every small business needs a plan and one of the best ways for you to develop a business plan is with business plan software. My friends at Bplans.com have a wonderful program that they sell that is monthly that’ll help you walk you step by step through building your business plan and it’s easy.
Don’t sit in front of a blank screen and try to figure out what you’re going to do with your business. Use their templates. Their website Bplans.com has hundreds of sample websites and sample business plans you can look at. They’re just a wonderful resource and I cannot recommend them more highly. If you prefer a book, the plan is you go business plan by Tim Berry is one of my favorite small business books for how to write a business plan and it really breaks it down in bite-sized chunks. I find though if you use the business plan software or use a book, you might still need to talk to a human being to finish it, particularly your financials. You might want to consider enrolling in a business plan course at a local small business development center or community college because that is going to be how you finally get your business plan done.
I want you to know that business plans are living, breathing documents. They are not to be put on a shelf like a historical document never to be looked at again. Your business plan should actually be updated every two to three months to make sure your business is on the right track. Now I wrote a book that will help you walk you through this entire process. It’s called “Becoming Your Own Boss in 12 Months.” It is available now. It came out January 2nd and it is being sold anywhere books are sold, so Target, Walmart, Sam’s Club, Barnes & Noble, Amazon.com.
Go on there right now. If you want an autographed copy of my book go to my website, succeedasyourownboss.com. I’m happy to sign one and get it out to you. I just want you to have this information because I already learned all of the hard lessons in business, so that you don’t have to. Please make this investment in yourself and if you like it will you please go give me a review somewhere. Give me a review on Amazon, give me a review on Target, Walmart, Sam’s Club. I love that stuff and I want to make sure that other people know how this information has helped you, so please consider doing that for me.
Now I promised you all an action plan for success, so here we go. Number one action plan, buy my book, “Becoming Your Own Boss in 12 Months.” Listen, it is a $12 investment. If you’re on this line you can afford that, so I want you to make that investment in yourself, so that you have a plan for success in your business. I also want you to lay out your personal goals. Start thinking about your life plan and evaluate your financial picture, figure out if you can afford to become your own boss. Then clarify your business concept, how is your business going to make money? That is really, really important.
Lastly, you know what, I think all small business owners are superheroes and every superhero has a theme song and you need one, too. Now my theme song is “Money, Money, Money” by The O’Jays. I believe money is how we keep score and whenever I hear the theme of “Money, Money, Money,” it always makes me feel good and it pumps me up and I can get on the phone or I can go to a meeting and I can close a client after I hear my theme song. I want all of you to get your theme song and make it in your favorites on YouTube and have it in the car, have it on your iPad, get your Pandora channel going.
I want you to use music to help you as an additional motivator because guys let me tell you something, it’s hard to start a small business. You are going to go on a journey that you could never imagine, you’re going to be pushed and pulled in ways you could not fathom. Listen, I’m here for you, I believe in you. I believe you can do it, you are one idea away from being able to do anything you want. If you want to reach out to me, if you want more information about me go to my blog, succeedasyourownboss.com.
Follow me on Twitter, the SmallBizLady, or connect to me on LinkedIn and please come and hang out with me every Wednesday night from 8 to 9pm Eastern on Small Biz Chat and like my Facebook fan page please, I hope I have given you some nuggets, some wisdom that’s going to help you in your business because that’s what it’s all about and right now I am happy to turn it back over to Sabrina, so we can take some live questions.
Sabrina: Great. Thank you, Melinda, such great information. First I just want to let you know, Melinda, that there’s been a lot of compliments and people letting us know that they love what you’re talking about and there’s definitely a lot of questions. Let’s start with a question. First, somebody wants you to repeat your blog, so that they have it, so that’s an easy one.
Melinda: That’s an easy one. It’s right on the screen, it is succeedasyourownboss.com. That’s a super easy one. If you can’t remember that just Google SmallBizLady, you’ll find everything about me, just Google SmallBizLady.
Sabrina: Great, great, great. Now here’s another interesting question because I think that this is more about confidence and maybe you can give a few tips, but someone wanted to know … They definitely agree that starting a business that really highlights your talents is the best way to go. How do you really make sure and understand what your talents are, how do you not make a mistake and think you can really do something and then realize oh, wow, I wasn’t really very good at that. How does someone go about saying these are my best talents and this is the business that I can start?
