"A small business is an amazing way to serve and leave an impact on the world you live in" - Nicole Snow
Small businesses are the backbone of any economy. You need to abandon the secure environment of monthly paychecks, employee health care plans, and paid vacations, and lunge into an environment where you are the boss and you become the provider of this security to your employees.
Seven Steps to Starting a Business
Step 1: Do Your Research
Businesses and sectors are being disrupted like never before. Technology, disintermediation and the climate are making previously dominant companies vulnerable, while startup companies run by millennials in hoodies are becoming increasingly dominant. While all this is happening on a micro level, on a macro level we are also seeing a shift in global power from the west to the east. Failure to identify, understand and exploit these changes will be fatal to any entrepreneur. Businesses fail due to their inability to anticipate changes.
According to Charles Darwin, it was not the strongest of the species that survives, nor the most intelligent. It is the species most adaptable to change. Between 2011 and 2013, three great brands went out of business. Eastman Kodak, Blockbuster, and Borders failed to adapt to the changing world and are now extinct. The twenty-first century has been fascinating from an investment perspective. We have witnessed three mega stock market crashes. The dot.com bubble burst in 2000, the subprime mortgage crisis in 2007/2008 and the coronavirus pandemic in 2020. In parallel, the meteoric rise of China has set up a battle for world domination. Major corporations and countries have gone bankrupt and companies that did not exist twenty-five years ago are worth hundreds of billions of dollars. Facebook, founded in 2004, is worth half a trillion dollars, Alibaba in 1999 worth $450 billion, Tencent in 1998 worth $400 billion, Netflix and Paypal in 1998 worth more than $100 billion. Tesla which was founded in 2003 is now bigger than four automakers which have collectively been around for 400 years - Audi, Nissan, Ford, and Ferrari.
Which industries are going to dominate the future? I divide the landscape into four categories: economy and finance, technology, energy and environment, and healthcare.
Economy and Finance - Peak Paranoia
Finance and banking have changed dramatically this century. Regulators have always been concerned about bank risk. After Lehman Brothers ripped up the textbooks, this concern morphed into outright paranoia. The phrase "too big to fail" entered our lexicon, as did Basel and all its sequels. The Basel Committee for Banking Supervision (BCBS) is a committee of banking supervisory authorities that was established by the central bank governors of the Group of Ten countries in 1974. The committee expanded its membership in 2009 and then again in 2014. In 2019, the BCBS comprised 45 members from 28 jurisdictions, consisting of Central Banks and authorities with responsibility for banking regulation. This committee is the global policeman of banks - a cooler bunch of people would be impossible to find. It is currently working to implement the Basel III Accord. Implementation was planned for 2013 but it is running a little behind schedule. The new date is 2022. This accord requires banks to hold inordinate amounts of capital to mitigate risks. Basel III forces banks to lend money to people that least need it – the corporations and individuals with little or no risk. This opens opportunities for disintermediation. Capital is not reaching the small to medium-sized businesses and the retail investors who do not boast pristine credit records. Opportunities exist in the area of microloans, asset-backed financing, and consumer finance. These are capital intensive businesses and the same rules of other people's money applies. If your access to capital is limited, you can also look at financial coaching. Levels of financial literacy are low globally. Clients are crying out for high-quality education and honest objective advice.
Technology - The Kids in Hoodies are Taking Over
Technology is disrupting everything. Robots are replacing accountants, tax advisers, travel agents, farmers, and taxi drivers. Greater connectivity through technology is also changing the way that resources are used and allocated. Technology is at the center of the sharing economy. The sharing economy is a radical new way to distribute goods and services. In the past, the economy focused on ownership or uninterrupted rent. People would leave university and get a job. Then they would buy or lease a motor vehicle to get to this job. At the same time, they would buy or rent a house as close to this new job as possible to avoid spending inordinate amounts of time in the newly acquired car. They would then start a family and require a bigger house and a bigger car and so the velocity of the spiral accelerates. Millennials and generation Zs are rejecting this evolution. Firstly, a car is the worst investment. It sits in the parking lot for 22 hours per day collecting dust. Also, if you buy it new, it loses 25-30 percent of its value the moment it leaves the agency. You need to ensure it, fill it with gas, wash it, wax it, license it, finance it and if you drive like me, pay fines on it. It needs to be frequently serviced, tires need to be rotated and shock absorbers replaced. If you live in a large city, you need to factor in the stress of sharing the road with hundreds of cold-blooded psychopaths who want to drive in your lane. Uber, Lyft and ride-hailing services are an elegant solution to this cauldron of hell. When 5G allows for autonomous driving, perfection will be attained. There will be no need to make small talk with the driver to maintain your Uber score.
