Category Financial

Millennials are screwed

Are you part of Generation F*cked? Take our test to find out.

caroline hughes Leave a comment

There is a three part test to find out if you are part of Generation Fucked. Try it now.

  1. Have you given yourself whiplash trying to catch a glimpse of the bottom rung of the property ladder as it’s being pulled up fast above your head?

  2. Have you put off having children for so long that you’re worried you’ll be mistaken for gramps when you drop them off at school?

  3. Have you given up on ever really having any money?

The results are in…

If you answered yes to any of the questions, then congratulations. You are part of Generation Fucked. And you are amongst friends.

It’s hard to know exactly where Generation Fucked begins and ends. It incorporates part of Generation X (my generation) and most of Generation Y (Millennials).

It includes everyone who marvels at the standard of living and accumulation of assets that their parents were able to achieve on ‘normal’ jobs.

It includes everyone who bought into the great university rip off and racked up tens of thousands in fees only to find that no-one gave a shit about their Ancient History degree.

It includes all of you who have turned interning into a three year job application (still hopeful…?!)

It includes everyone who is working on a start-up in the hope of creating a steady job. Unicorn rodeo rider?

The number of under-35s starting businesses has risen by more than 70pc since 2006

It definitely includes you if you spend more than 40% of your take home wage on rent. Or if you’re one of the 25% who still live at home (even just part-time to take the edge off).

What does it mean to be part of Generation Fucked?

In researching our new business, Lifetise, we’ve spoken to hundreds of people in their 20s and 30s about their lives, their hopes, their fears and their finances.

As you would expect, we heard many different stories, some good, some bad.  At times we felt like therapists – I’m sure we know things about people’s financial situations that they haven’t shared with their partners.

What was surprising was that there was a distinct lack of whinging. Everyone we spoke to seemed pretty accepting of their lot. Whilst the newspapers gleefully explain just how much worse Generation Fucked has it than previous generations, our survey showed that all of us poor little mites are just getting on with it.

We don’t need to be told that we are significantly less well off than the generation before us. We have eyes. We can see it. We perhaps hadn’t calculated that we were 21% less well off as at the same marker – but we definitely know we’re falling behind.

What’s clear from our research is that there’s no blueprint for how we should live our lives. The goalposts that we were brought up with have moved; or disappeared. We look at the difference between what we’ve got and what we expected to have and we don’t know if it’s ok.

So we delay a lot of the major life decisions and pretend that we don’t mind. We invest more time in our work because we feel we have more control that way and we convince ourselves that freelancing = freedom, whilst craving a stable monthly salary. Some of us try to save money, some of us can’t, some of us play the Euromillions and curse every time it’s won by someone over the age of 50.

There are 4.6 million freelancers in the UK – a 40 year high

We laugh at the quaintness of a job for life, as we build patchwork (portfolio) careers where hustle, following, and self-promotion count for more than ability. Us 30-somethings twitch at the seeming overwhelming confidence of the 20-somethings, forgetting that their role models are worth $200 million at age 25 and this is where they set their standards.

We over-rely on exclamation marks and emojis – keeping everything pepped up and positive. We generally believe in a sharing economy, but we can’t help but wonder whether it’s a race to the bottom for all but the paymasters. We denounce the 1%ers who made their money from flogging their countries’ natural resources, but some of us will find ourselves part of the new 1% that makes its money from flogging its peers.

We are the most liberal generations ever, but fewer of us drink, smoke, get knocked up early or take drugs. I guess for Millennials, when there’s so much uncertainty around what the future holds, it’s better to be sober and keep your wits about you.

Meanwhile, the over 65s are drinking themselves into a stupor…

 

 

 

 

My so-called start-up life

caroline hughes Leave a comment

Right guys, I’m going to need you to get up to speed quickly on the past 18 months.

Remember BeNeighbourly? That planned saviour of local communities, friend of the lonely, promoter of all things nearby.

Dead. I killed it.

Let’s be honest, the bees were the best bit. The bees were great. Everyone loved the bees.

Unfortunately, “everyone” was only a few hundred people. And they weren’t that bothered about the app itself. Which rather suggests that I should have saved the money on the app development and just sold bee stickers.