Melinda: I think my life planning process will really help people get clear about where are they a rock star, what do they really love to do, what would they do for free? That’s what the life planning process is about, but I’m also about external validation. I think you should ask three to five people who know you well what your best skills are and you might be surprised by the answer that you get.
Sabrina: Great, and that’s good advice because I feel a lot of entrepreneurs are just … They’re just scared and they just need a little extra encouragement. They actually know more than they think, so really great advice. This is a simple one, but I think it’s important. Somebody wants to know the difference between vision and mission.
Melinda: I think your vision is your big picture vision for your life. If you say, okay, I want to be America’s number one small business expert, that’s your vision. My mission is more specific to my audience, so your vision is about your big picture goal for your business, your mission is about how you’re going to serve your customers. In my case, my mission is to end small business failure, but my vision was to be America’s number one small business expert. Does that make sense?
Sabrina: Yeah, that makes great sense. Someone is curious if you have any advice to whether or not a franchise might be a good option and how do you determine whether you should consider a franchise business if you’re looking to start a business?
Melinda: I think franchises are fine. They are 10% more successful than others, but franchises are expensive and franchise contracts are the scariest contracts anybody will ever put in front of you in your life. If you are considering a franchise you need to get a franchise attorney, somebody who specializes in reviewing and dissecting franchise agreements because they’re very tricky and really your business could be our business and you still owe those people money. You want to be very careful before you sign a franchise agreement, but do your research, do your homework, talk to other franchisees. Find out about how they actually support the franchisee, so that you’re making an informed decision.
Sabrina: Yeah, that’s great advice because I think what I’ve seen with franchises is there’s so much more fine print, so working with a lawyer is probably very good advice there. There’s another question, somebody wants to know the pros and cons of working with a business partner. Should they go at it alone or they should work with a partner?
Melinda: I think you should work with a partner, but I don’t believe in working with spouses and best friends. I personally believe you should never hire somebody you can’t fire and you need to be really careful that your partner has different skills than you. If you and your partner are just alike, that’s not going to work. You also need to make sure that you have a legal agreement that governs your partnership, how it will dissolve, what happens if somebody dies, what happens if somebody gets mad.
Somebody needs to be 51 and somebody needs to be 49 if you’re going to have a partnership because at the end of the day somebody has to be able to make the final decision about big money decisions or big decisions in the business. I definitely think partnerships can work if they are well-defined and if there is a legal agreement between you, but I worry about people working with the boyfriend or working with the best friend because ah, it’s hard to turn it off if
you’re working with your spouse every day.
Sabrina: Yeah, and that’s great advice, Melinda. Not to mention the … I’m sure you’ve heard many of the horror stories of partnerships gone wrong when there’s no legal agreements, when people haven’t really talked things out and then put it in writing with a contract.
Melinda: Oh, I lived it, I lived it. I’m not telling them hyperbole. I lived through it, trust me, I’m divorced today over it, trust me.
Sabrina: Yeah, and that’s something I think people forget because when you start a business it’s all about the exciting things and the fun things. Nobody wants to talk about the hard things and the bad potential outcomes and somebody needing to be in charge, but oh, wow, yeah. Everyone either has lived it or knows a horrible story from a friend when a partnership went wrong, so please guys, listen to Melinda, do your legal work and define that partnership.
This is another interesting question because we’ve heard so much about crowdfunding, although I feel like we don’t hear quite as much anymore the popularity of it because of legal side of things has gone down. People are always asking us and I’m curious, what’s your take on crowdfunding and is there a crowdfunding platform that you like? How do you advise [crosstalk 00:55:44].
Melinda: You know what, here’s my thing about crowd … I think crowdfunding is great. I actually have a chapter in the new book on how to develop a successful crowdfunding campaign. The thing about it is though is I see a lot of bad practice out here and I see it consuming people’s businesses when they could have just gone out and raised $10,000 from one investor versus begging 3,200 people for $10,000. I think that there is a right and a wrong way to do anything and crowdfunding is only successful if your marketing is right, if your video is good, if you have an email list of at least 1,500 people. Your first 30% of funders in a crowdfunding campaign is going to come from people who know you.
