Some people are forced to start small businesses out of sheer economic necessity; here are a few ideas to help.
It’s not uncommon to speak of entrepreneurs who start small businesses in glowing, heroic, almost romantic terms. Admittedly, at Haven, we’re pretty guilty of this because we think the world of small business owners.
But not everyone comes to small business entrepreneurship under quite so sunny circumstances. Some people start small businesses out of sheer economic necessity, frequently due to a job loss or needing extra income from a side hustle when a day job just isn’t paying enough to keep things going.
For all we’ve heard about necessity being the mother of invention, these cases of news business starts are some of the toughest out there, and the struggles of these small business owners are some of the hardest to hear. Nothing we can say will make those problems go away, but here are a few ideas to help:
If you’re already in the position of having to start a business because you’ve lost a job, then skip this one because all it will do is remind you that hindsight is 20/20. But if you’re currently working in a job that doesn’t give you much of a cushion and you don’t have much of a safety net, then consider starting a side hustle now before you need it.
Think of side hustles as insurance policies. They might provide you with just a little extra income on top of your day job, but if you lose your day job, as many people did during the coronavirus, then you’ve already started your business and can focus on ways to expand it instead of trying to figure out what you’re going to do now.
Don’t make the mistake of feeling like you’re locked into one small business. When you own and operate a small business, you’re subject to a lot more risk than a large enterprise, and the best way to handle that risk is to diversify. Consider a side hustle on the side of your main small business. Picking up shifts or doing gig economy work can fill in the gaps in your income when business is slow. Starting a second small business might be the best option of all because if the first one fails, then you already have your next one lined up.
Are you doing something related but not identical to someone else in your space? If so, then consider whether it might sense to join forces in a partnership. If there are ways to cross-sell each other’s products or services to the other’s customers, then your two businesses together might be worth more than separately. These types of revenue synergies are a good reason to merge if they’re large enough that they outweigh the transaction costs of merging. Also, look to see if you’re both bearing similar costs and could reduce your costs by merging and eliminating redundant expenses, which is another legitimate reason for merging.
A word of caution, though: In the world of small business, a partnership is effectively a marriage, so make sure that you’re very comfortable with someone before you enter into a legal relationship with them. If something goes south, then untangling your affairs from theirs with the help of a lawyer won’t be easy or cheap.
Whatever your small business is, it’s going to carry with it lots of mundane administrative tasks that don’t in and of themselves mean more revenue for you but do require your time and attention to keep things running smoothly. Automate as many of these tasks as you can so that you save yourself as much time as you can. Essentially, you want to be on the lookout all the time for tools that could make you more productive. When you have more demand than you have time to satisfy, automating will add to your bottom line. And when you don’t, automation will free up more of your time so that you can focus on a second business or side hustle or take on a part-time job if one comes along.
When you’re in tough financial straits, the name of the game is doing what’s right by you. And if you’ve been working on your small business for six months and a stable job offer at a higher income comes along, then you’ll have to give that offer careful consideration. If the price is right, then that might mean walking away from the small business that you’ve spent the last six months or more building.
Economists would tell you that all the time and attention that you invested in your small business in the past is a sunk cost that you can’t get back no matter what you do, so you should completely ignore it in your calculations. But it’s extremely difficult psychologically for people to do that. So have the conversation with yourself up front and know what it would take in terms of salary to get you to walk away from a given level of expected future, not past, revenue.
Better yet, focus on the partnering and automation strategies described above so that you remain an owner, scale back your time commitment, and hand off operations to a new employee or an outsourced third party if it makes sense to do so.