Changing your career track from being an employee to entrepreneur is a very big step. The rewards can be great, but so are the risks. You will lose the steady paycheck that you enjoy as an employee. You will even have to wear many hats and do a wider variety of tasks that you may not know or even like to do (but unfortunately you have to do). Generally, the dynamic nature of entrepreneurship is a far cry from the steady routines of employment.
There are lots of unknowns in starting a business; hence it is but natural to experience fear, insecurity and uncertainty when making the jump. To ensure a successful transition from being a hired worker to becoming your own boss, here are things you need to consider:
1. Start by thinking and deciding what you really want to do.
You need to make a choice whether you want the comfort of a regular paycheck or the roller-coaster ride of entrepreneurship. You will be making a life-changing decision and you need 100% commitment to making the change. It will not be easy; and the road ahead will be full of challenges. But if you are up to the challenge, the rewards can be worth all the effort and hardships.
Do you think you can:
- Face the risks and uncertainty that comes with starting a business?
- Work on your own, making decisions that can make or break your business?
- Work independently, not relying on a whole team or a department, but possibly doing every single task that you need to run the business from the most strategic to the most mundane?
- Push yourself to do something every day, without any supervision from anyone?
- Identify opportunities that you can seize and have the courage to pursue it?
- Handle the pressure when the going gets tough and things are not going as you have envisioned or planned it to be?
- Work long hours and possess tremendous drive to see the business develop?
2. Decide what route you want to take in starting a business.
- Start your own business – This option allows you the flexibility and freedom to start the business you want and grow it at the pace you want.
- Buy into a franchise – Franchising allows you to market an already established product or service, thereby lessening the risks in your venture. However, there are fees and royalties that needs to be paid
- Buy an existing business – Buying an already established business allows you to save on time and startup costs. The business is up and running, and hopefully has established its customer base. However, this option is typically much more expensive than starting your own business. Be careful also, as the business you are buying may have problems the original owner failed to disclose.
Read the article Three Roads to Business Ownership
3. Decide on the exact business you want to do.
There are different approaches:
- Start a business based on your job – The easiest approach is to start a business doing exactly what you have been doing in your job. For example, if you work as a web designer for a company, you can decide to embark on a web design business on your own. You already have the skills, you know what the work entails, and you have the experience and reputation in the field.
- The downside, of course, is that your employer may view you as a competitor, and may not allow you engaging in a competitive business while still being employed by their company. You may also have signed a non-compete agreement that will not allow you to engage in the same commercial activity for a period of time after leaving the company.
- Start a business that highlights your interests, hobby or passions — Starting a business can be your opportunity to pursue what you really want to do in your life. You may be a journalist your entire career but if pottery is your passion, then this is your chance to be an artisan and start a pottery business. Doing something you love allows you to enjoy what you do, and find greater fulfillment in your life.
- Start a business where you see good opportunities, even if totally different from your career or something that you have never pursued before – You can start a business based on the demand or potential of the business, which may not necessarily be what you’ve pursued before. Study the market and find needs that are not currently being serviced, or serviced well. Or find an area that you think is poised to explode in terms of growth.
3. Start researching about the business.
Whether you will actually prepare a business plan or not, think of the following
- How does the business actually work?
- What is the demand for this business?
- Who are the customers of this business?
- What are needed to start and successfully run this business?
- What are the cost elements of this business?
- How much do you need to start this business?
- What do you need to acquire to start and run this business in terms of skills and knowledge?
4. Start looking at the resources needed for your business.
Knowing how much you need to start your planned business will allow you to make more informed decisions in your next steps:
- Do you have the funds for this business and can you fund the business using your own resources? You may have some cash saved, or credit card you can use, or other assets that can help you jumpstart the business. Or if the business is something you are doing at work, you may already have the equipment and materials you need. However, if you do not have the resources, you need to start thinking of where and how you will get the funds you need. Read the article How to Raise Money to Start a Business
- Can you borrow money from your family and friends? Family members and friends are the most accessible sources of funds – if you want them. The downside, of course, is that misunderstandings can occur especially if you are unable to repay them or provide them with the returns they are expecting, which could adversely affect your personal relationships. Read the article Raising Start-Up Capital: How to Borrow from Family and Friends
- What are your chances for getting this money? If you are going to apply for a bank loan, how good is your personal credit? Do you also have some equity of your own as well as collateral that you can present to the bank? Have you prepared your business plan? Knowing the criteria banks use to approve business loan applications can increase your chances of securing a bank loan for your business. Read the article 12 Tips for Getting Your Bank Loan Approved
- Do you know any investor to help you fund the business, or even how to look for investors? Investors can be your own family members, or people in your community such as your piano teacher, accountant, lawyer or bankers. Or they could be angel investors or venture capitalists. Read the article Find Yourself an Angel Investor
- If you cannot raise the funds, what are your alternatives and back up plan? It is important to plan out your alternative options. Should you launch a downscaled version of the original? Will you postpone starting the business until you have all the resources you need?
5. Decide on how you want to pursue the business.
Here are some options to consider:
- Will you quit your job immediately and start working on the business?
- Will you continue your job while starting on the business during weekends and your spare time?
- Will you reduce your work hours at your job in order to devote more time to jumpstarting the business?
- Will you hire someone to help you do the initial legwork for the business while you continue your employment?
6. Involve your family in your decision-making
Your family’s well-being is important in making the decision from an employee to a self employed individual. Having the family at your side allows you to solicit their moral, physical, intellectual and emotional support, which can prove invaluable to your startup operations. Here are some issues to consider:
- If you quit your job, do you have insurance or are you prepared to buy self-employment insurance for yourself and your family? Health insurance can be very expensive – and hard to find – for self employed individuals that it is important to plan out where you will get it and how much you are willing to pay BEFORE you even consider the move.
- Have you saved enough money that can tide your and your family for at least 6 months, or better yet for 1 year, in the event that the business will not yield the income you expected?
- If you need additional manpower, can you rely on your family members to help you? Your family may be able to help by doing some of the tasks that you need to do, thereby freeing you to focus on more important tasks of the business. Or they can simply give you the space and freedom to work (which can be really hard if you have young children).
Read the articles in the Your Home Business and the Family section
Recommended Books on Making the Jump from Employee to Entrepreneur:
- Employee to Entrepreneur: A Mind, Body and Spirit Transition
- Transitioning from Employee to Entrepreneur – A Road Map for Aspiring Entrepreneurs
- Making It Your Business: The Personal Transition from Employee to Entrepreneur
- Employee to Entrepreneur: Making the transition when you’re cash-poor
- Hiring and Retaining Good Employees
- The Enthusiastic Employee: 16 Myths on Employee and Performance Management
- Pros and Cons of Financing a Business
- From Employee to Entrepreneur: Things to Do Before You Leave Your Job
- Book: The Last Chance Millionaire