For those (sickos) who like to pick over the bones of a failed start-up, here’s the post-mortem:

It wasn’t a specific-enough problem: loneliness is a general feeling. It’s not a clearly defined problem. Nor is there a clear group of people for whom it’s a problem. We didn’t have great hordes of lonelies milling around, wistfully looking for a solution to their woes (if I had, I would’ve given them a hug).

We were caught between two types of people (1) those who felt a bit lonely, but not enough to make them want to do something about it and (2) genuinely lonely people who were too scared to go and mingle, so didn’t get beyond creating a profile.

Not enough going on in the ‘hood: turns out, there wasn’t a whole lot of anything going on in our neighbourhood. We (by which I mean my lovely, patient, sister Vicky) spent all our (her) time trudging around looking for events to put in our listings. And boy was it patchy.

If your listings only ever contain the same 3 things, you’re done. Especially if those are baby rhyme time, knitting circle at the library, and jazzercise.

Twitter and Facebook already had it covered: those who wanted to get involved in local stuff had generally already sniffed out local groups on Twitter and Facebook, so people just weren’t bothered about joining another social network. Oh and then there was Streetlife (the existing local social network that we found out about the day before we launched; the one that had Stephen Fry doing their video voiceover; an office in Covent Garden and which had started in exactly the same area, so it was a local hero…).

And we hadn’t anticipated just how wary people are of new things. We tried to advertise our site on local email chat groups, but it was the equivalent of getting hounded out of town by angry villagers with pitchforks. People were very mistrustful of our motives. They didn’t want to BeNeighbourly with just anyone: only with a very select group of people.

Great features don’t mean a thing: we actually built some great features – matching users’ interests to local events and groups, so users were notified every time something new came on the site that matched their interests; and event organisers had an incentive to upload new events, because they would be pushed out to users who would be interested. Really nifty, we thought.

Unless you can get enough of an audience to put these features to good use, they are worthless. Without the event organisers, there wasn’t enough content to push to users, so it became redundant. We called that feature “Snap”. I mean goddamit, we gave it a name.

It should have been a local discovery app – on mobile: we realised pretty early on that what we should have built was a mobile app that helped people discover what was going on around them, using the sort of geo-tagging that FourSquare was built on.

Problem was, there were already tons of other start-ups building something similar that had already been funded. So we were just too late. (http://www.locappy.com/; http://www.spottedbylocals.com/app/; https://findery.com/).

But it’s not all doom and gloom. Because we found a new calling. We’re going to help all of us who are part of Generation F***** to navigate our lives of (mainly) debt, possible unemployment due to robots, crazy house prices and pipe-dream retirement.

Stay tuned.

working girl

caroline hughes Leave a comment

And so it has come to pass.

The realities of living in London (even the edge of what I would ever properly call London, given that I live hemmed in by retail parks, suburban semis, filth-food drive thrus and, fortunately for my sanity, a National Trust park) have made themselves felt.

I’ve had to get a job.

There was no getting away from it.  As you know, I’m a big fan of whiteboards. But their one downside (apart from the fact that we bought cheap ones, so now have to use an industrial scourer to get the words off), is that when you use them to work out your finances, the truth is writ large.  And virtually indelibly.  And it says “You are officially broke.  You have managed to burn through a frankly incredible amount of money in 18 months.  Unless you get a job, in one month’s time you won’t be able to pay your rent and you’ll have to move back in with your mum.”

The whiteboards can be quite stern at times.

But they seem to know what they’re talking about.  So The Mack and I considered our options. And we came to the conclusion that, since he’s pretty much unemployable (my sisters call him “Tribunal Spice” – they keep warning me that it’s only a matter of time before he sues me for ginger discrimination and that I should be keeping contemporaneous notes of all of our work meetings), the only real option was me going back to work.

I actually took it surprisingly well.  I’m pretty good in a crisis.  I’m also hugely uptight about money. So if you present my choices as being (1) rinse through your remaining savings like you’re a Lawson/Saatchi personal assistant or (2) get a job.  It’s no contest.

