Making the leap from employee to business owner is a challenging adventure. It can be risky and stressful, but for those with the right plan and mindset, the benefits can be immeasurable. Do you have what it takes to become an entrepreneur?
Confirm your suitability
Writing in his book Entrepreneurial Leap, Gino Wickman explains that the majority of potential entrepreneurs find that they are not suited to be one.
There are a variety of barriers that can prevent people from becoming successful entrepreneurs, from financial stability and time availability to personality traits or an untenable business plan. Although many believe it is possible to learn the skills and traits required to be a successful entrepreneur; Wickman argues that ‘entrepreneurship is nature, not nurture’.
How do you know if you are cut out to become an entrepreneur?
Wickman describes the six essential traits of an entrepreneur as visionary, passionate, problem solver, driven, risk-taker, and responsible.
In addition, it has been noted that the following skills are usually present in successful entrepreneurs:
- Clear and effective communication
- Sales skills: To sell both themselves and their business idea
- Strong ability to focus
- Eagerness to learn
- The ability to work flexibly and find creative solutions to problems.
Of course, Wickman is only citing his opinion, the most important thing for starting any entrepreneurial venture is that you have the passion and motivation to make your dream happen. But if you do possess the skills and traits listed above, and have the funds and time to invest in your business, then it may be time to start making the change to entrepreneurship.
To create a solid business plan it is necessary to consider all elements of your business from the financial side and risk assessments to research, marketing and the expected time it will take you to become profitable.
Aside from the business, you must plan how the move to entrepreneurship may change your lifestyle and the lifestyles of your family and other dependents. Although being your own boss means you can set your own hours, being an entrepreneur and starting a business can consume a lot of time and energy. You should consider if you have space in your life for a project like this.
Consider the positives and negatives
It is important to consider what your day-to-day life might look like as an entrepreneur. Do the benefits outweigh the negatives? Can you see yourself enjoying your new working life and how it may change your personal life?
Entrepreneurs can often experience advantages like:
- Increased passion for their work.
- Flexible working hours.
- Being your own boss.
- Increased wealth.
But, these come alongside negatives like:
- Increased stress.
- Unstable finances and risk of bankruptcy.
- Working longer hours.
You should consider how the above changes may affect your life and if you feel the positives outweigh the negatives for you. And if you learn that it's the other way around down the road, don't hesitate to reverse.
Market research should cover gaining knowledge about your customer base and understanding if and why your idea would be interesting to them. This can help you adapt your offering to meet the needs of potential customers. It should also help to define your target audience.
In addition, you should carry out research on the market’s competitive landscape. You can start by considering the following types of questions:
- Are there lots of more established companies in your niche?
- Can you offer something they don’t?
- How are your competitors approaching their sales and marketing?
A market with many competitors indicates that it has been validated and is seen as profitable, however, oversaturation can occur with too much competition. Keep in mind that to break into a competitive market your offer will need to have a greater level of differentiation and offer something your competitors can’t.
Networking is often vital to your business's success. Start by considering any useful contacts you might have already. Then start reaching out to other people you might find helpful. This can be achieved through social media platforms like LinkedIn or via email, phone calls, and attending industry events.
Unless you have the money to finance your entrepreneurial venture until it starts making a profit, then you will need to find other sources of funding. For this, there are several avenues to consider:
Loans from friends and family
This will usually be one of the safest methods. However, you still need to be prepared to give up equity of your business to substantial investors and bear in mind that your family and friends may not have much money to invest.
These are the most common sources of funds for SMEs and new businesses. There are many options, with different banks offering varying advantages and disadvantages, so be sure to shop around to find a suitable option for your business.
In general, banks will be more likely to offer loans to companies with a good credit record and a solid business plan. For startups, there are often options to postpone loan repayments for 12 months or even for the first 12 months of sales.
