How to Find the Spirit of Your Business: 3 Key Aspects to Focus On

A business plan starts with a clear understanding of what the business does. When you're just conceiving of a business, this probably isn't clear. There are many directions you can go with any idea. Furthermore, there are different ways to spin your marketing that can make the true business model unclear. Let's get clear on what's at the heart of your business.

This is the second installment in my series on self-employed business plans. Last month I gave you a high-level overview of all the parts of a business plan. This month we're diving into the first two sections of a business plan: the Executive Summary and the Company Description. I'm going to focus more on what of these headings apply to self-employed people. For us we need clarity on what we're doing, how we're presenting that, and a way to keep hold of this clarity.

In a traditional business plan, the Executive Summary comes first followed by the Company Description. I'm going to switch the order. Why? Because we're self-employed - we get to do it our way! ...And because you're still getting clear on what your business is. We're going to start broad, before distilling it down.

A Business Overview

The first question I ask any prospective client is: What's your business idea? The answer to this question takes many different forms. I don't expect a new client to have a polished answer to this question. I chat with my clients on a weekly basis and we get to the bottom of it. However you get there, you're going to need to know 3 key aspects of your business: (1) Why you're launching/running this business. (2) What your business does. (3) Your legal formation. But before we get into that, my nod to the traditional business plan.

The (Traditional) Company Description

In traditional business plans, this section includes a few things. First the mission statement, company goals, and objectives. Also a simple description of your industry and who you're selling to. For companies greater than one, these documents keep people in step with one another. Later in the business plan, you'll explore these in more depth. In the company description, we're only looking to orient the reader. Remember, the reader of a business plan is a lender or investor. They don't know anything about you and your business. You need to tell them all the basics, including who the owner is, how you're structuring ownership, and why. For larger companies, these can be complex. For example, Corporations can have shareholders and complex ownership structures.

The (Self-Employed) Company Description

For self-employed businesses, having all that stuff written down can be superfluous. But there are parts of this that are vital. I want you to know what you're doing and why. I want you to understand you have a choice in how you deliver your skill or talent to your customers. You also have a choice in who your customers are. You have a choice in how you position your offering in the market. You have a choice if you're a sole proprietorship or an LLC. There are no right and wrong answers to these choices. But not making a choice is disempowering yourself.

What your business does is different from how your business markets it. I notice many solopreneur's descriptions of their business tie in how they plan to market. Let me explain by using the example of a bookstore/cafe business. Does this business:

• provide a place where people can gather and celebrate their love of books?

• provide a cozy, studious, and attractive ambiance for people to study, work, or meet with friends?

• sell coffee and books?

• rent out the space as a venue?

All these purposes can co-exist in the same business. But notice how those first two are all vibes. Those are the marketing carrots that bring customers in. It's not the business part of the business. The latter two are business ventures; money changes hands. The last two bullet points are not in perfect harmony with the first two bullet points. If someone's rented the space, a customer might not be able to just show up and study when they want. This is precisely why we need to get clear on what the business's primary purpose actually is.

For self-employed businesses, the business purpose is simpler. You are your business. The business's reason to exist is inextricable from your personal life goals and purpose. We can't talk about the business' purpose without talking about yours. From there we need to get functional: What good or service do you exchange for money? We need to be clear on which side your bread is buttered on vs. what's marketing. Your business will also need to operate in a legally recognized fashion. Your goals and what the business does inform the legal structure.

1. Why You're Doing This

There are a lot of reasons to start a business. In capitalism, some reasons are deemed more valuable than others. Bigger profits and broader reach are understood as more important than smaller-scale businesses. That's just not true. There's so much value in an individual having control of their own work. Self-employed businesses blend the status of a business with the conscience of a person. These things tied together can do so much for the well-being of our society. Self-employment can also be a path toward survival. Traditional employment often doesn't suit the needs or humanity of marginalized individuals. Plenty of folks still have a lot they can contribute to their communities. Self-employment turns this into survival and thriving.

Your dream for your business doesn't have to be traditionally understood as a "successful" business. You get to define success. Want an abundant livelihood? Want to maximize time spent doing enjoyable things and minimize the crappy stuff? You're in good company because that's what I and most of my clients want! These are valid reasons to launch a business. You can be successful at this!

Don't get distracted by grandiose business advice. Remember that their definition of success and yours are very different. It can be helpful for you to get clear on what matters to you and why. If that takes the format of a mission statement or goals or a vision board - there are no wrong answers. And none of that is required. If you know and you stay true to it, then you're going to end up with a business that supports your thriving.

2. What Your Business Does

In my bookstore/cafe example, the business did a lot of things, but only some made money. Even the things that make money needed to be prioritized since they didn't fully work with each other. How do you identify these things for your own business ideas? Exploring your business model can help.

Previously I've written about and provided a business model worksheet. Consider each of your business ideas or service offerings in a separate row of the business model worksheet. The first four columns of this worksheet ask you to clarify what you're selling, who consumes it, who pays for it, and how they buy and receive it. Thinking these through for each offering achieves a few objectives.

First, this makes you write down all your ideas. For many folks, this turns the feeling like you have a million ideas into the reality of a finite number. A million is intimidating. A dozen is tangible.

An example business model worksheet for this hypothetical bookstore/cafe.