I is going to get me a J.O.B.

selling myself short

Anyone else who’s quit their job to try something new will know that the way that you sustain yourself through the standard 4am “oh shit, what the fuck was I thinking, why am I so stupid, how am I ever going to make any money, what an idiot, stupid, stupid, stupid, stupid, stupid” routine, is to repeatedly tell yourself that it’s fine. That anytime it gets too much, you can walk back into a job.  No problemo.

And it’s pretty easy to believe that.  Because, like all great fairy tales, it doesn’t have any basis in reality. It’s just a nice story that you tell yourself to help you get to sleep.

But then there comes a time when you have to put it to the test.  And it’s stupidly nerve-shredding.  You convince yourself that no-one will hire you. That your 18 month “sabbatical” will most certainly be viewed as a breakdown. You realise that your eagerness to charity shop your entire work wardrobe was a little premature and it’s unlikely that your elasticated house trousers are interview suitable.

You also feel a bit resentful.  What do you mean I have to go to work?  What, like other people? I thought I gave that up?  You don’t want to have to explain your experience, or sell yourself.  You wish that interviewers could just absorb your competency, like osmosis or a big old recruitment sponge.  You’re not ready to be enthusiastic. Or smile. Or nod your head to show great depth of understanding.  Or rearrange your features so you don’t look completely horrified when they talk about clients and contracts.

I had to squash my mortification and get in touch with all my friends who could possible offer me a job.  I was very Britishly self-deprecating and called it my “work scrounge”. I felt embarrassed for asking. But everyone was great and quite a few genuinely tried to help.

Thanks guys. I’m touched.

But in the end I didn’t need it.  I met with one recruitment consultant, interviewed for one job, got it.  All in the space of a week.  It was either incredibly lucky, or showed of a distinct lack of discernment.  On both sides.

Either way, I’m back in the game. It’s a creative environment and the people are nice.  There’s a bar in the office and lots of toast and peanut butter.  Plus it’s only 2 days a week, so hardly even counts.  However, I loathe having to get up early.  The tube journey is hateful.  And I miss my spot on the sofa.  But it’s stopped me moping around the flat and it keeps the wolves from the door.

Knock knock

Who’s there?

Some wolves.

Go away. I’ve got a job.

lifestyle tetris – downsizing and deflation

caroline hughes Leave a comment

There comes a point where it’s no longer enough to talk about the lifestyle changes you’ve made, which, when you boil them down to the bare bones, equate to little more than not working and going on slightly longer holidays.

4 weeks instead of 2 weeks in the sun.  Take that, rat-racers…

That point has well and truly arrived for me.  As I sit amongst packing boxes, trying to decide which charity shops should share in the spoils of my decluttering (bad person alert – I give my best stuff to the ones which make an effort with lighting and merchandising and my shameful tat to the dusty ones manned by myopic elderly spinsters).

The fact is, it’s been looming over me for a little while.  How it’s all very well to pretend to change your life, by only giving up the bits that you don’t like.  But at some point, you’re going to need to make a few more difficult changes.

ch-ch-changes

So for me, the main one is giving up my rented flat in North London.  When you have no income, it suddenly seems a little bit ridiculous to be spending over a grand on basic living expenses every month.  So The Mack gets me as a houseguest for a month (lucky, lucky man) and, in return, the money I’ll save on rent will pay for his ticket to come join me in Argentina.

Cos that’s the other thing.  It’s actually cheaper for me to go to Argentina and Brazil for a couple of months than it is to stay in London.  I find it strange that London has such a strong start-up community, when it’s such a cripplingly expensive city.  I can only assume that Google campus works like a soup kitchen for starving wantrepreneurs.

So, anyway, it all sounds very exciting.  Living without a plan.  Travelling to hip destinations.  Not knowing where I’ll live when I come back.  Taking risks and living in the now.

Well let me describe the realities of the now…

I hate you so much right now

The now is the sort of logistical puzzle that, in comparison, makes me feel fairly certain I could mastermind a major war and comfortably expect to win with minimal loss of life to my troops.

It involves many lists of the many items that I own.  Most of which have been happily hiding away in the loft spaces since my last move 18 months ago.  And which, when assembled fully in my bedroom, make me want to weep at the enormity of the task before me.

take it away…

It involves various google searches to find people prepared to take away my unwanted furniture and electrical goods.  (If you’re interested, British Heart Foundation is pretty good for furniture and large, working electricals and there’s a scheme called 1,2,3 Recycle For Free for collection of electrical goods, big or small).

