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Starting alone

Starting alone

12 September coverThis article was written by Ed Hatton for the column the Start up Coach and published by the South African edition of Entrepreneur magazine in September 2012 and is posted here by their kind permission.

 

Leaving the security of the corporate world to start your own business requires more thought than expected

 

Challenge

A prospective entrepreneur asks how he can make the transition of leaving full time employment in the corporate world to make a career as an independent IT consultant. He does not have enough funds to cover expenses in the early months.

Response

The entrepreneur must have a very clear idea in his or her mind why they want to take this step. Some of the right reasons are a desire to make much more money, to build something lasting, to taste business ownership or to enjoy creativity which is stifled in the corporate world. Wrong reasons include an inability to get on with the boss, grievances about underpayment or a desire to work less. If these or similar thoughts are the reasons for going alone it may be better to change attitude, or change jobs.

Staying alive

A crucial part of the transition from the corporate world into self employment is having or generating the funds to pay for essentials in the early months. This means either having an income stream or having access to money from savings or borrowings. In either case it is wise for the entrepreneur to have a lean, low cost lifestyle, and cut out any extra expenses. Pay off debt, close accounts and trade in the high cost vehicle, but do not cut to the point where there will be pressure from the family to return to the corporate world.

The best strategy is to make these changes well before the start up is launched, and save the excess so that a reserve is available when there is no corporate salary. At the same time initial customers can be developed and serviced out of business hours. Do not take a loan to support living costs.

Getting started

The ex employer may be prepared to let the entrepreneur take his laptop and vehicle at a low cost. Large organisations routinely provide start ups with administrative support and marketing assistance like logo design and website development through their Enterprise Development fund, a part of the BBBEE structures. It pays to ask.

An ideal way to start is with an immediate contract for at least a few months work. If the entrepreneur leaves on good terms, the ex-employer may contract with him. If this is not possible the entrepreneur will have to find his own new business.  Many people in his position will ask friends and contacts if they will use their services should they start their own business, and get positive replies. But sadly this is no guarantee that there will be enough work from these sources when the business is launched.

The competitive edge

Instead of asking colleagues if they will support him he should ask them, and others, what they are not getting from their current suppliers, and then devise a way to plug those gaps. This is also a great way to define the target markets, by focusing on those business areas where there are big differences between customer expectations and the services they get.

An absolute requirement is to analyse competitors in detail, looking for their weaknesses, and their strengths. Competitors will not give up market share willingly, especially to a newcomer, and they have the advantage of an established client base. The entrepreneur needs to discover how he can take business away from existing players, or create new customers. This is perhaps the most crucial aspect of starting a business, and must be done realistically. Competitive strategies prepared with a healthy respect for the risks all entrepreneurs take will add greatly to the chances of success.

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