Nobody seems to be writing much this week. Maybe it is the oddball weather or the long weekend coming up. My mind is still working but my energy to sit down and type it out is lower then normal.
Everyone in this little community of ours seems to think that having your own small business(es) is the best answer to employment. This does have some real advantages like making your own hours, not having to take a bosses shit, working from home and potentially being able to live way out in the boonies. While all of these are wonderful theories reality is often a lot less pretty.
Small businesses fail quite often. When times get bad and all businesses get squeezed the small guys have the least padding (savings and potential easy cost cuts). If you are wise enough not to put much (could be 5k or $500 depends on your finances) the time that you aren't somewhere else earning money is a problem. The two small businessmen I know well enough to have some idea of how they are doing are doing bad. Cuts of 30% in earnings area real problem.
Particularly the idea of "recession proof" small businesses is sticking in my teeth like a little piece of tough meat. In fact I would say that genuinely recession proof small businesses which do not require highly specialized skills or large start up costs is at best very rare. Don't let me get you down but I'm just a guy calling it how I see it.
There is something to be said for having a secure job at a viable business or institution which is not going to fail. I will not make a ton of money where I am now but that check is going to hit my account on the 1st and the 15th.
My mother works for a state agency. She has been there for almost 20 years and short of committing a felony at work she would be impossible to fire. As she put it in a conversation we once had "I could start smoking crack now and they still couldn't get rid of me. I would be able to string along pretending to go to rehab and stuff for the last couple years."
Now someone is saying that as a guy who writes a blog that has the word libertarian in it I should be against working in anything but the private sector. Eh conceptually you may be right but in real world terms what an individual or two do or don't do for work isn't going to change anything in any way.
There is some wisdom to getting the most secure employment you can and staying there, particularly in times like these and I fear that rapidly security will become at least as important as compensation.
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I owned a small business in the mountains from 1986 until 1993. I worked like a dog and had to work a second job to make it fly. One of the best days of my life was when I sold it. Too much interference from different government people, you can never really estimate your net income per month so you never know how to budget accurately. It just wasn't worth it. I prefer a regular job, with steady pay, and less to worry about. It has a downside too, but what doesn't?
"I could start smoking crack now and they still couldn't get rid of me. I would be able to string along pretending to go to rehab and stuff for the last couple years."
That may be true but if the state is run badly enough to have money problems like CA is now she could still be out on the street.
If you think suing the state for breach of contract or lost retirement benefits is a winning proposition then go for it, but I doubt you'd succeed there.
Nothing is 100% guaranteed. State jobs are better than most, but they aren't 100% either.
The best hope for the small business when the economy is slow is to have little or no debt. The less debt you have then the higher the profit margin you will have.
I think of small business like a rental property. If you own the house outright then you can survive a couple of months without a tenant. If you are trying to pay a mortgage on the property with rent from the tenant then you will probably be in trouble the first month.
Hermit, I don't think having my primary income come from a small business would be comfortable for me either. You are correct that everything has a downside to it.
Bitmap, Obviously Mom isn't planning on picking up a crack habit. It is true that any job can go away but if you've been some place like that for long enough unless the entire state department gets axed things you're probably fine. Do you remember the last time a state axed an entire department? Again you are right that nothing is 100%.
You hit the nail on the head with debt. A small business with no debt and relatively low overhead could string itself along for awhile but one with debt can't.
I have a small contract-based buisness, and like hermit said, the income is so unpredictable that I mostly just use that income for savings/extra purchases. Starting a buisness in this economy would be a nightmare, I'm glad I have a job at this point. If I had to depend on my 'buisness' shit would hit the fan real quick in our house.
Maggy, Your income from said business has sure swung wildly. I remember having a conversation on the matter. Don't think anyone is starting a business these days. In those times you go to a party and the options are pretty bad it is best to stick with the one that brung ya even if they aren't perfect. Glad you have a job and shit isn't hitting the fan at your place.
