The Microbusiness Owner's Guide to More Profit, More Fun and More Time
You’ve worked hard for weeks and months, and your microbusiness is successful--whatever that means for you. From here, it’s up to you to help it become more profitable and more fun to run. In this post, discover how to create a more profitable microbusiness by observing usage trends. Dig into ways to eliminate the work you don’t enjoy in your microbusiness. Learn how to free up your time by slowly replacing yourself in the day-to-day administration of your microbusiness. Consider how to prepare your microbusiness for sale, in case the time to sell should come.
To help your microbusiness become more profitable, listen. Founders often become so focused on executing the first, initial vision they had for their business that they ignore or miss hidden opportunities.
To paraphrase Jack Dorsey (co-founder of Twitter), your initial business plan was a guess at what other people might want to see in the world. Your customers or visitors or buyers will, through their usage patterns in your business, tell you if that guess was correct and, if so, how correct. If your guess was 80% correct, more profits can be found in moving towards 100%.
For example, let’s say you have an online retail business that sells 3D printers and equipment, as well as a DVD training program for learning how to make and print 3D models. You promote each part of your website equally, but for some reason, the DVD training program outsells everything else on your website and contributes half of your overall revenue. The market is sending you a strong signal that there’s a hunger for 3D printing training materials. Are you going to listen to or ignore the market? You may have initially envisioned your business as purely dealing with the sale of physical products related to 3D printing. But there’s a clear opportunity to create an online video course or DVD series of your own that might be more successful than all of your retail categories combined.
Though not a microbusiness, a key shift in the early days of vacation rental startup Airbnb illustrates the importance of listening to your customers. The business was originally founded around providing people an airbed to crash on during events and conferences. Quite quickly, customers began to ask whether they could rent rooms and properties via Airbnb while on vacation. Airbnb co-founder Joe Gebbia says:
“As we started growing, it became clear that people wanted more than just Air Beds. They wanted houses, they wanted just space, in the abstract sense. They didn’t just want space for events, they wanted space for vacation, for business trips. We started thinking, why limit it?” (source).
Be open to change focus or re-invent your microbusiness if it’s clear your customers are asking you to. If the Airbnb founders had stuck with their original vision of providing cheap places for people to crash during conferences and events, they would not currently be valued at $2.5 billion.
If you’re wondering about any of the following questions, your business might be in a position where your initial business plan needs rethinking:
“If we only did X, my microbusiness might be just as successful as it is now, or maybe more so.”
This is the question the owner of the 3D printing retail store mentioned above might be asking herself. If one part of your business unexpectedly makes up the majority of your profits, it’s worth looking closely at that and considering whether that’s where your business's real value lies.
“If we didn’t have X, the business would go bust.”
You may start to get a sense that one aspect of your microbusiness is its lifeblood. That without it, you wouldn’t get nearly as many visits, customers, or sales. This might be a certain section of your website, a feature you provide, a product you sell, or a service you offer. Whatever it is, pay close attention and talk to your users to see whether this single factor is more important than all other elements of your microbusiness.
"I wonder if X would have been a better idea."
If you start to wonder if a microbusiness related to but not exactly the same as your current idea might have been a better one, you might be on to something. Switching your business model to something else in the same space might not be as difficult as you expect.
As the founder of a microbusiness you’ll be doing many different tasks involved in running the business, from customer support, to marketing, to SEO, to managing developers. Now that your microbusiness is successful, you can, if you choose, start to pare down your role to focus on important work that you enjoy.
As a general rule, you should consider reinvesting a portion of your profits in outsourcing some of the least enjoyable work in your business, as long as it’s work that others could easily do as well or better than you do. You probably don’t want to assign someone else to do high-level management and strategy tasks, or co-ordinate development projects. You do probably want to have others take care of customer service, or bookkeeping.
One of the least fun aspects of owning any business is bearing the responsibility for other people’s livelihoods on your shoulders, or having to potentially fire people who depend on your business for their entire income. You can minimize this burden by hiring people to work just a few hours a week. Rather than hiring one full-time person to manage multiple tasks (for example, writing content, bookkeeping, SEO and customer service), consider hiring different people to work a few hours a week for your microbusiness. Here are a few reasons why:
When someone’s role is straight-forward and simple, it’s easier to evaluate performance.