Second, you'll notice which ideas are not really businesses. In the image above, you can see the first two bookstore/cafe services don't have anyone paying for the service. There are many possible solutions to this. Everything from charging an entrance fee to shifting which idea your business prioritizes. The solution you choose needs to fit in with why you're launching a business.

For example, an entrance fee could fix the business problem. It might also conflict with the business owner's values surrounding access to a book-loving space. In this case, the owner needs to prioritize the needs of a service that brings in revenue over one that doesn't. Any of the business ideas can still play a role, the key is to balance your goals and definition of success.

Third, you'll notice similarities between services, and areas of conflict. In the example worksheet, you can clearly see that selling coffee and selling books has a very similar model. The payer for each is the same as the consumer. The way the service is bought/received has many similarities and some differences. These services might be easy to launch simultaneously since they share so many commonalities. Or you might prioritize the purchase/delivery tools of one over the other to start.

Conflicting services, like renting the space out as a venue, start to stand apart. The consumer and payer for renting out the space are different from each other and from the other offerings. The way this service is bought/received is also completely different than the others. This might be a more difficult offering to work into your business, especially from the get-go. But your goals for the business still play a key role! If offering the space is vital to your purpose, then you can deprioritize the others to focus on this one. When conflict between ideas occurs we can be clear on who's needs to prioritize. We'll center the needs of event space renters and the needs they perceive of their attendees. The needs of coffee lovers and bookworms get met only if they don't take away from the needs of the renters.

Understanding your business model will lead to clarity on which business ideas to prioritize. But this will only happen if you're examining it in light of your own definition of success. You need at least one business idea, but it absolutely has to integrate with your purpose and goals. You can use the percentage column in the business model to clarify your priorities. When the business is fully up and running, how much revenue would you anticipate from each idea? A higher revenue expectation is a stronger business idea. If you have more than one business idea, these percentages are a guide to growing/developing the business. You'll start with the highest percentage offering(s). Expand to new offerings only once you've gotten traction with the top-priority items.

3. Legal Formation

Self-employed business owners can get caught up on this part unnecessarily. There are finite forms of legal ownership: sole proprietor, limited liability corporation (LLC or PLLC), partnership, and corporation (C, S, etc). The latter two of these are inapplicable for self-employed businesses. As one person you cannot be a partnership. If you're not doing fancy stuff with investors, selling shares, then you're not going to be a corporation. PLLCs are only available to designated professions. They're the required version of an LLC for those professions. They are functionally very similar so I use "LLC" and "PLLC" interchangeably. (Consult your state website or a lawyer to get into the fine details between the two.)

Bam! We've now whittled this down to an either/or choice: sole proprietor or LLC. The decision between these two asks you to consider your legal, tax, and financial circumstances. I am not a lawyer nor an accountant and cannot give legal, tax, or financial advice. I definitely can't tell you, a stranger on the internet, which is the right choice for you! But you can make this decision for yourself without consulting a lawyer.

I go into this more in-depth in the article Want a Risk-Free Business? but here's a super simple breakdown of the pros and cons.

Sole proprietorship:

• pros

  • simplest, easiest, and cheapest to form.

  • adds one relatively simple form to how you file your taxes.

• cons

  • offers no liability protection beyond what good behavior, clear contracts, and insurance allows.

    • Risk can never be zero. When assessing your risk consider the volume of customers and the level of distance/anonymity you have with them. The greater of either increases your risk. Fewer customers and the more closely you know them, the less risky.

LLC:

• pros

  • creates a dividing line between your personal assets and your business.

    • This means a lawsuit against your business wouldn't automatically include your personal assets. If you have retirement accounts or own real estate, strongly consider this option.

  • earning above a certain amount may be able to get some federal tax filing benefits.

• cons

  • takes more paperwork and fees to maintain, especially to get those tax benefits.

Don’t stress about making this choice. It's simple enough to start as one type of business and then change to a different structure. Choose what's right for you now, and if your circumstances change, then make a change.

That's the Company Description!

Are you clear on why you're doing this, what your business does, and your legal formation? If so then you've got a defined business idea fit for a company description!

The Executive Summary

Rewinding back to the part where this lines up with a traditional business plan, let's talk about your Executive Summary. In a traditional business plan, this is the first part of your plan that the reader encounters. It summarizes the high points of your business plan. As a persuasive document, this distills your business down to the top selling points for the lender or investor reading it.

For self-employed businesses, there's no need to write a document like this. Think of this as the part where you summarize and remember. It still holds true that you might not start here. You need to do at least a little planning before you construct a reminder for yourself. But it also might not be the last thing you do. At this juncture do something to keep the key parts of your business in mind. Two key aspects to keep track of are (1) why you're working on this, and (2) what's most important about your business. Write it down. Post it somewhere visible. Use a method that works for you to keep focused on what really matters in your business!

Now What?

As you've read through this article you've thought about these aspects of your business. If you're pleased with where your thought process is, then that might be all you need to do! Journaling or doing something else to process or document your thoughts might also be helpful. You're not trying to inspire an investor, so this doesn't need to fill dozens of pages of Word document.

If you want to investigate deeper in any of these areas you can do that! Part of my role as a business coach is to be a thought partner as you develop your business idea. As well as offering instruction on any skills you want to develop to help your business thrive. This is just a starting place for learning! Check out The Launch Pad's many resources. The Making Your Business Legit section will walk you step by step through the legal formation and licensing of your business. Or leave a comment below letting me know what else you’d like to learn!