I think the best of all worlds would be to have a government job, with the security and benefits, and a side job that was conducive to cash-on-the-barrelhead.
Of course, it would depend on the .GOV job, but if it were the same as a private sector position, jump all over it.
I am currently busting my nuts to get my little biz off the ground, and I am running into nothing but obstacles. You have to be the inventor, sales, receptionist, marketing, accounting, legal and finance departments, all in one head.
Ain't easy...
Having no boss is worth some of the troubles, but there are always trade-offs.
TOM, I have speculated about something in that area us long term. Making even a few thousand dollars in cash a year would really help out particularly if it lets you stay in a tax bracket but earn a bit more.
Of course I pay my taxes like and good loyal citizen does.
Maggy pretty much hit the nail on the head when it comes to starting a business now.
6:45, It is a factor for sure. Trade offs are part of life for sure.
I have founded and built software companies since 1994.
My best advice to someone starting out is:
1) have a short business plan... stay focused.
2) Be patient - most people give up
3) When in good times, stockpile your cash for the bad...
4) Don't buy an expensive franchise and open up a business in an area that already has many places like it open
5) Just because you like what you do, doesn't mean others will buy it
6) Don't spend hours a day on trivial tasks... focus on money making and keeping organized.
7) Avoid expensive furniture and other purchases... be humble and avoid fancy.
8) Do lots of research into whatever you want to do... a few weeks or a few years of part time analysis might be required to learn if this business is right for you
9) If you come into a large sum of money, don't immediately plow it into some business.
10) Get mentors, advisers and other business people to give you feedback and advice. Meet a few times a year. Buy them lunch
11) What I am always floored by is people who assume that you are not a potential customer for whatever it is they do. I wear jeans every day to work, and we have a casual dress code. You would be surprised how many suits assume you are some nobody even though you might be their biggest legal, accounting or other type of client.
12) Don't underestimate people or yourself.
A lot of my points are obvious but I see time and time again people doing most of this.
We are seeing whole police and fire departments being closed across the country and that is only the start. I just read that the fed tax receipts for the month of April are down by over 30%. Also the S&P500 profits were reported to off by an unheard of amount something like the entire S&P500 lost money this last quarter. We may be looking at the Federal government contracting by 2/3rds either this year or next year. Unless something changes shortly we are looking at a nightmare never seen before. This will make the Great Depression look like a recession. Everyone that can needs to start a garden this summer, hold onto any job they have and start looking at building your own business(s). Yes they may not be the best option but they may be the only option going forward until this all gets sorted out...
Most of the fortune 500 companies started at home or in a garage. Sometimes, it was a hobby that turned into a business. Sometimes it was an niche idea that caught fire and become a moneymaker. Regardless of how, many businesses that thrive in bad times occur with lots of elbow grease and time. And talent, yeah, gotta have a good product.
CameronJS, Great advice. My main goal here was to get another perspective into the whole employment thing.
2:38, I agree this is a good time to circle the wagons and hold dearly onto as much money as you possibly can. Not a good time for large non essential purchases or extravagant vacations. I think it is a good time to be on the watch for any opportunity to make a few extra bucks.
8:22, You make good points. I am not so much against starting a business. More that I wanted people to see the benefits of another route.
I think security companies, exterminator and various trades will always be a good way to make a living.
I recommend reading the millionaire next door, an excellent book - the summary of the book is that most millionaires are not lawyers, doctors etc since they spend as much as they make and usually have to buy the best cars, etc to keep up appearances.
Meanwhile the plumber who has 8 trucks and a tidy business is the one who is the millionaire and who doesn't need to live in the best neighbourhood in the best city.
Cameron, great advice. I've saved and printed your post. Thanks.
One thing I have considered doing is starting making a product, such as soap. You can produce it through fairly cheap means if you do it right, and unlike food-stuffs you aren't regulated by the health department. Cutting timber for firewood, having a couple egg-laying chickens or a few angus hanging around isn't a bad idea either. If the bottom drops out of the economy, people still have to eat.
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