Becoming self-employed? Here’s the #1 critical question you MUST be able to answer

By Neil Patrick

Whether you are setting up business as a sole trader or a company, there's one critical question you must be able to answer.

Last week, I was contacted by a former colleague from the financial sector. She had just lost her job in the latest corporate reorganization. Her reaction to job loss was positive. She was embracing it as an opportunity to convert all those years’ experience and acquisition of skills into a self-employed variant of her former job. I immediately agreed to help her anyway I could.

About the same time, I was sent a business plan for a start-up financial business. I was asked to provide my reactions and suggestions as to how the plan might be improved. The plan was ambitious and innovative. It embraced and aimed to capitalise on the financial, technology and media changes that are transforming the world.

At first, these two events might appear to have nothing in common. But as I examined both situations I realised that both were dependent upon getting to grips with exactly the same question.

It’s a very simple question to ask but a very hard one to answer perfectly. In a single sentence though, it frames the challenge for every new business venture. Being able to answer it clearly and precisely sets you up for success. Even if you cannot answer it precisely, trying to do so will instantly reveal the weaknesses in any business plan.

So what is the question?

It’s this:

“What problem do we solve for whom, and how?”

That’s it.

Time and time again when I see new business proposals, whether they are corporations or individuals, they fall apart when examined with this question.

Often it’s a variation of the age old business failure that arises because the business owner is looking to sell what they want to make or do, rather than making what people want to buy.

Today, attention spans are getting ever shorter. If you cannot articulate what problem you solve in a couple of sentences, you will struggle to get attention. And no attention means no sales. And no sales means your business is dead.

So not only must you be able to answer the question, you also have to be able to express it in a way which demands attention and interest from the people you seek as customers.

In a start-up, this can be the difference between getting investment and withering on the vine. In the case of sole traders, it’s the difference between having a queue of eager customers and an empty diary.

Why do so many people get this wrong? 

Employers don’t teach us how to be entrepreneurs

Experience of working for a large corporation provides plenty of experience and learning. But it’s not usually the sort of learning that equips you to be successful in your own business venture. Suddenly your specialist expertise itself is less important than your ability to get others to pay for it. 

When you are self-employed, before you can start work, you must obtain it

In a normal job, our employer provides a regular pay cheque. And depending on its size, we cut our cloth accordingly. When we have a job, the work is just there. We normally don’t have to actually create it. In a normal job, what’s critical is the quality of our work. When you work for yourself, how much you earn depends on how much work or business you attract. What’s critical is the quantity and frequency of our work. 

Problem solving for others is different to problem solving for an employer

In a normal job, we may very well require problem-solving skills. But these problems are internal to our employer. The problems are given to us to tackle. When we work for ourselves, the problems are not given to us. We have to identify them in other people’s lives. So these problems are external. And before we can solve them, we have to have a solution that our customers find more attractive than the alternatives.

Knowing the answer to the number one question helps us focus our actions on doing the right things to drive business success. It means you have a business proposition which people actually want and are willing to pay for.

Not being able to answer the question means your business isn’t going anywhere, until you can…

Why your next job contract may scare you to death

By Neil Patrick

We are inclined to think of our careers as a steady climb to a peak of success and personal fulfillment. That 's great from the point of view of a personal life goal. The trouble is that employers are rapidly abandoning any commitment to helping us do that. 

We're on our own and we're not climbing a mountain, we're riding a very rickety roller-coaster. But if we understand how employer thinking is evolving and practices are changing, then at least we have a better view of what's ahead and how we can survive the ride.

Today I came across an insightful piece on Forbes by Edward Lawler titled in perfect management speak, ‘Creating Talent Agility’.

It’s written for an audience of business and HR people, but it reveals much about how we can expect employers to treat employees in the future.

Warning: This post contains facts which some readers may find disturbing...

The reality is that there’s now a yawning gap between what employers are willing to offer and how employees define a good employer.

The traditional implied contract between employers and employees for most jobs was abandoned years ago. This isn’t because employers have become somehow more evil. It’s the hard realities of business in an ever more competitive global business environment. Lawler reminds us that this change is also accelerating:

“Organizations must be increasingly agile in ways that allow them to change what they do and how well they do it. Organizations have always had to change the skills of their workforce. The big difference today, however, is how rapidly this needs to happen and how much change needs to occur”.

Lawler goes on to describe three employer models and gives examples of who uses them and why. 

