Making the transition from employee to entrepreneur can be fraught with anxiety. However, knowing what to do before you resign, will make the process easier and successful.
Consider why you want to go into business for yourself.
Do you have this burning passion to transition from employee to entrepreneur or are you looking to fire the boss and buy yourself a job?
It’s important to have the right motivation before becoming an entrepreneur as this makes a difference to the type of business you go into. For example, if you lack business skills, you may be better off buying a franchise where they provide you with training and support. If you have a unique idea or product coupled with a burning passion, you might want to start a business from scratch.
Regardless of your motivation, keep in mind some of the reasons why many start-ups fail.
- Lack of research
- Poor management and lack of leadership skills
- Don’t know how to sell and develop new business
- Expanding too quickly
- Lack of working capital
- Lack of planning
- Not understanding the numbers
Before transitioning into your own business, conduct market research to determine if your business idea is viable.
Conduct your market research
While you are still receiving an income from your day job, conducting a feasibility study and conducting market research is a good place to start. While this won’t guarantee your business idea will succeed, it will help you determine if you are prepared to take the risk and leave full time employment.
Analyse your potential competitors
Analysing potential competitors will give you an indication if there is a market for your business idea. It will identify if others have tried to market the same goods or services you will be offering and if they were successful or failed. Your analysis will also give you an indication as to whether the market or growing or shrinking.
Conduct a survey
Collecting information about the market will give you an insight into the minds of your potential customers. It helps you understand the demographics and psychographics of your potential market.
Assess the risk
Your research will give you a basis upon which to assess the risk. Identifying potential risks and opportunities will have a positive or negative effect on your business idea.
Narrow down your target market
Once you have analysed the data, you are in a better position to match your strengths with the market. The next step is to segment the market and define a specific target market. Unless you know exactly who your target market is, you could be spending precious marketing dollars in all the wrong places.
Once you have narrowed down your target market, you can put together a buyer persona to know how to market to your ideal customer.
Define your Service area
Consider the geographical region you set up a new business. Will it be local, regional or global? If you are selling products online for instance, you might want to tap into a regional or global market. However, if you are starting a retail business, then you will need to position yourself close to your target market.
Consider your current skill sets
As an employee, you rely on someone else to make the major decisions. Chances are, you weren’t in a position to question those decisions.
When you transition your own business, unless you have a partner or partners who bring different skills to the table, suddenly you become responsible for creating a vision, setting goals and objectives, writing the business, marketing and financial plans to achieve your business objectives.
While you are still employed, find a mentor who can help coach and teach you the skills you lack or haven’t been exposed to. For instance, you don’t have to be an accountant to run a business, but you do need to know how to interpret the numbers. You might enrol in a short course in accounting and learn how to interpret the numbers. You might also take a short course in sales and marketing, so you do understand the difference between sales and marketing.
Consider your financial position before resigning
As an employee, you receive a pay check every week or month. It’s an expectation. You don’t have to worry about cash flow, sales, profit margins, employee benefits, taxes and a multitude of other financial matters. As a new entrepreneur, you usually don’t have the financial resources to hire others to help you therefore you will be wearing many hats.
In the beginning, you end up doing everything yourself. Unless you have a partner, who can back you up, you become the manager, salesperson, accountant, planner, receptionist, customer service person and cover every role there is in a start-up business.
It takes time to build a business from scratch. Having a robust financial plan and enough working capital put aside before you resign is a smart move. You may need to put aside enough money to see the business through the start up phase AND cover your personal expenses for 6-12 months before you see a positive cash flow.
Keep in mind, your current salary pays your rent, mortgage, food, car payments, insurance and every other conceivable living expense. Once you start your business, these expenses don’t go away and you need to set aside enough money to carry you through while you still receive a pay check until the business can afford to pay you.
Develop a business plan in advance
You can shorten the time a business cash flows with careful planning in addition to conducting your market research. Before you resign, prepare your business plan in advance. Ensure you include a marketing plan and financial plan in your overarching business plan.