I wouldn’t bother trying to sell your stuff.  No-one’s buying.  If you can be arsed to enter the barcodes, then apparently Music Magpie is ok for CDs, DVDs and computer games, but you’re talking about 10 – 20p per item, so you need a fair few before you make any real money back.  And if you have any old textbooks, then Fat Brain is another good one, I’m told.

store it…

If you have stuff you want to keep, then you’ll need to navigate the dizzying array of storage options.  I nearly started a spreadsheet to make sense of the different pricing offers.  Some give you a free month if you take a minimum of 2 months.  Others charge per month and not every 4 weeks.  Some give free collection.  Some free insurance.  It’s a minefield, people.

In the end I went for Henfield Storage.  They’re the cheapest I found, they offer a free collection service if you pre-pay 3 months and they have good locations.

I’m just hoping that all my stuff fits into the size of room that I’ve reserved.  I’m quite tense about this.  My spatial awareness (or rather lack of it) is legendary in my family.  I’m the girl who struggles to fasten those elasticated luggage strap things on the inside of suitcases.  I’m there for days, twisting those stupid little fastenings around and around, just praying that somehow they will magically come together.  I’ve been known to cut them out of my suitcases in a fit of pique.  Hateful little things.

So, in my mind, a sideboard, chest of drawers, trunk, 2x stag armchairs, 2 x small chairs, wine rack, 2 large mirrors, a screen, 2 old-fashioned suitcases, various boxes of crockery, DVDs, kitchen stuff, microwave, stereo, clothes, ironing board and duvets, should easily stack into a 5ft x 7ft x 10ft room…  Right??

I’m taking The Mack with me to help me unload.  This could prove to be the toughest test of our relationship.  I think he’s going to be thankful that there will be an innocent bystander there too.  And that it’s a public place.  Otherwise this could get U-G-L-Y.

The Mack thinks it’s all a game.  Silly, silly man…

Yesterday, I felt totally overwhelmed by the whole packing up process (err, you can maybe tell I don’t work anymore, if this is my idea of stress..?).  Today I feel calmer.  I have a game plan.  It is flawless.  Probably.

Step 1:  Charity Shop – I have packed 10 bags of unwanted stuff to take to the charity shop on Thursday.  This is neatly stacked on the landing outside my flat, so as to leave more room inside for more packing.

Step 2: Mother’s Pride –  I have identified the stuff that I’m going to store in my mum’s loft (the “good stuff”).  This is packed and in an easily accessible corner of my bedroom.  My mum may shed a few tears when she sees the extent of what I’m bringing home, but her maternal instincts will prevail, I’m sure.

Step 3:  Collectors’ Items – I have booked collections in a couple of weeks’ time for my unwanted furniture and electrical items (the woman on the phone said “electronicals”, but I let it go…) and my stuff to go into storage.  I will mainly be spending that week waiting for white vans to show up.  I have itemised lists so that I don’t send the wrong items with the wrong van…

Step 4:  Mack Attack – I’ve hired a van for the day after the collections, so that The Mack and I can take whatever’s left over to his house.  I had promised him that I’d only be bringing 2 suitcases (normal clothes for now and stuff for our trip) and a plant and my bike.  We’ll see…

I suspect that what will actually happen on Step 4 is that I’ll look around and realise that there’s loads more stuff left over than I expected.  I’ll then have a little cry.  The Mack will lose patience with this woe-is-me routine after about 3 minutes and tell me to pull myself together.

We’ll then have to split up the stuff into different piles.  There will be a “shit, that was meant to go into storage” pile, a “fuck it, that can just go to the dump” pile and a “please can we find a little tiny space in your flat for it?” pile.  Which means that our journey to The Mack’s in deepest South London will be via the storage facility in North West London and the nearest landfill.