The traditional career employer

This is probably closest to how most people think an employer should behave towards its employees. It’s been around so long that it has become the default position for how most of us frame our expectations about what a good employer does.

It’s still used by some organizations including General Electric. Lawler describes it thus:

“Fundamentally, it relies on a career model of talent development and agility. Individuals are told that if they will commit themselves to a career at the company, it will “look after them” and be sure that they are trained and developed for tomorrow’s jobs. When new skills are needed, individuals are expected to want to learn the new skills because they know it is in their best interest for their long-term job security and career development.” 

The contractor-employer

The second category Lawler identifies is what I think resembles long-term contract work. There is no implied employer obligation to the employee beyond paying you. When your usefulness expires for whatever reason, you’re out. Period. This model is used by firms like Netflix, LinkedIn, and many other tech companies.

In Lawler’s words:

“It tells individuals that they will be well-paid and have a job as long as they can perform at a high level and do the work that needs to be done. There is no promise of a career, skill development, or job security. This approach produces low transaction costs when it comes to shifting the skill sets of the organization. Training is not required and terminations can be relatively easily executed without individuals feeling the organization has violated their employment contract.”

For workers who have highly sought after skills and the willingness to be highly mobile in their work, this model delivers high returns in exchange for a somewhat nomadic lifestyle. It’s great for a young tech worker, but almost unworkable for just about everyone else. 

Crowdsourced labour

According to Lawler, “Odesk and other companies have developed crowdsourcing technologies that allow organizations to buy labor that is willing and able to perform tasks for a contracted amount. In essence, the organization relies on outsourcing much of its labor and may outsource anything from a few hours to a few months’ worth of work. It is frequently used by companies that are looking for software development, but also for less skilled labor such as survey respondents and a host of more transactional activities. “

This model is closest to what has been termed “labour on demand”. Whilst Lawler quotes its popularity in the software development sector, in the UK at least, it has spawned a much more sinister variant, the ‘zero hours contract’.

Almost unheard of in the United States and mainland Europe, in the UK, looser government employment regulations have allowed firms to employ workers with no guarantee of the number of hours work they will get each month. It’s often an unequal contract in which the worker commits to availability for work, whilst the employer makes no commitment to actually providing any minimum number of hours of work.

For employers with highly fluctuating requirements for low-skilled labour, the zero-hours contract has been a godsend. Suddenly their workforce can be increased or decreased almost in realtime. At a stroke one of their major cost problems is eliminated.

But this isn't the end of the story. When we consider this development alongside the impact of technology on jobs which is deskilling some work and eliminating other jobs altogether, we get a glimpse of a seriously distopian future.

In an employment sector which was merely providing work for people who wanted to earn small second incomes, this would be a good thing. The terrible realty in a depressed jobs market is that this type of work has exploded and for many low-paid workers, it is the only work they can find.

From a small base of around 50,000 UK jobs in 2005, zero hours contracts have grown and grown. The Office for National Statistics (ONS) quotes that there are now a staggering 1.4 million zero hours contracts in use in the UK in 2014!

N.B. Here's a link to the latest (Autumn 2016) report and stats about zero hours contracts from the Office for National Statistics.

Of course the government loves zero hours contracts because along with the growth in 'self-unemployment', such ‘jobs’ allow the government to report falling unemployment. It’s spin and it supports the growth in wealth inequality.

Worse it’s now a feature of many ‘respectable’ firms’ employment practices. According to Wikipedia, one of the UK's largest pub chains, J D Wetherspoon has 24,000 staff, or 80% of its workforce, on contracts with no guarantee of work each week. 90% of McDonald's workforce in the UK - 82,000 people - are employed on a zero-hour contract. Britain’s biggest and most troubled supermarket chain, Tesco uses zero hours contracts.

A major franchise of Subway also uses the contracts, which state, "The company has no duty to provide you with work. Your hours of work are not predetermined and will be notified to you on a weekly basis as soon as is reasonably practicable in advance by your store manager. The company has the right to require you to work varied or extended hours from time to time." Subway workers are also required, as a condition of employment, to waive their rights to limit their workweek to 48 hours.

Boots UK has 4,000 staff on zero-hours contracts. Even Buckingham Palace, which employs 350 seasonal summer workers, now uses zero hours contracts.

My take is that hard cash will always trump elegant academic and ethical arguments in most businesses, most of the time. And since the cost of labour is usually the largest part of any business's operating costs, what we are witnessing isn’t a growth in employment options, it’s a relentless movement towards less and less secure employment and lower incomes for most people most of the time.