Transitioning from employee to entrepreneur
Yaneek Page, Business Contributor
QUESTION: I have always followed you and enjoy your columns. My question to you is how do you move from being employed to self-employed in these economic times? My desire is to have my own business or at least start while still employed, however, I don't know how to begin and yet I have the potential.
BUSINESSWISE: You have every right to be apprehensive about leaving the security of a job to start your own business because entrepreneurship, by nature, is a risky proposition and is not for everybody. You're not alone either.
The fact is that most new businesses are started by people who are either unemployed or earning minimum wage and have no other choice but to try their hand at business, not by those like you in comfortable jobs.
The sad irony is that it's the people who start businesses out of desperation to earn more who are most likely to fail and least likely to realise growth because they are driven more by their personal financial needs rather than the quality of their business idea and the potential market.
Those who start for the right reasons - identifying good opportunities, fulfilling unmet needs, to make positive differences, offering innovative solutions to others' problems - and have done proper due diligence and business planning are the ones most likely to launch viable, high-growth businesses. In answering your question, I thought it would helpful to share the experiences of people who recently transitioned from employment to entrepreneurship and are trying to manage the current economic challenges.
Londie Murray left his job as a social media administrator with the government to start Nirvana Magazine last year. Here's how he described the transition:
"Wow, the transition is certainly a wow factor. Going from a sure income every month to unsure is very scary. However, it was smooth-ish. I am a photographer as well, and I have shot for a few celebrities and corporate clients, so I had that to piggy back on while the transition was being made. In addition to my skills, there is the family business. My dad is in home security, construction and trucking so there was that."
For Simone Banhan who started Banyan Catering in April 2014, Sheryl Senior who launched GK Micro-financing in March 2014 and Stephen Williamson who started Island Interactive in 2011 the journey has not been as smooth. Here's their take:
Simone Banhan: "It has been challenging as I don't believe the environment is conducive to entrepreneurship. Too many start-up costs that by the time you get started, there's little or nothing to actually start doing business."
Sheryl Senior: "My transition from employee to entrepreneur was a big blow to my finance and the plans I had for the business"
Stephen Williamson: "It was a rough transition because I went in unprepared, without experience or mentorship. However, taking the advice of my former employer, "keep on keeping on" I eventually acquired the experience and skills necessary to run a profitable business. One of our recent successes is the release of our app, 'TapKat Fiesta' on Google play."
One issue that made the transition challenging is the inability to access the funding they wanted to start their venture. Most did not have enough capital, which is unfortunately very common for new businesses. All the entrepreneurs interviewed used primarily savings and loans from family to start the business. Only one entrepreneur had accessed a bank loan to partially fund her start-up.
Another reality the entrepreneurs faced is how long it takes to make a profit. For Williamson, it took two years and a few tweaks to his business model before he was able to make a profit.
Murray was able to turn a profit after a year, but has chosen to reinvest every cent of it back into the business in his quest to achieve growth. Although Senior was able to realise a small profit after 3 months, she still operates a micro business which has minimal expenses.
Banhan, who has been in business for only a few months, is not yet profitable and expects this will not change in the short term.
You may now be wondering how do they manage to pay themselves and meet their personal expenses having exhausted their savings, borrowed money from family and the bank and with little if any profits in hand.
Most earning less
While one entrepreneur is earning more, the others are not. Here's what they said about how their current earnings compare to their previous salaries:
Murray: "Let's just say there are days I look back at my pay cheques and go: Why did I leave?"
Senior: "It's extremely low because I needed my salary to cover my personal expenses until I was able to develop the business at a stage to be able to pay me."
Banhan: "I earned significantly more as a salaried employee and was able to budget and forecast expenses. Now, it's a totally different ballgame."
Williamson: "My earnings now are greater than when I was employed, however a lot goes back into developing the company and investing in our team."
However, money was not the biggest challenge in making the transition - it's actually the personal sacrifices, hard work, long hours, and stress of running the business.
According to Williamson: "You do the work of at least five people in the beginning; you stay up the latest and eat last. Your investment in your business involves great sacrifice on your part."
Murray agreed, noting that: "Being an entrepreneur means that you bear all the burdens of your business. You have to work much harder to keep that dream alive. As an employee, all you have to do is show up to work, do the work that's given to you and go home."
The key lessons from these experiences are similar to my own when I resigned a great job to start a business. It will not be easy, so you must manage your expectations.