Why right now is the perfect time to launch your own business

Time to become your own boss?
Why now is the perfect time to launch a business

So you want to run your own business, either because you are sick of your job, you’ve been made redundant, or you’ve had a long-held dream of creating something special? That’s great, because there has never been a better time to run your own show.

Contrary to received wisdom, new businesses can and do survive in tough economic times. The difference between launching your own business in a time of austerity is that you really have to think through your niche, your offering and your unique selling point (USP) in a way that you might not have needed to when money was plentiful.

And here’s why now is the perfect time to become self-employed:

1. Secure jobs are illusory: cut-backs, redudancies and downsizing in companies big and small show that there is no such thing as a job for life…..or even for the next five years. Just because you are on PAYE does not mean that your salary has a gold-plated guarantee. Self-employment offers a much more bumpy ride, income-wise, but no-one can ever fire you.

2.You can’t get finance: in my opinion this is an excellent discipline. We’ve all seen the figures about how one in three small businesses fail in the first few years, despite their creators writing fabulous, long-winded business plans to soothe the nerves of the bank manager when they are trying to get a bank loan. Creating a business that requires minimal investment and leaves you in total control is the best way to control costs and survive in a tough economic climate.

3.You’ll awaken your passion: who wants to hang around in a job they hate until the economy picks up…. or until they retire? Life is too short to spend eight or more hours every day doing something you hate. Finding an outlet for your creative business energy will inject more excitement and fun into your life than you ever dreamed possible.

4. Your business idea will need real focus: lots of flakey business concepts struggle on in good times because of the glut of disposable income. In a recession, you need to find an idea or product that people really need. This is absolutely the best discipline for concentrating your mind on how, why and where you will sell your products, and to whom.

5. The power of the internet is perfect for small businesses: once you were constrained by geographical boundaries, now thanks to social media, Google searches and the power of Facebook and Twitter you can potentially reach hundreds of thousands of prospective customers across the country – and the globe. This is perfect for tightly-targeted niche products which may have a limited market in the UK but a huge market on a global scale via internet marketing and selling.

In my next blogs I’ll be looking at what business schools don’t teach you about running your own business, and how to set up a micro-business while you are still in a job,

regards, Marianne

How to make (and lose) money from stockmarket bubbles

It can be very tempting to buy into a bubble when all around you fellow investors seem to be making easy money. But as a very interesting article today in the Daily Telegraph demonstrates, market timing is everything.

In stockmarket terms, “bubbles” are usually defined as a period when stock prices run ahead of the real valuation of underlying assets, or when stock prices are driven higher than their valuation might justify.

As the Telegraph article illustrates, many people were seduced into buying into the South Sea Company after it was set up in 1711.

The company was promised a monopoly on trade with Spanish South American companies by the British government in return for taking on debt incurred in the War of Spanish Succession.

Intitially, investors made good money. Indeed, Sir Isaac Newton invested early and sold out into profit. But he then made the mistake of buying back into the company at a later date.

The shares were on a roll, rising  from £128 in January 1720 to £1050 by June the same year. Who would want to stand by and miss out on the chance to make a fortune so quickly?

But the bubble burst shortly afterwards, bankrupting many investors. Newton himself was said to have lost £20,000, the equivalent of around £3 million in today’s terms.

That one of history’s smartest men could have been so badly burned by the volatility of the stockmarket is a salutory lesson. The psychology of humans means that we find it very hard to stay level-headed during such frenzies, and those who stand on the sidelines fear they are missing out on a one-off opportunity to make their fortune.

Also, investors are prone to suffer from attachment bias, in other words, they struggle to imagine a scenario which is radically different from the current status quo. A good example is house prices. Residential property in this country is overpriced relative to wages and mortgage affordability, but if you ask anyone what they think their house is worth they are unlikely to quote you a figure 20 to 30% less than the current asking prices on their street.

Knowing when to invest is best learned early on
Market timing can be problematic

Similarly, if you have owned a share which has hit a high and then fallen back significantly, it can be difficult to acknowledge that you are unlikely to see the stock reach that price again in the short to medium term, if ever. This requires you to reassess your data and to accept that you have made a mistake.

So attachment bias prevents you from making an impartial decision and means people tend to discount evidence which contracts their opinion. It is one of the contributory factors to creating a bubble, and explains why the sceptics are often sidelined or ignored even when the bubble looks ready to pop.

Much of investing is about managing one’s own psychology and having the courage to question the behaviour of the crowd. It is much harder to do than it sounds, but is a lesson best learned early on.

You can read the full Daily Telegraph article here.

Marianne Curphey May 2014

Rebel, Resign and Retire Early