We don’t celebrate Valentine’s day.  Why would we when we have all of this to look forward to as a true expression of our commitment to one another?  I’ll make sure I keep back one of my bottles of champagne to toast the occasion…

crowdfunding – money for nothing?

caroline hughes Leave a comment

In the olden days, if you wanted to start up a business or launch a new product, you either had to have lots of your own money or find an investor willing to part with theirs.  For most budding entrepreneurs, it meant having a whip-round amongst friends and family to raise seed capital.  Which, inevitably, meant that those same friends and family then felt that they had acquired the right to tell you exactly where you were going wrong with your idea…

Then came Dragons Den.  Which taught us all that the boy scout motto applies equally to investment pitches and convinced the entire nation that an idea without a patent is utterly worthless.  It also provided a valuable insight into human beings’ capacity for self-deception (remember the guy who wanted £100k for his amazing device for helping drivers drive safely abroad??  It turned out to be a single glove that you wear on your right hand when travelling abroad, to remind you which side of the road you should be on…).

All very enlightening, but, ultimately, it was hard to take the show seriously when one of the dragons clearly thought that a retail high street stationery business was a good idea.

I’m out.

crowdfunding

Now there’s a new way to get investment.  It’s very trendy and inclusive and gives people a warm, fuzzy feeling inside.

It’s called crowdfunding and it involves getting lots of people to invest a small amount of money in your business or product.

When I first heard about it, I was skeptical. I mistakenly thought that each person who invested would get a teensy piece of equity in the business, so you’d have lots of little shareholders.  I assumed that it was a bit like taking your company public, but without people being able to then buy and sell their shares.  I thought that it sounded interesting, but I wondered what would happen if you wanted to sell your company on?… hmmm.

Turns out I was right to be skeptical, but way off the mark in terms of how crowdfunding works…

kickstarter

There are a ton of crowdfunding platforms out there now, but Kickstarter is the biggest for the US and UK markets.  The Mack was looking to use it for one of his business projects and explained how it worked.  We were in a Vietnamese restaurant at the time.  I almost spat my pho out at him.  I definitely remember telling him that he was immoral and that I wouldn’t be any part of it.

Overreaction?  Maybe a tad, but I’ll let you be the judge of that.

So the premise of crowdfunding is that it allows individuals to invest small amounts in businesses or projects that they like the look of and it allows companies to raise money without having to give away any equity.  Typically, individuals can invest upwards of $5 in a project.  In return, they get some sort of reward or recognition.  Whether that’s a name-check on the art film project or an advance copy of the role-play game they’ve invested in.

So you could look at it as a platform which gives rein to the ultimate free market principles.  Power to the people.  A chance for consumers to influence the latest products and support the arts.  A way for small companies to forward-sell innovative products.

Or, like me, you could just look at it as absolutely barmy and ripe for scamming.

money for nothing?

Because it’s not even money for old rope.  It’s basically free money.  It’s the equivalent of the friends and family whip-round of old, but with 10 million mates all chipping in a couple of quid.

It flies in the face of all conventional business wisdom on bootstrapping and angel investment and careful financial husbandry.  You don’t need a business plan.  You don’t even need a company.  You don’t need to show anyone your finances.  Or tell investors how you plan to spend the money they’re investing.

All you need is a project, a snazzy marketing video and enough people who are happy to part with the cost of a latte, and bingo!  Instant success.

Because not only do you raise the money that you need, but you also get massive exposure to your target audience and, if your fundraising exceeds all expectations (the largest amount raised was $10m; over 10,000% of the target), the media will pick up on it too, so further free advertising and even more potential customers.

The most successful projects seem to be those involving funky technology products (smart watches, games consoles), computer games or arty stuff.  That would seem logical – the people who like those things tend to be early adopters anyway, so of course they’d jump at an opportunity to say that they helped make that product a reality.

The Mack and I think it’s only a matter of time before crowdfunding is taken over by organised crime.  Gullible punters willing to part with cash in return for nothing?  It’s the ultimate investor-endorsed Ponzi scheme.

Maybe because of this, Kickstarter has closed its platform to all but “creative” projects.  Don’t be put off.  It seems as though “creative” stretches a long way.  Just take a look at some of the projects that have been funded recently and you’ll get an idea of what flies and if it could work for your project.