If you hire the wrong person in one of these micro-roles, it’s not a huge deal if you decide they aren’t a good fit. You know that working for you is only a small portion of their income.
You can hire specialists for each role, rather than an all-rounder who is unlikely to be great at all the various tasks you assign them.
You lower risk. If you are dependent on one other person to fulfill many tasks in your microbusiness, it would be a major inconvenience if they left. If they are solely handling your SEO, you can fill the gap while you look for someone else.
Consider slowly eliminating the less fun aspects of running your microbusiness by hiring people to fill micro-roles (less than 5 hours a week). This frees you up to spend your time on things like establishing a vision for your microbusiness, spotting new trends, tracking essential metrics, closing sales, forging partnerships, managing developers and spearheading new features. Things that, if done well, will grow your microbusiness and make it more profitable.
Once you’ve hired others to help with your microbusiness, freeing you up to focus on higher-level tasks, you need to make a choice:
Do you fill the extra time with more work on higher-level tasks for your current microbusiness? If you’re still excited by all the possibilities of your online microbusiness, it may be worth pouring extra effort into it, rather than selling or starting a new project.
Do you create another microbusiness? If you get the sense that your microbusiness has plateaued at a level of success you are happy with, and you are looking for a new challenge, you should consider creating a new microbusiness.
Do you sell your original microbusiness and start something new? If you feel done with your current microbusiness and wish you could sell it, either for a quick windfall or to reinvest in a new microbusiness, you should start to do research on selling your microbusiness.
Preparing a Microbusiness for Sale
When sellers consider buying an online microbusiness, they will be looking at one of two factors: future income potential or a track-record of established income. They make an investment because they believe they will get a financial return on that investment. You may love many things about your microbusiness: its design, the character of its users, the rigorously tested code-base you built, or the content you’ve written. While the quality of these things makes a difference to a potential buyer, they are likely to laser-focus on one thing. Profit.
Preparing your microbusiness for sale involves being able to prove its potential or expectations of future profit. An investor will be looking for a business that is profitable and that has extensive proof, such as documentation to show financials over time.
Steady, predictable profits are also much more attractive to a potential buyer than big spikes and troughs. A single month where you earned $20,000 because of a one-off promotion you did may have been fantastic for you, but a potential buyer may worry they won’t be able to repeat the success, especially if your earnings have been modest since then. Consistent, month-on-month income is much more attractive, especially if it is growing. It suggests that the microbusiness has a strong and predictable business model, and that profits will most likely continue at a similar rate once the new owner takes over.
To prove this track record of profits, it’s essential that your financial records are in good shape. A buyer wants to be totally confident that you’re correctly representing your microbusiness profits and have been keeping sound financial records. Here’s a brief excerpt from a story describing a microbusines sale on Flippa:
Given his history, it’s no surprise that Adam needed what he describes as “a lot more info” than most site sellers usually provide—even on Flippa. Calvin admits that Adam “spent months working on straightening up the books, auditing the financial statements, etc. to make all of the accounting more professional.”
“It was a big eye opener to how the business world expects you to do business,” Calvin adds. While he had a great portfolio and loyal clients, it was the financials that really sealed the deal. With the additional information in hand, Adam felt comfortable with the business’s position. (source)
Even if you are confident your microbusiness is turning a solid profit, this doesn’t count for much if you can’t convince a potential buyer of this. You will thank yourself for keeping good financial records.
Flippa is currently a good place to sell an online microbusiness. They offer a number of free guides on selling here. Web entrepreneur Yaro Starak has also written a detailed guide on selling and valuating websites.
In this session we’ve covered the entire journey of an online microbusiness, from idea, to pre-launch, to launch, growth, profitability and scale (or sale). In the final post in this series, we’ll explore the biggest current-day trends in online microbusiness. We’ll answer the question: what kinds of microbusinesses are people running 2013, and how are they running them? If you’ve read through this series but haven’t yet started to create your own microbusiness, I hope this final post will give you the inspiration and motivation you need.