These investors can support your project but will usually require you to give up some ownership of your company. Keep in mind that, although venture capitalists are often willing to invest in risky ideas, they are usually on the lookout for promising industries with high-growth prospects. This means that they are not a suitable avenue for all entrepreneurial projects.
These are usually wealthy individuals or retired execs who invest directly in small businesses. The best angels to find are leaders in your field who are willing to help with advice and provide networking opportunities and introductions.
Angels often invest in the early stages of the business with anywhere from $25,000 to $100,000. For their investment, they may choose to supervise your business’s management practices and join the board of directors.
There are online websites and associations to help entrepreneurs find Angel investors like Angel Investment Network.
These organizations are usually focused on exciting new tech businesses and are not appropriate for all types of businesses. However, for those that fit their focus, they offer the opportunity to cut costs during up to two years of the business’s start-up phase by sharing premises, admin, logistical and technical resources.
Government agencies can offer financing as grants that may be available. However, the criteria for grants can be tough to fulfill and most require you to match the funds you receive, which can vary greatly.
Some of the most common ways businesses fall short of achieving grants include:
- The work is not relevant to the government's plans and goals.
- The geographic location is not eligible.
- The business proposal does not provide a strong rationale.
- The research plan is not focused enough.
- The scope of the work is unrealistic.
- The business is unable to match the funds.
Although there are many sources of finances for entrepreneurs, not all of them will be available and suitable for all businesses. In most cases, startups and entrepreneurial ventures are funded by a combination of a few sources and some of the owner's personal savings.
Register your business
When you are ready to begin trading, you will need to get the relevant paperwork in order. This means obtaining a business license, registering with the IRS, and registering with the state. Before you do any of this you will need to decide on your business’s name and business structure.
There are a few options to choose from when deciding on your structure:
This is the easiest way to register as a business, however, it does not create a separate business identity. This means your assets and liabilities are not separate from your business’s, so you will be liable for your business’s debts.
In addition, as you are the sole proprietor you cannot sell shares and it can be hard to find bank loans. This type of structure is most suitable for low-risk ventures when little investment is required.
Corporations are legal entities separate from the owners. Corporations can make a profit, be taxed, and can be held legally liable. It requires more investment and record-keeping to become a corporation, but they provide the best security for the business owner who is not liable.
You can also sell shares as a corporation, which makes it easier to win investment. The corporation structure is a good choice for medium or higher-risk businesses and those that plan to go public.
The partnership structure means the business is owned by two or more people. They come in two types:
In a Limited partnership (LP) one partner has unlimited liability and the other partners have limited liability. Those with limited liability also usually have limited control over the company, as disclosed in the partnership agreement. Profits are passed through personal tax returns and the partner without limited liability needs to pay self-employment taxes.
Limited liability partnerships (LLP) are like LPs but allow every owner to have limited liability. In this way, all partners are protected from the business’s debt and the actions of each of the other partners.
Partnerships are good options for businesses with more than one owner and group. They are often used to test an initial business idea.
Limited liability company (LLC)
An LLC structure provides the benefits of both corporations and partnerships by meaning your personal liability is limited and your personal assets won’t be at risk if your business goes bankrupt. Your profits and losses will also be taken as personal income and will not be subjected to corporation taxes, however, members of LLCs need to pay self-employment tax and contribute to medicare and social security.
LLCs are a good choice for medium to high-risk businesses, when owners have a lot of personal assets, and when owners want to pay less in tax.
If you have a good business idea, a solid plan, and can complete the steps above, then there is nothing stopping you. Your new entrepreneurial venture could develop into a thriving enterprise and transform your life. Just make sure you have the skills, fortitude, and passion for your idea to make it happen.
So, what's it going to be - updating your resume for a new day job, or taking the step to becoming your own boss?
As a professional recruiter, I have over 10 years of experience helping candidates find work with businesses that match their skills, personalities and goals. Here on Resume Supply, I share some of the key things I have learned over my career to help job seekers with resumes, applications and interviews.