Your financial plan should also include your vision, business goals and objectives along with start-up costs, a cash flow forecast, sales projections and capital requirements. If you are not an expert at preparing a financial plan, be sure to run this by a professional first. There are bookkeepers, accountants and management accountants who operate at all different levels. Whoever you choose to be your financial advisor needs to have experience in advising start-ups.
The better you plan your transition from employee into entrepreneur, the more likely you are to succeed.
Learn the power of networking
Before going out on your own, learn to network like a pro. People buy from people they trust and who do you trust more, a referral from family and friends. Join a relevant networking group that will potentially bring you referrals for your future business. Work this into your schedule many months in advance so you can hit the ground running once you resign.
Building a network doesn’t always have to be about potential customers, they can also be suppliers, industry leaders and other entrepreneurs you can learn from.
Check out this e-Book, The Power of Networking to help you become a better networker.
Learn the art of selling
As an entrepreneur, you are the business. It’s your idea, your baby, your reputation and your money on the line.
A major reason entrepreneurs fail is they lack the ability to sell themselves, their products and their services. If you have an attitude that says, “who me, I’m not going to push my products or services onto others,” you will not succeed. You must believe in your products and services wholeheartedly if you want to succeed. If you can’t back yourself, why would you expect others to buy from you. This is an important skill set because of the high cost to hire a professional salesperson. No customers, no business!
Understanding why customers are motivated to buy from you is an essential part of learning how to sell. Following a proven sales process will accelerate your results exponentially. Learning this skill set before you resign will save you both time and money when you first launch your business.
The 6-step sales process works and it’s easy to follow. You can download the free cheat sheet here.
Check in with your self-belief
Having a powerful vision for the future and believing in yourself are key components of becoming a successful entrepreneur. Once you pull the pin on your job and hand in your resignation, you must have absolute belief in yourself. This is critically important because of the long hours ahead while you get your business off the ground. When you hit roadblocks, doubt will challenge your faith.
Jumping from employee to an entrepreneur takes a leap of faith. That faith must stay intact to achieve business success.
Keep your goals in sight
On a final note, consider this story about Florence Chadwick, the first woman to swim from Catalina Island to the California coast.
When she looked ahead, Florence Chadwick saw nothing but a solid wall of fog. Her body was numb. She had been swimming for more than sixteen hours. Already she was the first woman to swim the English Channel in both directions.
At age 34, her goal was to become the first woman to swim from Catalina Island to the Californian Coast. On July 4th 1952, the sea was icy cold and the fog so dense she could hardly see her support boats. Against the frigid grip of the sea, she struggled on – hour after hour while millions watched on national television.
Alongside Florence in one of the boats, her mother and trainer offered encouragement. They told her it wasn’t much further. But all she could see was fog. They urged her not to quit. She never had… until then.
With only a half a mile to go she asked to be pulled out. Still thawing her chilled body several hours later, she told a reporter “Look, I’m not excusing myself, but if I had been able to see land I might have made it.”
It wasn’t fatigue or even cold water that defeated her. It was the fog. She was unable to see her goal.
Two months later she tried again. This time, despite the same dense fog, she swam with her faith intact and her goal clearly pictured in her mind. She knew that somewhere behind that fog was land and this time she made it! Florence Chadwick became the first woman to swim the Catalina Channel, eclipsing the men’s record by two hours.
On a final note
The best way to transition from an employee to an entrepreneur is to do your research, allow enough working capital to see you through the start-up phase and plan carefully before you resign from your job.
In a Nutshell
Before resigning your job:
- Conduct market research to determine if your business idea is viable.
- Analyse the market and your competitors.
- Conduct a survey to give you an insight into the minds of your potential customers.
- Assess the risks based on your research.
- Narrow down your target market.
- Define your service area.
- Consider your current skill sets and up-skill in areas you need help.
- Ensure you have enough working capital for 6 – 12 months.
- Prepare your business plan including marketing and financial plans in advance.
- Learn to leverage the power of networking.
- Learn the art of salesmanship.
- Check in with your self-belief.
- Above all, keep your goals in sight.