Energy and the Environment - Green is the New Black
Oil is dirty. It has caused more wars than beautiful women and short men combined. In the 1980s, the countries against whom the United States ran the biggest trade deficits were Libya, Algeria, Saudi Arabia, and Venezuela. These countries had the black gold and the United States were devoted junkies. John Paul Getty made billions out of oil, but the party is getting boring and the cool kids are starting to leave. Ten years ago we were obsessed over peak oil – the theory that oil is a finite resource. We were locked in the phobia of running out of oil and being left stranded on the side of the freeway with our thumbs stuck out and in danger of being picked up by a serial killer or a Jehovah’s Witness. This stress was unwarranted. By 2050, renewables will dominate the grid. The younger generation is driving this rejection of fossils. They are concerned about a Mad Max-esque dystopian future of polluted rivers, water scarcity, acid rain, global warming and the extinction of animal species. They are pressurizing corporations to reduce greenhouse gas emissions, total energy use, water use, and waste generation and increase the amount of water they recycle. Millennials are buying more second-hand clothes to reduce the demand for new clothes. Clothing factories are notorious polluters. Then there is the plague of plastic. Nothing exemplifies modernity more than plastic. It is cheap, flexible and durable. The problem, however, is that it does not rot and decompose. Eighty percent of all plastic is either buried in landfills or stuck in the nasal passages of sea turtles. Only 9 percent of plastic is recycled. The solution lies either in slashing plastic use or finding better and more efficient ways to manage and dispose of it.
Future of Health - Gene Editing and POT
Global population pyramids are being upended as the elderly start to outnumber the youngsters. Japan sells more adult diapers than infant diapers. China is reaping the whirlwind of its one-child policy and its population is expected to stop growing in 2024. Apart from the strain that the world's aging population is going to place on unfunded pension liabilities, it is also going to place a burden on the healthcare systems unless we can find a way to live healthier lives. The coronavirus pandemic in 2020 highlighted the fragility of global healthcare. Biohacking is the desire to understand the body and mind and utilize everything at our disposal to become the best version of ourselves. There are two fields under the umbrella of biohacking. Implantation is the placement of non-phalic digital devices inside the body and gene-modification is the alteration of DNA to produce favorable genetic traits. We could be decades away from a world populated by 3.5 billion Brad Pitts and 3.5 billion Jennifer Anistons, but the future is closer than ever. CRISPR is a gene-editing system so cheap, effective and easy to use that it promises to change our relationship with genetics. Cannabis is also going mainstream. Companies are exploring the health benefits of cannabis as the global trend towards legalization gains momentum. Health is also starting to intersect with concern over the environment. People are eating less meat. Concerns about the environment, personal health, and animal welfare are driving the change. It takes 16,000 liters of water to produce one kilogram of meat. As water scarcity increases, millennials are migrating to a vegan diet and eating their way to a healthier body and planet.
Step 2: Identify the Need
Before launching your business, you need to identify the need. Jeff Bezos says you should start with the customer and work backward. You need to understand the needs and desires of the user and ensure that your product or service meets that. Many entrepreneurs start with the product or service and then work to deliver that to the market. Recall the scene in Cinderella when the ugly sisters are trying to force the glass slipper onto their fat feet. That business strategy is not going to cut it in the 21st century. You need to spend time profiling your potential customers and you need to be ultra-specific.
When I started Rebel Finance, my financial coaching firm, the mission was to shake up the financial industry. I wanted to give it a good old kick up the buttocks. For decades, financial services have been in the business of serving their own interests at the expense of its customers. Instead of offering financial solutions, the industry has been selling products. It has no interest in financially educating its clients or providing them with the tools they need to achieve financial freedom. The relationship has been one of master and servant and I wanted to turn this around. This is the profiling I did for Rebel Finance. In this case "you" is the potential client.
What is your age?
The core of Rebel Finance is financial freedom. To seek freedom, you would need to have experienced bondage. Most kids coming out of school do not know what it is like to work for a paycheck, to feel the pressure of saving for retirement and the need to budget. They probably would not be potential clients. The older generation, on the other hand, understands the limitations of working for money, having to pay bills and facing financial obligations. You have been working for 5-10 years and are looking for an alternative. It is unlikely you will be younger than 30 unless you are a certified genius and graduated from college before you started shaving.
What does your family look like?
You are married with kids. You are concerned about the future of your kids in a world that is being overtaken by automation. You want to start a business and leave a financial legacy. You want to educate your kids financially and give them the tools they need to be free.
What level of education have you completed?