And even if Kickstarter is a non-starter, there are many more crowdfunding platforms out there.  Country-specific platforms, sector-specific platforms, even worthy causes platforms.  If you’re looking to attract crowdfunding, then you need to think seriously about the amount of money you need to raise and which platforms get enough of the right eyeballs to make that likely.  As with all of these things, with popularity comes fragmentation and if there are too many platforms, then it becomes harder to attract enough mugs, sorry, investors, to your project.

So my advice…  Get in there now if you’ve got an idea but no cash.  In a troubled economy, it seems there is no shortage of people willing to throw money at new “stuff”.  And they expect almost nothing in return.

Jeez, I bet Madoff wishes he’d thought of this…

business planning 101

caroline hughes Leave a comment

Business plans have a bad rep these days.  I’m not sure what happened.  Maybe they let themselves go, piled on a few pounds and stopped returning calls…

I suspect that the issue lies with the idea of what a business plan should be (dense and serious) and what it should contain (lots of dry facts and figures, a liberal sprinkling of pie charts).

Whatever the reason, whenever I talk to someone about their fledgling business, nothing gets me stonewalled quicker than asking them how they put their business plan together.  Particularly in the tech or creative sectors.  Business plans are seen as old-school, flabby and a waste of time that could be spent creating an amazing viral campaign.

Well, call me old-fashioned and pour me a sherry, but I’m pretty certain that they still have their place.  I’ve yet to be in an investor meeting where the money guys have said “we’re not interested in your business plan, just show us that cool remote-controlled egg timer app again”.  (If you do know money guys like that, please send them my way.  Especially if they want to invest in egg timer apps.  I sense a real opportunity in emerging markets).

I actually think that if you were to ask most people running a business what’s the one thing they wished they’d done better at the beginning – the response would be: planning how to manage their business and make money from it.

So in the immortal words of Tag Team – Whoomp There It Is… I’m takin’ it back to the old school…’Cause I’m an old fool who’s so cool (they said it, not me)… and below are some suggested questions to help you generate your very first business plan.

BUSINESS PLAN QUESTIONNAIRE *

1.  PRODUCTS / SERVICES:

  • What products / services are you planning to offer to customers?  Describe in detail.
  • What differentiates your products / services from similar products / services in the market?
  • Who are your competitors? List categories and specific businesses.
  • What does your business stand for (e.g. value-for-money, quality, craftsmanship, innovation, philanthropy)?
  • What testing have you done to ensure that there is a market for your product / services?

2.  CUSTOMERS:

  • Who are your target customers? Describe demographic and customer characteristics.
  • What are your customers’ needs and expectations and how will you service these?
  • How will you attract new customers? (e.g. word of mouth, advertising, discount marketing – groupon, wowcher etc.)
  • How will you encourage customer retention / repeat custom? (e.g. loyalty programmes, refer-a-friend discounts, package deals)

3.  MARKETING:

  • What existing marketing tools/materials do you have? (e.g. current customers who can give testimonials)
  • What are the best marketing tools to reach your target customer audience? (e.g. website, flyers, word of mouth, social media)
  • What experience do you have in marketing and / or what budget have you allocated for marketing?

4.  CAPACITY/LOGISTICS:

  • How many hours per week can you devote to your business? If part-time, draw up a realistic schedule of available hours.
  • How / where will you provide the services/products (e.g. online, via a shop, at home, mail-order) and what type of costs are associated with your delivery method (e.g. travel, heating, lighting, electricity etc)?
  • Do you foresee any problems with your delivery method:
    • for you?
    • for your customers?
  • Do you have everything in place to begin providing the services or products?  If not, what preparation, money and time is required on your part to get you to this point?
  • What is your capacity (the maximum number of customers you can service)?  What would enable you to increase that capacity?
  • Do you need anyone else to help you deliver your product / service to your customers?  If so, how do you intend to work with that person / service provider (e.g. employee, contractor etc.)?
  • Do you have all the necessary licenses and business permits you need to operate your business?

