Diane Abbott doesn’t often feature on these pages – in fact, she’s about as likely to get an invite for tea at Mightify Towers as Tom Winsor or Joe Wicks. However, she has helpfully illustrated a point this week – getting your facts right.
Here at Mightify we love to see people unlocking their potential and making that leap into a new world. You are obviously going to be passionate and excited about your new venture or why bother doing it at all? So passion and optimism are your constant friends when setting out - right?
Mostly, but they also can be your enemies. Don’t get so carried away that you ignore the facts. It is very easy when doing the sums to be over optimistic about how much business you will generate in the first 12 months, or how little you can live on while you move to a new career.
Even if no-one (like that pesky bank) asks you for a “business plan”, it is a very good idea to sit down and put a simple one together. Nothing fancy, no set format. Just set out all your assumptions and calculations to see if they really add up – for example, if you are free-lancing or setting up a business, there are only 20-odd working days in a month and will you initially have enough business all day, every day for all of those? Most big companies stand down contractors, including consultants, over the Christmas/New Year period so don’t assume every month will be the same – who knows, you might even want a holiday sometime yourself.
Decide how you are going to live for those first few months – some people might pay on time, plenty won’t, so even if you are fortunate enough to start to invoice for your goods/services straight away, you won’t get any cash for a while, realistically about 3 months.
And sadly, you will have customers who won’t pay at all!
You need a “critical friend” – by which I mean someone who is on your side but who is not just going to agree with everything you say just because they are a mate. Get them to review your business plan. They can help you by going through your maths and assumptions and testing you to see if they are realistic and achievable. Don’t get angry and frustrated if they disagree with you – like on many other occasions in life, your best friends are the ones who tell you the way it is, not just what you want to hear. They are trying to help!
Remember that if you are moving away from a salaried job, what you see is not necessarily what you get.
The cash you can see in your business account may not be what you have – you may seem in credit but you may not really be. You are often building up “liabilities” (think of it as future debt!) that you can’t see. This may be deferred income tax or National Insurance Contributions if you are self-employed or Corporation Tax on your profits if you are a limited company (or all those) – some of these may not actually catch up with you for 12–18 months. But you need to plan for them otherwise they come as a nasty shock. If you think this is an obvious point, I refer you to the number of “rich” rock stars and similar who have been bankrupted by a bill from the Revenue.
So, you may be creative and imaginative in your world of work and full of passion for what you are going to do next. Which is great - you should embrace that. It feels so negative to focus on all that bureaucratic nonsense. But trust us, this is one time when passion needs a visit from Captain Sensible – and not the one who founded the punk band. When setting out on a new venture there isn’t much of a substitute for hard facts and proper planning – and if necessary for some proper advice. The internet is full of advice and uplifting stories of new entrepreneurs’ easy success but they aren’t all true!
So, in summary – unleash your idea on the world and back yourself 100% - but take the time to sprinkle a little realism on your plans too.