You are university educated. Financial freedom comes through the mastery of investments. You need to dominate capital markets, accounting, tax, business law, and marketing. This process of financial literacy and education is facilitated by a tertiary undergraduate degree. A master's degree is not necessary but would not be wasted.
How big is the company you work for?
You work in a relatively large company that does not allow tax flexibility on your compensation. This means that you have paid an unconscionable amount of tax over your lifetime. This intensifies your desire to find an alternative.
What is your job?
You have worked in a job that requires a fair degree of human interaction both internally and with clients. This means that you are outgoing and ambitious.
How long have you worked there?
You have worked in that job for at least five years but not more than twenty. We have found that if you have been laboring for more than two decades in the same or similar job you have achieved a level of comfort and you really do not want to change – better the devil you know.
What is a typical day like for you?
There is minimal flexibility in your workday. This does not necessarily mean that you are a clock puncher, but it means that you work for a boss and you need to account for every hour of your day. You don't have the flexibility to leave the office midday on Friday for a round of golf with your mates.
What does success mean for you?
Success is not defined in terms of money. Success is defined in terms of fulfillment and making a difference in this world. Money is not your "why". You are driven by a higher purpose. This could be providing for your family or your community. You are attracted to work with people who share your values.
How do you learn about new information?
You love to learn and have an inherent curiosity about the world around you. You a frequently faced with "why" questions and you are driven to find the answers. You are self-aware. You want to understand why you do things and why you react the way you do. You are also looking for meaning in your life.
What do you read?
You are curious about history. You read biographies of great men from the past. You want to understand the past to get a better understanding of the future. You revere great men and aspire to learn from them.
What are your deepest values?
You are driven by the desire to give back and make your family, community, city, and country a better place. You are generous with your time and resources, you are kind and compassionate, you are grateful and not envious and you are moved by a concern for others.
What are your deepest fears?
You fear a life of quiet desperation and dying with your song still inside of you. You are afraid of living a safe life and not taking the road less traveled. You are afraid of lying on your death bed and regretting all the things you have not done, all the relationships you did not forge and all the opportunities you did not take.
Step 3: Make a Business Plan
You need to have a plan but at the same time, you need to be flexible. I have come across aspiring entrepreneurs that spend months on the plan. They do exhaustive research, plan for every possible eventuality (the D day invasion was executed with less planning), and try to cover every detail up to the color of the mousepad that they wanted to use. The best businesses are simple to explain and simple to plan for. If your business plan is longer than "War and Peace", it is too complicated and you need to simplify. Don't spend too much time on the plan and be sufficiently flexible to re-tilt or re-tool your business. Once your plan is ready, do not take out a ring, don't fall to your knee and do not propose marriage to it. Date it casually at first. Nurture it and commit yourself to it but always be open to modifications and refinements. Keep it fresh and exciting – do not get into a routine.
Step 4: Plan Your Finances
In the old days, financing options were limited. The most common option was your local bank. You would draw up your business plan, extract urine, blood and DNA samples, put your pride in your pocket and walk into the branch. After hours of humiliation and relentless begging, the bank manager’s secretary would let you go into his office and pitch your business. Another avenue was tapping into the kindness and generosity of friends, family and your millionaire great aunt who lives alone in a cold mansion surrounded by 39 cats. They would either loan you the money or invest in the capital of your business.
These traditional channels are still available. Technology, however, has opened new avenues:
1) Social Media - Not as Frivolous as you may Think
Entrepreneurs can leverage their network on LinkedIn to raise capital. You need to treat capital raising like a sales pipeline. You need to develop your sales pitch, prepare the supporting documentation, find the gap into which you can sell (meet the needs of the investors), and follow up.
2) Crowdfunding - Tapping into the Masses
Interest rates are low to negative and this makes debt attractive. Technology is being deployed to disintermediate the banks and allow borrowers and lenders to interact directly. Popular platforms for business-related crowdsourcing include Kickstarter and Indiegogo. Some platforms will let you keep all the cash raised even if you don't make your goal. Others will not allow you to collect any money if goals aren't reached. One of the many beauties of crowdfunding and digital currencies is that you have access to a larger pool of capital. Investors in China can lend money to startups in Mexico. Small businesses are no longer limited by geography. It is now easier to find like-minded investors who are prepared to take a chance on you.