5.  FINANCIAL:

  • What is your current monthly income?
  • How many hours do you currently work to generate that income?
  • How much of that income are you looking to replace with the income from your new business?
  • Is there any deadline for replacing some / all of that income (e.g. because your job is being made redundant, your company has cut back on your hours etc.)?
  • What is your proposed pricing schedule for your product / service? Make sure you list out any one-off fees, discounts, bulk-pricing etc.  How does this compare against your competitors’ prices?
  • What are your monthly costs of providing the services? For each cost on your list above, try to get as accurate an estimate of amounts as possible.
  • What capital expenditure (if any) will you need to spend in order to provide the services (e.g. on equipment, premises etc.) and when will you need to spend this?
  • How long will it be before you start to break even?  How long before you generate enough money to pay yourself a salary?
  • Who will manage your accounts for you?

6.  GENERAL:

  • Why do you want to start this business?  What are your drivers and goals?
  • What obstacles do you see to making this business a success?  How might you overcome these obstacles?
  • What help is available to your type of business (e.g. government grants, local enterprise schemes, mentor assistance, crowd funding)?
  • What are your current plans / timetable for expanding the business?  What capital would you need in order to achieve this?  Where will you obtain this investment?
  • If you had unlimited capital investment, what would you do with it to expand the business?

 

*DISCLAIMER: the above is not intended for you if you are pitching for capital investment.  You’re gonna need some pie charts for that…

mo’ money, mo’ problems

caroline hughes Leave a comment

The dreadful thing about having a steady job and a decent monthly salary is that you become conditioned to believe that you need it.  And if you don’t particularly enjoy your job, then that salary becomes the justification for sticking it out and the means of paying for all those treats you buy yourself to make up for it.  Sound familiar??

Allegedly, there’s a button on Word Press that allows you to insert a poll.  I am nowhere near that level of technical wizardry, but if I were to do a poll of top reasons for not starting something new, I’d guess that lack of cash/fear of financial meltdown would come up pretty high.  Understandable, perhaps, but (whispers), I think you might be using this as an excuse…

what’s it worth?

I’m not going to pretend that it’s easy to walk away from a salary.  It’s not.  I thought long and hard about when to do it.  I gave 3 months’ extra notice on my job, just to get that bit more cash in the bank and to give myself time to adjust to thinking about my finances differently.

But ultimately, I decided that I valued my time more than I valued the money I was earning.  Ask me again in 12 months’ time, but right now I wouldn’t go back to employment for all the tea in China.

easy for you to say

I hear you.  It’s easy for me to enthuse about lifestyle changes when I’m childless, mortgage-less, debt-free and have no dependents relying on me.  That’s all true.  But I still have financial obligations.  I pay a staggering amount of monthly rent and council tax on my flat (London, I love you dearly, but you’re killing me).  I don’t have a pension, stocks or shares or any other security, except the cash in my bank and my earning potential.

I’m not here to tell you that my way is the best way.  That everyone should quit their jobs, eschew material things and live like financial nomads in pursuit of spiritual enlightenment.

It’s just that I’ve realised that this is the best way for me, right now.  And maybe it’s something you’ve wondered about.  In which case, use what I’ve learned so far to see what your options are.

you do the math*

I’m a little scared of money.  I didn’t have a lot growing up, so I’m probably more fearful than most about not having enough.  In my last job, I did a lot of forecasting and financial modelling for investment raising and I learned to read a balance sheet, P&L and cash-flow statement.  So when I was trying to decide if I could afford to leave my job, I applied that learning to my own finances.

Personal balance sheet

Crucial first step: you need to work out what you’ve got in terms of assets and liabilities.

If you’re a whizz on excel, then start using a spreadsheet for your personal finances.  It does all the number crunching for you, so you’re less likely to make mistakes.  Otherwise, just write it out old-school in a notebook.

You need two columns: Assets and Liabilities.

Under the “Assets” column, list out all your assets (the value of your house/flat/car, cash in the bank, stocks and shares, pension, ISAs, premium bonds, etc.).

Under the “Liabilities” column, list out all your liabilities (your current total mortgage owing, credit card debts, car repayments, etc.).

Deducting the total amount of Liabilities from the total amount of Assets, gives you your basic net worth in money terms.  It will either be a positive number (i.e. what you own is greater than what you owe) or negative (i.e. what you owe is greater than what you own).

Remember, it’s a snapshot of this moment in time and will change, but it gives you a good indication as to whether you have assets you can free up to finance your lifestyle change.  Don’t panic if the picture looks bleak.  A negative personal balance sheet doesn’t mean you’re stuck as a wage slave forever.  It’s only part of the equation.

