When making the leap to your own small business, prepare family, stick to what you know—and think twice about quitting that day job
So you're stuck in the corporate work world and you're hoping to break out of the mold this year and start your own business. No doubt you've got myriad questions: Where do I start? What kind of business should I consider founding or buying? Should I go back to school? Where do I get the money to fund this venture? We asked a number of small-business consultants to share their best advice for corporate refugees longing to breathe free as entrepreneurs. What follows is a roundup of their e-mailed answers:
Before you even start thinking about what business to pursue, you may find that you need something more fundamental, particularly if you're currently in a management or executive position: an entrepreneurial attitude adjustment (see BusinessWeek.com, 10/30/06, "Is There a Gene for Business?"). "It's one thing to dream about running your own business, and something quite different to actually start a business and jump through hoops—and often not make much money—while the business is getting going," says Janet Attard, small-business consultant and founder of BusinessKnowHow.com. "That 'getting-going stage' often takes much longer than expected. Once you leave a position of power [in a corporation], you may not get calls returned as quickly as in the past. And the people that promised to 'help any time' may not have time at all to give you much assistance."
Phil Borden, a longtime Los Angeles entrepreneurial consultant, agrees. "Entrepreneurs have no place to hide. Everything they do is visible. The…ambition to succeed in an entrepreneurial venture comes with demands that are more personal and more threatening," he says. "Also, the job is more lonely, less social, and the circumstances of entrepreneurship are personally riskier and less protected on the downside." To get some insights into whether your personality fits the demands of entrepreneurship, check out some of the characteristics identified by the U.S. Small Business Administration at www.sba.gov/smallbusinessplanner/plan/getready/serv_sbplanner_plan_whatittake.html, or take a quiz prepared with the help of Gene Fairbrother, the leading small-business consultant for the National Association of the Self-Employed (see BusinessWeek.com, 1/16/06, "Are You Ready for Your Second Act?").
Build on Current Skills
Another personal area that's often fraught with emotional turmoil for corporate-types-turning-entrepreneurs is the support—or lack thereof—from friends and family. "While many [relatives and friends may] cheer your decision, they do not often understand it, especially family used to a certain lifestyle," Borden notes. "As time wears on, they may tend to get impatient and irritated." Attard agrees, and advises that you cement family support by having a realistic discussion about the demands entrepreneurship makes on finances and time before you decide to push ahead. "You don't want constant arguments or questions about when will you finally start making money," she says.
When you've decided to move forward, you'll have to figure out first what kind of business you want to pursue. Joe Kennedy, small-business consultant and author of The Small Business Owner's Manual, says stick to what you know. "Don't just look for a business that strikes your fancy somehow. The business area you get into should not be too far away from the work you're doing now, or maybe a personal passion or hobby you're involved with. Everything is so specialized today that if you get into an industry that's completely new to you, it will take several years before anyone—investors, vendors, or customers—will take you seriously," Kennedy says. "Even if you take courses in that area, you still need to have a track record actually doing something similar or closely related."
Another benefit of building on your current skills and training: Your current employer may well be your all-important first client. "Use your current position to raise your visibility before you launch out on your own," says Andrew Morrison, president of New Rochelle (N.Y.)-based Small Business Camp. "Get in the habit of collecting home numbers of colleagues and vendors who can be of assistance in your new venture, and once you decide to leave, don't keep your venture a secret. A former employee may be of assistance."
Picture What You'll Be Doing
Think about what you can actually picture yourself doing in your own business, Attard advises. "What would you be happy doing day after day? If you're used to playing golf with high-net-worth business associates, can you picture yourself spending your days at a store that ships packages to consumers or supervising a crew of minimum-wage earners mass-producing tacos?" If not, she says, don't buy single-unit stores in fields you wouldn't like to work in. Business owners almost never move directly into management, she points out. They typically have to work in the business—taking out trash, doing inventory, waiting on customers—as well as working on business strategy, especially in the beginning.
Thorough, realistic planning will be absolutely crucial to your success, experts say. How much money will you need to start, run, and market the company before you become profitable? Can you get your operation up and running before you leave your corporate job—and regular paycheck? Do you have at least six months' to one year's worth of living expenses available—in the bank or via established credit—to tide you over until you reach the break-even point? If not, wait. Unless you have a hot new product idea, there's no upside to rushing into entrepreneurship. You'll benefit tremendously by accumulating the necessary savings and at the same time doing additional research on your industry and taking some courses on entrepreneurship at your local community college or Small Business Development Center (see BusinessWeek.com, 1/19/06, "The B-School Route to Career Change").
Prepare With Plans and Credit
Make sure you have a business plan and a marketing plan for your new company written up before you take the leap: "A solid business plan can help identify weaknesses in the business so you can address them," says Stephanie Chandler, a small-business expert and author of From Entrepreneur to Infopreneur. "Being fully prepared also removes a tremendous amount of fear from the equation."
Since it can take time to establish business credit, you may want to open a line of credit before you quit your job. When it comes to money, "don't risk more than you can afford to lose," Attard advises, "especially if you're in midlife. Retirement isn't that far away and you won't want to have to be worrying where the money to pay the heat and electric bill will come from when you're 65 or 70."
Finally, don't burn any bridges, Morrison advises. "If your venture does not work out, your old position may still be available," he says. Attard's sites, BusinessKnowHow.com and FranchiseTrade.com, offer numerous resources, including startup checklists and cost calculators as well as a market planning worksheet.