Or: Why the middle of an economic crisis can be a good time to launch a business…

Image of Ralph Waldo Emerson from 1857

If a man has good corn or wood, or boards, or pigs, to sell, or can make better chairs or knives, crucibles or church organs, than anybody else, you will find a broad hard-beaten road to his house, though it be in the woods.

— Ralph Waldo Emerson

It’s safe to say that it’s a worrying time. Actually that’s probably a pitiful understatement, but it’ll do for now. It’s entirely understandable that in such a worrying time, with job security at an absolute premium, people should clutch to jobs like a drowning man to a straw. After all, in the current economy, if you have a job that looks like it will be stable and secure for the foreseeable future it makes sense to hang on to it, right?

A Job For Life?

Well… maybe. The days of a job-for-life have rather disappeared, though. For my parents’ generation, the job-for-life was a thing, at least if you were a white male. My dad joined the police in 1965 knowing that if he wanted, he could stay there until he retired (and he did).  The old orthodoxy was that you signed up with an employer and barring catastrophe you would retire at 65, get your gold watch and go home to tend to the roses. Whether you joined the civil service, the police, the NHS, a bank, an insurance company or private industry, that was the deal.

British Leyland LogoIt started unravelling in nationalised industries first. From the end of WW2 through to the end of the 70s, the instinctive government reaction to major business failing was to nationalise it – take it over, in other words. Coal, rail transport, steelmaking, car making, shipbuilding, bus travel and telephone services were all under state ownership at some point in the UK, for better or worse. So even if you worked for a company that was on its uppers, if it was big enough there was a reasonable chance the government would step in and save it rather than let the jobless figures shoot up. The repeated catastrophic failures of British Leyland and the implacable opposition of the Thatcher government to state ownership put paid to that (apart from banks, apparently, but that’s a whole other blog post), and a lot of people in what they thought were jobs-for-life in places like coalmines and car factories ended up out of work.

At around the same time, a lot of big office-based corporations realised that if they became a bit less British and a bit more American (and by extension, ruthless), the people at the top and the shareholders could make a LOT more money. Mergers, hostile takeovers and downsizing meant that jobs previously thought unassailable were disappearing as the world moved on – there a lot fewer bank managers, these days. Even if you work for the government, directly or indirectly, cuts in police numbers, the armed services and the NHS have meant significantly fewer people have a JFL these days.

As the Covid-19 pandemic continues to wreak havoc on all our lives and some of us are forced to look for other employment, that little essay’s probably not much comfort. Sorry about that. But here’s the good news. If you have a side-hustle that you’re passionate about, enjoy and are good at, now could be a great time to make that your new career. Here’s a few thoughts on how and why…

1: There’s never a bad time to launch a good business.

Altair 8800 microcomputerIn the mid-70s the US was experiencing its worst financial downturn in decades. Two business were formed in garages during that time. One had created a programming language called BASIC for a hugely popular build-it-yourself microcomputer called the Altair 8800 and subsequently formed a tiny company to sell it called Micro-soft. The other, also inspired by the Altair 8800, designed the first home computer to have a keyboard like a typewriter and use a TV set as the output device – a machine known to history as the Apple 1. Microsoft and Apple were successfully launched in the middle of the worst financial climate in the US for a generation, because the founders were passionate about what they did, good at doing it and knew that people wanted it.

Conversely, in the dotcom boom and blossoming economy of the late 1990s, there were businesses falling over themselves to start up or invest in internet companies whether they were good or not. Some, like Amazon, were, although their survival was touch-and-go for a while. Some, like boo.com or AltaVista… weren’t. So it’s not about the state of the economy. It’s about whether you’re good at what you do and passionate enough to convince others. Plus, in a downturn, rents are often cheap because commercial landlords are desperate for tenants.

With that said, however…

2: Get your finances under control.