3) Cryptocurrencies and Blockchain
Creative entrepreneurs are using crypto and blockchain technology to raise funds. In 2018, Bloomberg reported a story on a cryptocurrency called Agrocoin which was giving buyers a chance to invest in some of the world’s spiciest peppers. Mexico’s Amar Hidroponia, which grows only habanero chilis, started selling digital tokens in September 2017 as a way to raise capital from smaller investors. Each 500 pesos Agrocoin is backed by a square meter of hydroponic production in the state of Quintana Roo, Mexico. The company says it expects to pay a yearly dividend equal to about 30 percent of the cost, depending on output and demand. One of the benefits of funding through ICO (Initial Coin Offerings) is that blockchain takes control of all the transaction verifications and record keeping. Also, this is the perfect example of disintermediation. There are no banks, brokers, custodians or regulators involved which means that time to market is quicker and the cost of funding is optimized.
Step 5: Choose Your Accounting and Payroll System
Technology is disrupting the accounting industry which means that small businesses can run without accountants and payroll managers. This is appealing for startup businesses that want to keep their overhead structure lean and mean. QuickBooks is an accounting software package developed and marketed by Intuit. QuickBooks products are geared mainly toward small and medium-sized businesses and offer on-premises accounting applications as well as cloud-based versions that accept business payments, manage and pay bills, and payroll functions.
Step 6: Set up your Business Location
Far behind us are the days when new businesses needed to go out and enter into a 12 month rental for office space. The sharing economy has created office sharing. WeWork is the Uber of office rental. With a couple of hundred bucks per month, you can secure modern and equipped office space. You only pay for what you need and the contract is on a month-to-month basis. You are not committed to a long term rental agreement. The work environment is young and lively which will keep you motivated and driven. Office sharing does not work for everyone and you may need to enter into a long term rental. You will also need to weigh up buying or leasing your commercial space.
Step 8: Scale Your Business
Scaling a business means setting the stage to enable and support growth in your company. It means having the ability to grow without being hampered. It requires planning, some funding, and the right systems, staff, processes, technology, and partners. Let me share with you how I went about scaling my financial coaching business Rebel Finance.
1) Commitment to Grow
I started Rebel Finance with a desire to coach people to financial freedom. Being a native English speaker and being fluent in Spanish after living and traveling almost 20 years in Latin America, I wanted to reach as broad a market as possible. I believe my message resonates with millions of people. But, given the limitations of time and geography, how do you reach this target market? I had a commitment to grow and scale.
2) Identify Core Competence
Over the past 25 years, I have built a solid knowledge base in financial markets covering a wide range of assets from equities, bonds, hedge funds, and derivatives. I have also worked within the financial system which means I understand how banks, brokers, pension funds and investment funds work. I also understand how the financial system exploits customer weakness, insecurities, and ignorance. Overlaying all this is my love of teaching and the fact that I have spent the last 20 years of my life giving seminars, presenting at conferences and teaching at universities. I also love to write. Back in South Africa when I embarked on my career in investment banking in 1997, I started to write a daily market report that I sent out on email to a distribution list that grew to numerous thousands. This was my first exposure to blogging and the feedback I received from the recipients was mostly positive. All these competencies lead me to believe that I had the building blocks for a scalable business.
3) What exactly is Your Competitive Advantage?
There is no lack of financial advisers and coaches in the world. We are like Starbucks coffee shops – there is one on every corner. What could I do to differentiate myself from the sea of competition? I focused on three pillars. Firstly, a desire to challenge conventional finance and money paradigms. I wanted to rebel against the existing financial system and show people that all the rules by which they were managing their money were wrong. I wanted to be a contrarian swimming against the tide of conventional wisdom. Secondly, not many financial coaches can take complex topics and express them in simple, everyday language. Financial literacy is low because there is no desire to explain complex financial structures in simple intelligible language. Finally, finance and humor typically do not go hand in hand. Bankers have never learned how to laugh at themselves. They take themselves too seriously. I wanted to take a comical and irreverent look at finance. The financial industry does provide a substantial body of comic material.
4) Develop a Plan and Execute
I decided to execute on this plan by making use of four channels that would enable me to extend my reach and scale the business of Rebel Finance. a) Books Rebel Finance books are written to provide people with the tools necessary to attain financial freedom. These books are written in English and translated into Spanish. They are written to educate and entertain. They are designed to be rebellious and irreverent. I have written them in a style never before seen in the financial and money self-help genre. I take complex issues and break them down into simple components that even the most financially illiterate will be able to understand and dominate. These books will be delivered in the form of eBooks and print on demand through the Amazon Kindle platform. b) Video Downloads Content in the books will be broken down into short video tutorials with a duration of between 10 and 20 minutes and will be available on a subscription basis through our website rebel-finance.com. c) Real-Time Webinars and Podcasts These will be run every week in both English and Spanish again covering aspects covered in the series of Rebel Finance books. d) Coaching This will be done on a 1x1 basis in person or remotely and billed on an hourly basis.
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