With the rise of the gig economy, even longtime traditional employees may consider going into business for themselves. I made the switch from employee to entrepreneur 13 years ago for the flexibility and unlimited earning potential, and now I would never go back. That said, it took me four years before I even identified as an entrepreneur. It also took me four years to grow my business income beyond my corporate salary.
I canvassed other small business owners, as well as vendors who support small business owners, about the mistakes even smart employees make as they transition to entrepreneurship. Based on the responses I received, you can see a wide range of issues to look out for if you’re thinking about going into business for yourself.
After all, when you move from working for a company to running your own, you become the worker and the CEO. You are also your own HR, finance department, IT help desk and more! Here are 10 mistakes to avoid when moving from employee to entrepreneur:
1 – Not taking time off to deal with the emotions of your job loss
David Shriner-Cahn is host of the podcast, Going Solo, which profiles longtime employees who pivot to entrepreneurship in late career. He cites a lesson shared by one of his podcast guests, Philip VanDusen, founder of Verhaal Brand Design:
“Though it was in a way his choice to step away, Philip describes his first day on his own as ‘incredibly disorienting.’ One moment you are managing dozens of people in multiple divisions then suddenly you are spending most of your time in your home office. It’s a real wake up call.
Philip describes coming to the realization that he had spent years building up other people’s brand, and hardly any time building up his as an independent person. When working in the industry he explains, ‘Over time you develop a great deal of self-identity wrapped up in your title and the company that you work for, and suddenly it just goes away.’ Figuring out who you are as an individual and your place in the marketplace was the biggest shift in mindset, according to Philip. So, to figure this out Philip took time off to explore, explore himself and his career interests and options.” – David Shriner-Cahn, summarizing the podcast episode, Building Your Brand Ecosystem Featuring Philip VanDusen.
2 – Going too broad with your message and trying to help everyone
“When I first started out, I definitely went too broad with my message trying to help everyone instead of being specific and targeted. I didn’t have an ideal client in mind when I was building my business and communicating with my audience that I was growing which cost me time and money. I also didn’t think big enough from the beginning because I was coming from a beginners mind and I had imposter syndrome, which is standard for entrepreneurs, but what gives you the edge is owning your message from the get go and leading with certainty, clarity and specificity.” – Lucy Shahjahan, CEO of Soul to Soul Global.
3 – Pausing business development efforts when you get busy with client work
“The biggest mistake employees make when they go into business for themselves is to pause business development efforts when they get busy with client work. Continuing to push forward on business development when you’ve got enough work for the moment can be challenging, especially for new business owners, but necessary. Don’t let your foot off the gas when you’re busy.” – Jules Taggart, founder of digital marketing firm, Wayward Kind.
4 – Freaking out when you hit a slow period
Taggart also offered this helpful insight, if you’re on the opposite end of the too-busy spectrum and don’t have enough work:
“My brother is also an entrepreneur. When I first launched my company, he told me to embrace the slow times because they will be rare and short lived. Slow periods in business are going to happen. If you can look at them as a chance to reimagine and retool, rather than a reason to get nervous, you’re going to be better off.” – Jules Taggart, founder of digital marketing firm, Wayward Kind.
5 – Not hiring for the right skill set
“I’ve owned my own law firm for fifteen years and although I’ve had a lot of successes and have been able to create my perfect life, there have been mistakes along the way that I’ve learned valuable lessons from….I’ve hired people for hard skills, which was a mistake. You can teach anyone to do anything, but you can’t teach soft skills like integrity, a pleasant demeanor and being a team player. To go along with my team, I’ve also had to learn to delegate, which can be extremely difficult because so many of us think that no one can do a job better than we can.” – Rosanna Berardi, CEO of High Wire Woman
6 – Not understanding the financial side of your business
“When I first went into business for myself, I really had no idea how important it would be to understand the financials of my business. I figured if I learned sales and marketing, I could make enough money to solve any problems. And while I did make money, I didn’t know how to take care of it or set goals based on the life I wanted. Even when I had earned over a million dollars a year for the first time, I was still incredibly stressed about money, and never felt as if I had enough time. I ended up hating my business, and even quitting altogether for a period of time and filing bankruptcy, thinking entrepreneurship just wasn’t for me.
It turns out though that I didn’t hate owning a business, I was just financially illiterate. After my bankruptcy, I decided I would give business one more try and learn to really understand the numbers of my business – both time and money. That’s when everything clicked into place and I came to see that it was never about the money. I always had plenty of money. It was about learning to make decisions about my time and money in a new way. When I opened my eyes to that, I got to see that being in business is the path to service and creativity and freedom, but only by flipping everything I had learned about time and money when I was an employee.” – Ali Katz, CEO and Founder of The New Law Business Model
7 – Not planning and saving enough for taxes that are due
“As an employee, all of your taxes (social security, Medicare, federal, state and local) are withheld and remitted by your employer. When you are self-employed, you are responsible for remitting those taxes on your own. People are initially shocked at how quickly those add up and not getting on an estimated quarterly tax payment scheduled can be a serious detriment to cash flow while potentially jeopardizing the viability of your new venture.” – Aaron Smyle, Owner of Smyle and Associates LLC accounting firm
8 – Starting a business to escape from office politics
“Lots of people get fed up being pigeon-holed and playing politics in the workplace. So they think starting their own business is a way out of that frustration. It’s not. There’s way more involved to running your own business than the work you were doing for that idiot boss.
Going into business for yourself requires a vast shift in your skill set—and your mindset. Before you take the leap—and tell your boss to stuff it—do some research about entrepreneurship. Read Michael Gerber’s The E-Myth Revisited. Take a course on starting your own business. Talk to people who started their own business in your industry. If you don’t have entrepreneurs among your family and close friends, there’s a lot you won’t know.” – Nina Kaufman, attorney and founder of Business Exponential
9 – Not knowing yourself
In addition to getting to know the ins and outs of running a productive business, Kaufman also advised that you take some time to understand the ins and outs of what makes you productive:
“Starting your own business is like creating an artistic masterwork from a blank canvas. You make the rules. No restrictions. No boundaries. No one to tell you what to do or how to do it. No accountability. Does the lack of structure excite you – or paralyze you? Answering that question is crucial to your success as a business owner.
Would-be entrepreneurs often overlook the structural benefits that a job provides: a ready-made community of other people, someone else meting out tasks and deciding priorities, the accountability to others for meeting deadlines, the ultimate responsibility for getting results. When you run your own business, YOU have to wear all those hats — getting the work, doing the work, billing for the work, and strategizing your company culture. Add to that the prospect of working from home during COVID-19, and you have to factor in interruptions from your toddler, golden retriever, and the UPS driver. If you’re not comfortable working solo, entrepreneurship can be a difficult and lonely ride.” — Nina Kaufman, attorney and founder of Business Exponential
10 – Waiting for the right time to get started
I hope these minefields to avoid are helpful and not discouraging to your entrepreneurial aspirations. If you’re curious but still not convinced that starting a business is for you, start a side gig – a side business can even help your current career. You can start small but get started as soon as you can, rather than waiting for the right time. There is no perfect time, and the actions you take to get started will give you much more clarity than thinking even more about how to get started.
Contributed By: Aaron Smyle