If you’re worrying about money all the time, you’ll run back to the comfy blanket of your job – and probably rightly. Or, you'll stop building up your side hustle to focus on stuff that you can get paid for right away. So, you need to make sure you've got some money stashed away. The time to be a big spender is not when you’re about to set up your own business. The bills still need paying, plus there’ll be a whole new set of bills that you didn’t think about. Make sure you’ve got a bit of a reserve – only you know how much you need, but if you think it might take three months for your business to really start to fly, make sure that you can pay the bills for three months at least. If you can get launch the business in evenings and weekends while still doing the “day job”, that’s great, as long as you’re sure you’ll have the energy! Bear in mind that in the early years, entrepreneurs rarely save - all the spare money goes back into the business. In the current climate, we’re all going out less and taking fewer holidays though, so it’s a great time to build up your side-hustle into a viable business! Plus, there are often grants available for innovative start-ups, or if you've been trading on the side for a while there are low cost Coronavirus "Bounceback" loans available from a lot of business banks.

If nothing else, aim the be what venture capital specialist Paul Graham calls “Ramen Profitable” as quickly as you can – in other words, just profitable enough that you can afford to pay yourself enough to live on without needing outside funding. Then as you grow, the rest is gravy. If nothing else, being “ramen profitable” buys you time to plan and build for the next phase, because you’re not taking other jobs to make ends meet.

[Incidentally, this is not the last time I’ll reference one of Paul Graham’s essays. If you have some spare time, they are very, very much worth reading]

3: Launch fast and iterate (or: Don’t let perfect get in the way of good enough)

This is another shameless pinch from Paul Graham’ essays; essentially what this means is that the best feedback you’ll ever get is from actual customers. You might think your business idea looks great. Your mum almost certainly will, as will your mates. Until you’ve got actual feedback from actual customers, you won’t actually know whether you’ve got a winner on your hands or not. So get something out there as quickly as you can, even if it’s not as perfectly polished as you’d like it. Explain it’s a “beta” version or a trial, maybe give the first 10 customers a discount, try and get a few sales and GET FEEDBACK by any means possible. WooCommerce allows customers who have bought a product to leave online reviews; you can use social media; you can solicit feedback by offering little extras to people who have bought. And then – this is the critical bit – use that feedback to revise what you offer, so that version 2.0 is better.

4: People are pleasantly surprised by good service

An awful lot of big companies treat their customers appallingly badly. I have seen so many people on social media ripping into businesses like [entirely random internet company named after large river] for dreadful service, but they go back because quite often there’s no acceptable alternative. So when we get really great service from someone, it can come as a surprise; it’s kind of a refreshing change. This is less true in America, where they are waaaaay better at customer service and don’t tend to look down on retail/service jobs as the province of teenagers and unemployable oiks, but in the UK really good customer service will make you stand out. It takes a bit more time, but in the early days of your business it’s so much better to have a small band of loyal customers who think you’re AMAZING, will come back to buy again and will recommend you to their mates than a big bunch of customers who think you’re “meh” and will migrate to the competition the moment there’s a better offer. Plus, happy customers tell on average 4-6 people about how good you are. But UNHAPPY ones will tell 9-13 people about how deeply you suck.

5: Do things that will scale up

Side hustles tend to fall into two categories - things that scale, and things that don't. If your side hustle is baking, that will scale up quite easily - you need more space, bigger kit and a bigger oven, maybe, but it's reasonably straightforward to go from making one wedding cake a fortnight to three a day, for example. If it's a service that you charge by the hour for, even better, because you can just fill the hours you're prepared to work until you don't have any more capacity - bookkeeping, maybe. Or web design 🙂 And once you're capacity is regularly full, it's probably time to consider charging more per hour.

However, if your side hustle is painting watercolour landscapes, there's going to be a pretty fixed limit to how many of those you can knock out in a month no matter how good you are. You can't get machinery to help automate parts of it and you can't really take on staff if you get too much work, so unless you can charge £1000 per painting it's going to be difficult to make that into a full time job. Ideally you should also make sure that you're not entering a space that is too crowded, unless you have already made a name for yourself as a part-time exponent of whatever it is. There are an awful lot of hairdressers already, for example. And try not to do something that already has a lot of gifted amateurs doing it on the side for mates rates (or free) - photography is a prime example of this.

