New Venture Lab: Equipping Christian Entrepreneurs

Transitioning From a Corporate Layoff to an Entrepreneur

Do you find yourself in a situation where you have recently stepped out of the corporate rat race and you are now wondering what to do next in order to build your own business?  Take comfort in that you are not alone and that through prayer and seeking God's will, you can create opportunities to provide and be productive. The excerpt below from a Columbia Business School professor provides a few useful cautions to be aware of during this period of transition.

The company and you have parted ways - now what?

In an uncertain economy, one of the things you can predict is that there will be people who lose their corporate affiliation – either through downsizing, or because they elect to take early retirement, or for some other reason – and decide explore the self-employment instead of joining a new organization. Many will become consultants (pretty typical) or go into real estate (not that I would advise that just at the moment) or otherwise start something entrepreneurial in retail. I’d suggest a couple of cautionary notes before making that big leap.

Losing the infrastructure

First, you need to be aware that the transition to working for yourself can be traumatic. When you run your own show, a lot of the support infrastructure of the big corporation is no longer available. Things like logistics, mail, travel arrangements, computer set up and so on can take a lot more time and cost much more than many newly self-employed people expect. It can be lonely – you’re no longer part of a work team. Working from home, which many do, is a whole lot different than working in an office on a schedule. It takes a lot of discipline to resist the distractions that can inevitably intrude on the home environment – not to mention the non-professional noises (crying babies, barking dogs) that don’t exactly go with the high profile image you may be trying to project.

Startups take time to develop

Secondly, remember that most of the time it’s going to take a while for your new venture to be self-sustaining. Don’t expect any new business to start throwing off cash immediately. That means you better have a source of income or savings to sustain you while you’re going through the start up phase. Loving spouses, savings, and an initial contract with your former employer that will pay the bills are all good. Throwing money on your credit cards is not.

The purpose of a business is to create a customer – nothing else matters nearly as much

Third, recognize that many newly self-employed people haven’t got the foggiest idea how to create a viable business. So they’ll invest money in brochures, business cards, fancy office equipment and so forth, but fail to recognize that these things don’t make you a viable business. Only customers willing to pay for your services make you a viable business! They often totally under-estimate how long it’s going to take to generate real new sales. If one can, a much better route is to try to replicate the services you performed for your old company for a new one, and ideally set that up before you are out on your own. I can’t tell you how many times I’ve watched in dismay as people sink the rewards of a lifetime of working into a "cute" retail concept, a restaurant, or some other fun-sounding business without realizing how much work and how long it’s going to take.

Don’t be unrealistic about how much enthusiasm you can generate from customers before you’ve tested the waters. A good idea is to allocate a ton of time to marketing and outreach – probably more than you expected, particularly in the early days.

By: Rita McGrath

Source: Harvard Business Publishing

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