When it is time to go out on your own?
“You’re on your own, and you know what you know.
And you are the guy who’ll decide where to go.”
- Dr. Seuss
Many of us who work in professional services often wonder about leaving our employers and starting out on our own. Starting a new firm (whether consulting, law, search, real estate, etc.) is not like starting a company that actually makes things, where you need all kinds of capital up front. Services are about people and relationships. If you can get your own clients, who needs a boss making decisions for you and an employer keeping most of the revenue you generate?
In 2009 I began rationalizing with myself about why I should definitely start a company and, being the stubborn person I am, nothing would have stopped me from doing this. In the end, thanks in large part to some great partners, a small group of us managed to launch, build and eventually sell a successful little company. We may not have achieved my secret goal (fundamentally changing recruitment forever) but it was a positive experience that changed my career. Having said that, there are times when I look back on the whole thing and feel plain lucky to have stepped off the roller coaster relatively unscathed.
I don’t know if I will ever do it again, but I do have a much better idea of what I would consider before making a decision. For anyone out there who is considering whether to hang their own shingle for the first time, here are the questions I would be asking:
Do you have a clear vision?
- It’s not just that people don’t know about your new company, it is even more important to remember that most people don’t care. You have to be able to explain INCREDIBLY SUCCINCTLY and COMPELLINGLY what makes you worth paying attention to, let alone worth paying for.
- How the company will be managed must be clearly defined beforehand. Are you better served with partners to share the load, even if it means giving up some control, or do you believe it is better to go it alone? Sharing the load with partners raises all kinds of critical questions: Are your potential partners aligned with you on the company’s vision, its value and its goals? You need to have some direct conversations where all the tough questions get answered at the outset.
- You also need to have a realistic view of how little or how much your business can be scaled. Managing growth is a constant balancing act of knowing when to invest and how thinly you can stretch yourself. Many businesses start out well and die by trying to be more than they can be. Would your business be able to grow enough, and even if it could, would you be able to give it that kind of freedom?
Do you have the financial flexibility?
- For the record, I found it challenging to find details about this so I will try to provide some actual numbers, even if in reality they vary greatly in every different context.
- You should be ready to survive with no income for six months. This should be a worst case scenario but you need to recognize it takes a while to ramp up and even longer for some clients to pay for your completed work.
- If you envision using contractors or employees, you will need credit to manage cash flow while you wait to get paid, probably at least $100K. The term “cash flow is king” is based on real examples of companies going out of business because they sold too much, made too many commitments and incurred too many costs before they were paid for their services.
- If you want to build a company instead of a one person contractor arrangement, you should also have startup costs of at least $30K set aside for the first six months. Little costs show up everywhere, such as building a credible web site, getting a logo designed, developing marketing materials, renting and furnishing an office, etc.
- All this may sound scary, but if you can get through that first 6-10 month stretch, there is the potential to earn a great deal more than you would be able to as an employee. You get to eat more of what you kill, but it takes a lot of lonely hunting.
On that point…
Can you sell enough?
- Do not be fooled, sales will not happen on its own. You will not get to focus solely on the work you love doing, you will always be focused on the sales of tomorrow.
- You have to be clear on who you are, what you are selling and who you are selling it too.
- The first step is to assess your brand and the value of your existing relationships. In most cases it is much more difficult to sell a small individual brand as opposed to a large brand. I have watched better salesmen than me learn how long it takes to move even the closest relationships. Buyers are on the hook for their choices, and they feel much more comfortable with known commodities. There is an old expression that says “you don’t get fired for hiring IBM”.
- If/when initial sales success come, many take the opportunity to focus solely on delivery, and then, when engagements end, they have to start the long sales cycle process all over again from scratch. Sales must be a constant driving force.
- While all this is daunting, sales in services is more about relationships than fancy marketing. People like to buy from people they know. Persistence will pay off.
Are you ready to be completely committed?
-Being an owner is very rewarding and a great learning experience. Most people could never get that kind of strategic exposure as an employee.
- However, the romance (mostly) wears off quickly and leaves a pile of real work in its place. The constant pull of billing, receivables, marketing, IT, administration, lining up power point bullets and constant tweeting about things you only marginally care about can be overwhelming, and it makes it all too easy to tell yourself you are too busy to do sales.
- Let go of the idea that you no longer have a boss. When you are an owner your clients start to feel a lot more like bosses than they used to, and the better things go, the more new bosses you have. Boundaries between work and home life blur until the business is a seemingly un-removable part of you.
- Make sure your family is on board. It may seem like only your decision, but it will impact everyone you share your life with. They are sharing the risk as well as the reward.
As I read these over they seem very logical, but they were not what led me to my decision in 2009. At that time I was passionately attached to the idea of pushing myself and the rest of the evaluation process focused more on rationalizing a decision I had already made. That pig-headed stubbornness probably served me at times, because there were plenty of times when I could have made a very persuasive argument to give up. I just didn’t want to.
My father once told me that most people don’t have trouble deciding things, their energy and thought is spent more on rationalizing and legitimizing what they have already decided.
With that in mind, here is one final question to ask yourself: Would you rather these questions talked you into something or talked you out of something?
They can do either.