The once in a century situation that we see ourselves in leads to great uncertainty for everyone. The stress of not knowing what our employment status might be in three months’ time, let alone six, can have a significant impact on our happiness and well being.
It’s times like these when you might find yourself wondering what you can do to diversify your income streams, particularly if you have a single employer.
Therefore, now is as great a time as any to talk about financial diversification. With a tremendous spike in online activity, countless new opportunities to pursue entrepreneurship have arisen.
Let’s have a look at the steps you can take to pursue financial independence as an entrepreneur.
Evaluating where you are now
Financial stability has historically been maintained by keeping a steady job in a safe industry. The start-up industry has been challenging this idea over the past few decades. The likes of Amazon and Uber began a pattern of disruption that led to many employees in traditionally stable industries losing their jobs.
As COVID-19 started to spread globally at the start of this year, 2020, the idea of a steady job was challenged even further. This time, the challenge was far greater and faster than the gradual disruption caused by the rise of start-ups.
A common trait in the vulnerable industries is that they are removed from the digital or online world. If you’re in one of these, then proactively pursuing a side-hustle or a career change into entrepreneurship may be an intelligent way to gain financial independence.
Consider where you want to be
Entrepreneurship is not for everyone. You need, for one, a high degree of risk tolerance. Also, changing one’s career doesn’t happen overnight, so patience is another virtue. Ideally, you should take a staged, gradual approach and exercise careful consideration and planning.
Identifying the area that you want to pursue as an entrepreneur is the first step in defining where you want to transition to. This involves thorough research and study in the area you choose, be it e-commerce, professional services, app development, import/export and so on. From this, developing a clear roadmap of where you want to be in three to five years’ time will help you visualise your goal and give you something to work towards.
With your pathway into entrepreneurship clearly defined, it’s time to set the wheels in motion. The first step is to identify and develop your first business concept.
Developing an idea into a fully-fledged business takes time and will typically see several fails before showing signs of success. To minimise failures, it’s important to spend enough time defining and refining your idea before starting with implementation.
Leveraging the Lean Canvas approach for a business plan is a great way to start. It entails that you develop a plan for your business, covering questions like these:
- Who are your target customers and users?
- What are your top three problems and solutions?
- What are your revenue streams? (Revenue model, life time value, revenue and gross margin.)
- What is your unique value proposition or UVP? (A UVP is a single, clear, compelling message that states why you are different and worth paying attention to.)
- What is your unfair advantage? (Meaning, what about your idea can’t be easily copied or bought.)
- What are your channels, or your paths to your customer?
- What are your key metrics? (Key numbers to measure the state of your business.)
- What is your cost structure? (customer acquisition costs, distribution costs, hosting, people etc.)
Answering the above questions will give you a clear outline for your business implementation and will provide you with the assurance that you have a workable business model.
The Minimum Viable Product approach
The Minimum Viable Product (MVP) approach to business development sees us attempting to validate the business model as early on as possible. By doing so you can cut your losses early rather than later, if you find your idea doesn’t work after long and protracted implementation.
The MVP encourages you to validate one or more of the key assumptions about your model by quickly getting a working version of the product or service into the hands of a consumer.
A great example of this particular approach can be illustrated by the app development process. By developing and releasing an app which contains just a small set of features (that still provides value to your customers), you will soon see if your assumptions are correct based on customer feedback. A great option for this is the use of Progressive Web App technology, which can offer a quality mobile app experience delivered over the web.
The MVP approach can be used in practically all business spheres. As long as you can release an early version of your product, and test your assumptions, then you can develop an MVP. The general process in the MVP approach is:
- Define and refine the idea
- Design and develop the product or service while factoring in your assumptions
- Release an early version or offer
- Learn what works from your customers’ feedback and your key metrics
Ultimately, you want to keep what works and throw away what doesn’t.
Once your product or service is gaining traction and you’re starting to see some progress, pursuing investment may be a good option. Assuming you bootstrapped your business with your own capital so far, leveraging the capital and knowledge of others may be what you need to step your business up a notch.
Given you followed the MVP approach, you will have a working version of your product or service for showcasing to potential investors. Also, you will have an established set of metrics to back up your claims of success. Creating an enticing slide deck and working on your pitch should be all you need to bring one or more investors on board.
Although investment means giving up equity, it’s often prudent for the following reasons:
- Extra capital for expansion
- Greater networking capabilities
- Increased business support and experience
- Often, reduced financial risk to your personal assets
We are currently living in times of unprecedented uncertainty and economic disruption. Diversifying one’s income with entrepreneurial endeavours is a great way to reduce the risks associated with having a single employer. Also, the current work-from-home conditions are providing unique business opportunities not seen before.
A transition into partial or complete entrepreneurship should be taken with careful planning and consideration. Setting clear goals will give you something to work towards and will help keep you level headed when dealing with failures.
The MVP approach to business development is a tried and tested way to get a foothold in the market and to establish a product or service offering that customers actually want. Once established, sourcing investment can be a great way to get a foothold in the market and will lead to a more stable financial situation.