How To Be Your Own Boss

Before you strike out on your own, make a game plan and get your finances in order.

By Laura Cohn, Associate Editor

From Kiplinger's Personal Finance magazine, September 2009

Talk about bad timing. Just before Shannon O’Brien left her CEO position, the construction firm where her husband worked went bankrupt. So early in 2008, O’Brien and her husband, Emmet Hayes, both found themselves unemployed.

RELATED LINKS
	Set Out on Your Own as a Consultant
	The Prefab Franchise Alternative
	Tax Rules for the Self-Employed
	Quiz: Test Your Start Up Know How

But instead of rushing back to the relative safety of corporate jobs, O’Brien and Hayes decided to parlay their work experience into start-up businesses. O’Brien, 50, is a former Massachusetts state treasurer who ran for governor in 2002 and who had just resigned from heading the Girl Scouts of Greater Boston. She decided to satisfy her entrepreneurial streak and use her expertise to advise renewable-energy companies on how to fund-raise and cut red tape. Hayes, 58, a former state legislator and director of business development for his bankrupt former employer, joined two fellow veterans of the state capitol to found a law firm that does lobbying and consulting.

O’Brien and Hayes had some early gut checks, especially given the slumping economy. “For a time the two of us were saying, “Holy cow, what have we gotten ourselves into?””says O’Brien. But their savings helped them through the lean times, and now both of their enterprises have started to take root.

The couple aren’t alone. With job security sagging even in traditionally stable industries, many Americans, by choice or necessity, are leaving the corporate cocoon to start their own businesses. Brian Headd, an economist at the Small Business Administration’s Office of Advocacy, says that the number of one-person operations rises when the economy is struggling. For instance, in 2007, the year the current slowdown began, the number of such firms increased 4.5%. They don’t all make it. Of the more than 600,000 companies started in the U.S. each year, only about half will survive for five years or longer, says the SBA.

How do you make sure you’re among the winners? Start by laying out your plans carefully and getting the best advice you can from other entrepreneurs and experts in the field.

That’s what O’Brien did. She knew she was interested in renewable energy, having made it part of her platform as a candidate for governor. But she wasn’t sure she could carve out a full-time job in the field. So she touched base with New Directions, an outplacement firm that caters to senior executives. Through its seminars, group discussions and one-on-one meetings, New Directions guided O’Brien to the resources she needed to confirm that her idea could fly. She found that start-ups, such as Free Flow Power, a hydropower firm that is now a client, had ideas and energy but needed help to raise money from public and private sources. And she found another key ingredient: passion. Working in clean energy “gets me revved up every morning,” she says.

Do the Legwork

Passion and a market for your services are just the beginning. Before investing real money, you need to focus your plan by finding out everything you can about the sector, and by analyzing competitors’ pricing and marketing.

That kind of legwork paid off for David Miller. After toying with the idea of starting a Web-based fantasy-sports game aimed at families, Miller, 36, attended the annual meeting of the Fantasy Sports Trade Association. He left the meeting convinced that his idea was a good one. By networking and doing research, Miller found that 40% of National Football League viewers are women. So, as he suspected, he could attract women to his site. That was a crucial insight because women tend to control the family budget, and he figures sponsors and advertisers will want exposure to those women. “There’s no reason fantasy sports should just be for dorky guys,” says Miller, who lives in Bethesda, Md.

Miller launched FamilyFantasy-Sports.com in June 2008. Having studied entrepreneurship (he’s working on a PhD in the subject), he knew that a start-up was more likely to succeed when it’s a partnership. So Miller enlisted a friend who lives in Cincinnati. He and his partner dipped into their savings to finance the site, and together invested in the “low six figures” over a period of two years.

They also avoided a big mistake often made by entrepreneurs: They didn’t blow their budget on fancy offices or expensive marketing campaigns. To keep costs low, neither pays for office space, and the company has relied on social-networking sites, such as Facebook and Twitter, to gin up interest. Through Twitter they got on a local radio program, which eventually landed them a deal with a sports-merchandising company that provides prizes on their Web site to winners of competitions. Miller and his partner hope to break even this year.

1 |
• 2
• NEXT >