Listen, if people who know you won’t invest in you, please don’t believe strangers are going to invest in you, right. You’ve got to make sure that your message is good, that you’re using social media long before you need to launch your campaign. You don’t want to look opportunistic because everybody can smell that, right. You’ve really got to make sure that your why is compelling, that you have great rewards, that you have a timeline that you’re going to actually be able to deliver because we’ve also seen other people have PR nightmares behind doing crowdfunding the wrong way.
I love Indiegogo. Actually, I think Indiegogo is a fantastic platform and that’s the one that I send people to when they ask me. Crowdfunding is cool if you’ve got a good enough why. People are going to invest in you because of your why, why you’re doing your business. It’s not because I’m broke and I need some money. That is not a compelling why, it’s not at all.
Sabrina: Great, great information and I’ll just add that make sure that you know what’s legal in your state, what’s not. Indiegogo I agree is a great platform. People have obviously heard of Kickstarter. A lot of those platforms define how you’re going to get that money and you’re actually not getting investment, you’re doing preorders that you can cash which is fantastic. Great advice, Melinda.
As we get to the top of the hour there’s so many other questions, but I feel this one’s a great one for you because you’re so phenomenal in social media and have been so successful. There is someone wanting to know what’s the secret sauce to keeping your audience engaged on social media platforms? Obviously, it’s a big question, but do you have tips for people on the biggest … maybe one to five tips on say Twitter that work for you.
Melinda: I think no matter what social media platform you’re going to use, the thing that I want people to understand is you really only need to focus on one platform. If you’re killing yourself trying to do Facebook [inaudible 00:58:31], LinkedIn, Instagram, Google Plus every day, you’re wasting your time. You’re doing a scattershot method that’s not working. I became America’s number one small business expert by focusing on Twitter. Then a year later I went to LinkedIn, then six months after that I went to Facebook. I wasn’t doing all that stuff every day. You’ve got to figure out where your best target customers hang out online and be there and be there consistently.
You also need to use what I call the help mantra. You need to share stuff that’s helpful to people, right, period. You also need to engage with people. Thank people for sharing your stuff, thank people for re-tweeting your stuff, learn some people’s names, right. It’s still about like, know, and trust, it’s just online. You also need to listen carefully. Do not assume that you know the culture of the different social media site, right. Facebook people do not want to be communicating like they are Twitter people, they don’t like that hashtag stuff we do over on Twitter, right.
I tweet 32 to 36 times a day. That would make everybody unfollow me on Facebook, so make sure that you understand how people are using the social media site you want to focus on. Lastly, promote yourself with care. Nobody wants to be sold to, right. You should be sharing other people’s content at a four to one ratio of your own. That is how I became a brand in demand. That is how I reached three million entrepreneurs a week online and that is what I have done consistently. I have over 300,000 followers on Twitter and I got those followers one at a time.
Sabrina: Great, such great advice. We’re at the top of the hour, so I just want to thank you so much, Melinda. We were so excited to get you to do this webinar and obviously anyone who missed maybe the beginning or any portion we’ve recorded it, we’ll follow up with an email, so that you’ll be able to hear the recorded webinar. We’ll have Melinda’s information, the link to her website, her Twitter account, so that you can [crosstalk 01:00:33].
Melinda: My book, my book, you’re going to talk about my book, right?
Sabrina: I’m getting there. We will have all the information about her book and I will say to everybody, I know that as an entrepreneur you’re always looking for lots of free things. Once in a while you’re going to need to spend a little money to educate yourself. Melinda’s book, how to become your own boss in 12 months, it’s a book that’s going to help you get the confidence you need. If you can’t spend $12.99 on Amazon or through her website you might not be ready to take that leap, or go to her website and get her PDF of how to do your life plan and how to be successful for $10.
Sometimes you do have to spend a little bit of money to get that information that you need and it’s well worth it. She is the expert she is for a reason, the information is great. We’ll follow up with an email with all of you that were on the webinar and give you all the information you need to get her book, to get to her website, to get all the other information. We really thank both Melinda and all of you for joining us this morning.
Melinda: Thank you for having me, Sabrina. I love you guys at Bplans.com, you know Tim Berry is my heart, so I’m so happy to be here with you all today and I’d be happy to come on back.
Sabrina: Great, thank you so much.