Cash-flow

Next, you need to work out your average monthly cash-flow, so you know what you need to earn to meet your commitments.  For this you need 3 columns: a blank first column, then “Monthly Income” and “Monthly Expenditure”.

In your first column, list out each category of income and each category of expenditure, as this allows you to do a more detailed projection.  Then deduct the total expenditure from the total income, to get your balance.

It should look something like this:

Do this exercise for at least 3 months back (go through your bank statements to work out each month’s expenditure).  This will help you to then get an average of your monthly income and outgoings.  This is essential before you even begin to consider giving up your salary.

You need to know that your assets (from Step 1 above) and your non-salary income are sufficient to meet your expenditure requirements going forward.

Remember: not all assets are created equal.  Cash is king, because you can get at it readily.  Having a house that’s worth a lot of money does not help with cash-flow, because it will take time to remortgage it or sell it to get cash in your hand.

what’s the plan, Stan?  

It pains me to tell you, guys, but quitting your job and going solo does require a bit of planning.  There’s nothing that sours the satisfaction of giving the 2-fingered salute to full-time employment like having no way to pay your rent next month.

So don’t rush it.  It’s rarely so bad that you can’t stick it out a couple more months.

You’ve got your balance sheet and cash-flow data, so use it to forecast your new life.

1.     Improve your cash-flow (or stop spending so much goddam money on stuff you don’t need)

  • I’m not a massive consumer (unless you count booze, in which case I’m right up there with the best of them).  I’m also pretty thrifty.  I have spidey sense to spot the “reduced to clear” stickers in the supermarket.  I rarely shop for clothes and, when I do, I sell a load of my back-wardrobe on eBay (seller name raghi77 if you’re interested…).  Before you buy anything, ask yourself if it will help or hinder your new lifestyle.
  • I spend my money on experiences – travel, festivals, gigs, nights out with friends, spa sessions.  These don’t come cheaply, but they do tend to come less frequently, so it helps with cash-flow.  I also tend to pay for these on a cheap credit card (look for 0% balance transfers and purchase deals on moneysupermarket.com), so I have longer to pay them off.
  • If you can start up your business by working on it during weekends/evenings around your existing job, then for gawd’s sake do that.  Keep the money rolling in from your salary to finance it, so that the financial risk is lower.
  • Consider going part-time or freelance for your existing company.  You may feel like you couldn’t stand to work another day, but you’d be surprised how differently you feel once you’re in control of your time.
  • Before you quit, sign up with some temp agencies for your specialism.  Knowing that you can get a few weeks’/months’ work here and there as you need it helps to keep the fear gremlins at bay.
  • Separate your bank accounts.  Put the majority of your savings beyond easy reach somewhere where it’s earning a reasonable rate of interest.  Set up a standing order to feed your monthly cash requirement into your day-to-day account and have a second current account with a buffer amount in it, for contingencies.  Then learn to live within your means (easier said than done!!).

2.     Weave your safety net

Ask yourself what you could realistically do to get money in if you were in a tight spot or to finance your new business plans.  For most people, this will mean looking at your assets on your balance sheet and working out how to make some money out of them. For example, you could:

  • rent out / sell / remortgage your house
  • cash in stock options / ISAs / pensions
  • borrow money
  • sell other assets (car, clothes, furniture)

Clearly these are big decisions and should not be taken lightly unless you derive perverse pleasure from riding a financial rollercoaster.  But what I’m trying to get across is that most people have options when it comes to money.  These options may seem terrifying and some may be totally inappropriate for your circumstances, but they should all be factored in to your financial planning.

Knowing that you have a safety net (or starting to weave one) allows you to shift your focus away from simply surviving to creating your new life.

I am fortunate that I have a reasonable amount of money saved up to support me.  But I’ve also downsized my living arrangements, cashed in my Oyster card (getting around by bike also keeps me fit), stopped getting my hair cut so frequently and haven’t been into a clothes shop in 6 months.

I’m still working on cutting down on my £10-a-pop cocktail habit…..

 *sorry for the Americanism, but it scans better…