6: Tomorrow never comes. Don't wait for it.

If you've got the finances thought out, and you know you can scale your side hustle up enough to make a living doing it, then almost everything else is just a excuse to procrastinate. Possibly the worst thing to do is to wait for the "time to feel right", because in the sense of being a perfect time to quit your job with its pension and benefits, and start dog-walking or teaching rock-climbing for a living, or whatever, the time will never be "perfect" - at best it will be "good enough". Instead try setting specific goals or deadlines - for example "once I've got six months' worth of bills saved up for emergencies" or "by the end of the year". You may find that life presents you with an unexpected opportunity, too - sadly, many people at the moment are facing redundancy consultations and often the terms offered for taking "voluntary redundancy" and saving other people some pain can be quite generous. Eventually, you're going to have to hold your nose and plunge into the cold water...

The main thing to acknowledge is that it will always feel scary. Even if you’ve been building momentum and your side-hustle income matches/outruns your 9-5 salary, it will still feel like a leap.

Sophie Clyde-Smith, Business and Life Coach

7: Social Media can make a business fly, for free

There's a lot wrong with social media. But if you're good at it and have the right product/service for it, you can get a huge amount of business from social media without having to pay for advertising. This is especially true if your side hustle is creating something photogenic - cake decorating, dog grooming, tailoring, classic car restoration, vintage furniture upcycling and so on. I had a conversation recently with a florist who posts as much of her work as possible on her Instagram feed and gets a LOT of business as a result. It doesn't work for everyone and different networks are good for different things. Instagram is great for "visual" businesses that sell direct to consumers but if you're an accountant or health and safety consultant looking to work with other businesses, LinkedIn is probably going to serve you better.

8: Admin is dull. But you still have to do it.

There are things about running your own business that, to put it bluntly, aren't much fun. Remembering to save 20% of your profit to pay HMRC (which means having a solid grasp on whether you're actually making a profit each month!). Sorting out payroll paperwork. Remembering to pay suppliers. Basically anything that isn't doing the core thing that you enjoy is going to be kind of a chore, but you need to be able to steel yourself and have the discipline to do it. Personally, I hate doing sales-y stuff. I've actually had sales training and spent a year employed as a sales rep, a year in which I was so far from being worth my salary it was embarrassing. So when I have to promote my own business - which basically means telling other people how good I am - I have to work VERY hard to bite the bullet and get on with it while suppressing the instinct to cringe. Get yer big pants on and do the dull stuff!

On that topic, there is of course an alternative...

9: Learn to outsource

You don't have to do everything. And in fact you shouldn't. If your thing is landscape gardening, the chances of you being equally good at bookkeeping, social media and website design are slim. You may well be good at one or two of them, but if there are things that you know you'll struggle with, it's worth the money to pay someone to do it for you. I suck at payroll and tax, so I have an accountant to do that for me. I might be able to learn how to do it, but in the time I took to learn how to do it and then actually do it with the necessary care and attention to detail to keep myself out of prison, I could have earned quite a lot of money doing something I enjoy a lot more! And then use that money to pay someone who can do it in an hour or two...

Of course I have a slight vested interest in this one, because I'd like everyone to outsource their web design and hosting to Picture Engine! We specialise in small/medium businesses that aren't big enough to pay a full time web designer on the staff, and even if you don't pay yourself a huge wage, the time you spend trying to do it yourself if you're new to it is time you could probably use to make a lot more money if you concentrated on your course business!

10: The two rules for picking an accountant

And finally... some of the best business advice I was ever given when I started on my self-employment journey was this. Pretty much everyone needs an accountant at some point, especially if you set up a limited company to run your business. Many bigger accountancy firms will offer all sort of extra services like investment advice, pensions, mortgage broking and so on, but when you're starting on your business journey you ONLY need your accountant to do TWO things:

  1. Keep you both out of prison
  2. Save you more in tax than you pay them in fees!