The Most Expensive Business to Start

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It’s entirely possible to start a new business on a shoestring. We know this, because every publication worth the paper or website it’s published on tells us so:  Forbes, USA Today, Entrepreneur, all of them.

It requires time, grit, determination, attention to detail, great word-of-mouth – oh – and money! More about this in a minute.

The truth is – the concept of starting a business on a shoestring depends on the size of your shoes and therefore, the length and strength of their laces. It certainly doesn’t hurt if they are made of solid-gold, and you can sell them for your seed money.

If you hear a sarcastic edge in this post, it’s for good reason. It’s born of frustration, the feeling that I’m shouting into an empty cave.  I’ve just heard from one more person who has closed up her advocacy practice because she can’t afford it anymore; this on the heels of a conversation last week with one of our APHA Mentors who asked me, “Why do people think they can start an advocacy practice with no investment? Why do they think they can do it for free?”

Good questions. GREAT questions. And sadly, representative of too much reality and too much failure. And, for today, it means I’m going to try to provide this reality check one more time.

Let’s look at that shoestring for a minute. 

Starting a business on a shoestring does not mean starting it at no cost. And some of those costs can be quite high!  It can cost hundreds of dollars for the legal paperwork, thousands of dollars for insurance (business or liability or both), hundreds or thousands for marketing – and more. That’s not free.

Wait! (you say) – I can do all those myself and save myself all that money!

Really?  Let’s look at that idea – from some different angles.

We’ll begin with the concept of billable – vs – non-billable hours. It’s easy enough to understand the idea that a billable hour is one you get paid for; a non-billable hour is an hour you work that you don’t get paid for. When you first start a business, doing all those things mentioned above requires your hours – and you won’t be paid for them. Granted, you could work 60-80-100 hours a week and be paid for more – but there will never be more than 24 hours in your day – ever!  So that takes us to our next thought:

Just because you can doesn’t mean you should. Maybe you CAN draw up your own legal paperwork, but should you?  Maybe you CAN set up a freebie website, but if you don’t know anything about marketing – should you? If you don’t understand the basics of target audiences and messaging, how do you know you won’t drive people away instead of encouraging them to call?

And then there is the concept of opportunity cost (= opportunity lost) because when you spend your time trying to do things you don’t really know how to do, you lose not only the opportunity to get them done right and efficiently and effectively, but you also lose the opportunity to actually work those same hours and get paid for services and capabilities you DO have that people WILL pay you for.

The concept of cashflow is another consideration that regards timing – the need for money to come IN, before it needs to go OUT. As an example: the second most effective form of marketing your patient advocacy practice can employ is to be listed in the AdvoConnection Directory (right behind word-of-mouth marketing which is the most effective). Once listed in the directory, your phone will begin to ring, especially if it’s paired with some local public relations and public speaking. However, in order to be listed in the directory, you must have liability insurance – and that’s an expense. Paying for something before you have the money to pay for it coming in is called negative cashflow. OK, so now let’s say you put the cost of your insurance on your credit card, and next month when the bill arrives, you haven’t amassed enough billable hours to pay the credit card bill, so now you’ll be paying interest… more expense.

Another concept isn’t about your advocacy, but is definitely about living your life:  that is, if you quit your day job, then you no longer have access to health insurance, or you don’t have paid sick leave or family leave….  bottom line, those perks that came with your employment have now gone away.  It will take at least a couple of years of your self-employment in any new business (advocacy included) for you to cover those benefits you used to receive from an employer.

Finally, you need to ask yourself what you don’t know. We focus on this a lot for patients (potential clients) – if you don’t know what you don’t know, how will you know what questions to ask?  No business-starter can sit in a vacuum, build a business, and succeed. Success requires outreach, networking, tapping into experts – and sometimes, yes, that costs money.

All of those money-related questions, when left unattended, mean that the very capable advocate – the one who could be saving lives, and improving quality of life, the one with a huge heart and great capabilities, the one who is passionate about helping those who need help (yes – you!) – instead begins to spend his/her time worrying about money, worrying about not having enough clients, worrying about how to keep cashflow positive, and continuing to spend more and more of his/her own money instead of making a profit….

There’s nothing free – or freeing – about any of that.  In fact, in my estimation, that’s the most expensive business to start.

The most expensive business to start – is the one that fails. 

Further, the failure is represented not just by the loss of money, but by the loss of faith in oneself, and the loss of all those people who will never get the help they would have received if the advocacy-practice-owner had actually done things right to begin with.

So now that I’ve painted such a negative picture… are there solutions?  Yes, of course!  You know this because new businesses (advocacy and otherwise) start – and succeed – every day!  So how do they do it?

  • They begin with investment: investment of money, yes, and of expertise. As long as the business concept is solid (meaning, they are offering products or services that people WANT, and NEED, and are WILLING TO PAY FOR) – then they will succeed when they invest their time and money using tried and true solutions.
  • They make sure the money they need is in the bank, ready to make up for negative cashflow when necessary..
  • They consult with the right and smart people to support them with legal, financial, and marketing advice (from lawyers, and bankers, to business advisors, to marketers, web developers, insurance people, and others.)
  • They use start-up money efficiently – and focus almost all their non-billable hours on marketing because THAT is how they will begin to develop the paying clientele needed to support their advocacy practices.
  • They learn, and lean on support, for every business aspect necessary because they understand that no matter how good they are at (insert service or product here) – they will fail unless they conduct proper business.

Those tenets are the ones to succeed by.

Those tenets are the ones that will put you on a solid footing, establishing a strong and viable health or patient or care management practice that serves your clients – and yourself – very well.

Any other approach, shoestrings included, will doom your practice to failure.

Because yes, failure is free.

 

Have you been successful establishing your advocacy or care management practice?  Please help others understand the concepts outlined here. Please share either the biggest mistake you had to fix (we all make those!) or the smartest advice anyone ever gave you.  You’ll be helping to strengthen our profession as independent advocates. Thanks!

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Comments

  1. Cindi Gatton  June 13, 2017

    I suspect you’ve said this before but it needed to be said again. And probably again. If you want to earn your living as an independent advocate you have to put on the entrepreneur’s hat first, and the advocate hat second. Another thought occurred to me as I read this. I wonder how often the mindset of “I’ll try this without expending any financial resources until I’m making enough money to invest in my business” leads to the mindset of many new advocates not charging enough for what they do? The two things seem psychologically linked to me. Both come from a scarcity mentality – and it’s very hard to be successful with scarcity thinking. It’s interesting that many solo-preneurs I’ve engaged with in similar businesses (home care, downsizing support, long term care insurance) may invest as much as $50K to *be* in business before they ever opened their doors. They are all “helpers” too but business people first. No scarcity mentality with them at all. This doesn’t imply that we need $50,000 to begin working as a private advocate, but it does mean writing a professional business plan that projects overhead and expenses and has a Plan B if revenue doesn’t cover those things.

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