One of the most difficult parts to starting a business is, well, starting a business. You might have a great idea, or an amazing set of skills, or insight into an emerging market, but unless you have connections in high places or funds, it can be incredibly difficult to quit your fulltime job and jump into an entirely new venture.
One solution for this problem is to try franchising. The 2021 rankings of our Franchise 500 were just announced, and these established businesses can help you get off the ground, support you as you learn how to lead and bring in customers through built-in brand awareness and marketing efforts. If you have a different vision in mind, though, your best bet may be to slowly grow your business with the time and money you already have.
These three strategies can help you maximize your resources and steer your product or service toward profitability. That way, when you are finally ready to make your side hustle a full-time business, you’ll feel more confident diving off the deep end.
1. Refuse to offer your talents for free
Hopefully, The Joker is not one of your role models, in either life or business. In The Dark Knight, the villainous clown (portrayed infamously by Heath Ledger) commits countless felonies including murder, bank robbery and — worst of all from a financial sense — burning several million dollars in a fit of pique. But, The Joker does have one single line in the movie that all entrepreneurs would do well to remember: “If you’re good at something, never do it for free.”
Perhaps in the past, you’ve taken unpaid internships to put a fancy name on your resume or gain experience in a new industry. But, according to the Department of Labor, unpaid internships or labor are only legal if the worker is considered the primary beneficiary of the work. Some of the necessary boxes one might need to check to prove the unpaid laborer is the true beneficiary include demonstrating that “the internship provides training that would be similar to that which would be given in an educational environment” and “the internship is tied to the intern’s formal education program.”
If you’ve already mastered the essential skills for your next business — say, copywriting, business consulting, or public speaking, then don’t do it for free. You’re only cheating yourself out of a paycheck that could help you establish your business. You might even be pushing potential investors or customers away.
It’s like the old anecdote about the garage sale washing machine: If you just set it outside with a sign that reads “FREE,” people will assume it’s broken and worthless — even if you tell them otherwise — and ignore it. But if you give it a price, say, $40, then people might end up fighting over such a great bargain.
Turning your skill into a business requires learning how to profit from your skill set by attracting paying customers, which can take some time. What’s an optimal price point for your offerings? What’s the target market? Which marketing strategy most speaks to new clients? What does your optimal sales funnel look like? Answering these questions can help you turn your skill into an actual business far quicker than doing a friend a favor.
If you’re uncertain about where to begin, Executive Vice President and GM of Essentials and SMB at Salesforce Meredith Schmidt wrote a great piece for Entrepreneur about a simple, five-step process you can use to find the right price for your offerings:
- Understand the value of your product or service. Schmidt says you should start by asking your customers an aided question. “Something like: ‘What would you think if we charged X amount?’ The second is an unaided question like: ‘What would you be willing to pay for this?’ You can reconcile the two sets of answers to get closer to a target price.”
- Research the competition. You don’t have to copy what other businesses in your industry do, but they can help you find a price that might give you a competitive advantage in the marketplace.
- Determine your costs. This one might be obvious, but if you don’t know how much you spend on your product or service, you won’t know your break-even cost: the minimum price to charge for your offering to earn back what you’ve invested.
- Build a basic pricing model. You might hate math, but there’s a fairly straightforward formula you can use. First, take the price of your offering and subtract the cost it requires to make. Then, multiply that number by the quantity of your sales, and you have your profit.
- Move to behavior numbers. Schmidt reminds you that English readers go from left to right, and thus, pay more attention to the far-left numbers than those on the right. An item priced at $19 can seem considerably less in someone’s mind than if it’s priced at $20, but it’s only a dollar difference. These behavior numbers can help you sell more without considerably lowering prices.
Pricing your business can be an inexact science: Charge too much, and you might lose some customers. Charge too little, and you won’t earn as much as you could. Trial and error can help you find the right number for you, if you’re willing to try.
2. Utilize freemium models and third-party shops to round out your offerings
What if your business idea is digital? It might not be practical to expect consumers to pay for your product, site unseen (pun intended), when there are so many free options available to them. Even the most popular subscription platforms in the U.S., like The Athletic ($1 per week for the first six months) or The New York Times ($1 per week for the first year), offer heavily discounted trials for access.
Unless you have decades of history or tens of millions in venture capital, it may not make sense for you to charge right away. In such cases, a freemium model can help you monetize your digital platform without scaring away potential customers.
Unfamiliar with freemium? Harvard Business Review defines it this way: “Users get basic features at no cost and can access richer functionality for a subscription fee. If you’ve networked on LinkedIn, shared files through Dropbox, watched TV shows through Hulu or searched for a mate on Match, you’ve experienced the model firsthand. It works for B2B companies as well — examples include Box, Splunk and Yammer.”
The best way to do this, if you want to avoid the headache of dealing with the security required for ecommerce, might be to capitalize on established, third-party sites. Amazon’s affiliate program “helps content creators, publishers and bloggers monetize their traffic” by earning “up to 10% in associate commissions from qualifying purchases and programs.” You could connect your website to an online store like Shopify so “customers can enter your custom URL into their web browser to visit your online store. You still use your third-party domain provider to manage your domain settings, pay for your domain, and renew it.”
If your business is centered around a service, you might consider freelancing as a way to build your customer base and get paid at the same time. It’s almost like the discounted trials we spoke about above from The New York Times, where potential clients can test out what you have to offer without making a long-term commitment.
Five basic steps you can follow:
- Find your niche. You might think that casting a wide net is your best option, but McCoy notes that within her field, “authority writers get paid up to $1 per word while building a lasting name in their industry.” And while $1 per word may not sound like very much, consider the fact that prolific writers can easily churn out several thousand words in a single day.
- Decide which hard and soft skills are essential. In a separate piece, McCoy outlines three hard skills, which are more technical, that one might need to become an excellent freelance copywriter, which include SEO and content strategy. But your clients will be people, and so it’s just as important to develop more interpersonal, soft skills like empathy or curiosity.
- Build your portfolio. What do you already have to offer as proof of your worth? Can you direct people to a well-designed website with customer testimonials?
- Pitch for projects. McCoy recommends Upwork and Fiverr for those who are just getting started with freelancing. But, if you already have some potential clients, you might try reaching out to them directly.
- Rinse and repeat. Just as a business is always iterating, so should your freelance process. More projects means a better portfolio, a better-defined niche and more lessons. Keep using each step of the process to grow your network and reputation.
For example, if you work faster than your competitors, you may devalue your work by offering an hourly price. But, if you work on an artistic project, you should factor in any revisions to the project price.
Just keep it simple. Explain who you are, summarize why you’re the right person to help a client with their project, and offer details about your work.