Leaving a Corporate Job for Entrepreneurship
Thomas Stephens is cofounder and managing director of the consulting firm Trinity in Boston, MA. and a member of the MIT EMBA class of 2015.
If you want to launch a startup, there are a lot of resources out there with “how to” tips and advice. There are also plenty of mentors willing and able to help new entrepreneurs. However, the steps aren’t so clear for those who want to transition from a corporate environment to entrepreneurship.
Having recently completed an MIT EMBA session on driving innovation through entrepreneurship – and launching a company in 2012 after a long corporate career – I’ve learned a lot about making this kind of career leap. If you’re thinking about leaving a corporate job for entrepreneurship, here are a few things to consider:
The first thing to think about is your own personal financial situation. It may take time to develop relationships with investors so you’ll want to make sure you have enough cash to tide you over. If you’re jumping into your venture full steam and leaving your prior job, this is especially important. My rule of thumb is to have at least two years of cash reserves before you even consider launching. This will allow you to have a personal safety net to pay bills while pitching investors and preparing to launch.
Expect to make mistakes. Hopefully, they won’t be expensive ones, but they might be. You also may need to make several pivots during the process. Perhaps you developed a product that doesn’t have as wide appeal as you thought. You may need to iterate the product’s features or change your market to see if you can gain more traction. There could even be an unanticipated shift in the industry, which means you’ll need time and possibly more capital to adjust.
Dipping your Toes
If you don’t have two years of cash reserves, but can’t wait to work on your startup then it may be better to just dip your toes in the water. In other words: Keep your day job. This is inherently more challenging because startups demand all of your time and attention, but it does give you an income during the process. It’s also going to make raising money harder, as many angel investors and VCs don’t see part-time entrepreneurs as dedicated as their full-time counterparts. They don’t invest in hobbies so you have to show them you’re serious about developing your idea into a profitable business.
Create an Activity Plan Not Just a Business Plan
Whether you’re jumping in or dipping your toes, you’ll need a business plan and an activity plan. The business plan covers year one through year three and includes things like revenue targets and financials. The activity plan lists your daily goals that must be achieved in order to move your business forward. For example, today I might need to make four calls to VCs, work on recruiting a new executive team member, or get our website up and running. Without identifying and completing the tasks in your activity plan, you’ll struggle to meet your long-term business goals.
Even if you haven’t launched a startup before, don’t under-value your entrepreneurial experience. Perhaps you’ve developed skills and competencies in prior jobs that will be transferable to developing your idea. This is important when talking to potential investors who want to be confident that you can make your idea work. In my case, I spent 17 years in retail financial services before starting my own company. Although I wasn’t running a startup during those 17 years, I spent the first seven years as a commission-based financial advisor, which is a very entrepreneurial position. If I didn’t drive revenue in a particular month, I didn’t get paid.
Weigh the Risks
If you’ve built a network within your own industry, consider whether those people will still support you if you go out on your own. You may be entering their space and unintentionally disrupt their business. What will they do if you become their competitor and infringe on their turf?
Also, have you anticipated challenges to the way your idea creates and captures value? How would a pilot help to validate your model? These questions and others will assist in identifying areas where your product/service might be enhanced or more clearly differentiated in the marketplace prior to launch. Launching a start-up is one matter, but creating a sustaining, profitable business is another matter entirely.
A Softer Entry is Not Bad
After considering all of these factors, you may decide that you’re not ready to launch your own venture, but are still interested in entrepreneurship. How should you proceed? It may be time to join an existing startup that has funding and can pay a salary. You can learn a lot at a startup while making a valuable contribution and bringing home a paycheck. On the other hand, you may be ready to dive in and become a founder!
Are you thinking of becoming an entrepreneur? If so, what factors have you considered in making your decision?