I spent a large part of my career in a marketing capacity working for large consumer goods companies – in fact, two of the worlds biggest. In doing so, and through having such blue chip training I thought I knew a thing or two about business. I thought I’d march into my first startup and show the world how it’s done. Clearly I was delusional. What I did learn though, and very quickly, was that there are fundamental differences in being an employee versus an entrepreneur. Knowing a lot about business, doesn’t necessarily mean we can build a business. Knowing how to write code as a developer doesn’t necessarily mean we can build a community.
So here they are, my top 10 things employees need to know before becoming entrepreneurs.
Or how smart you are, it only cares about what you give it and if you create value within it – that is, value for the end users. The market doesn’t make judgment calls, it only feeds back reality on value creation. It does it in real time too. Your boss on the other hand makes judgment calls, which are often based on personality, friendship, values and corporate politics.
Ideas are like water, they are life giving, but they are omnipresent. We all have them. If the idea is good, then you can guarantee others have thought of it, are working on it, and some are probably already in market. When Youtube launched there were more than 400 other video sharing websites. What matters is execution and building a user base – they are the bits that matter. In fact, new ideas are harder to sell because you need to invent demand. Ideas are a small part of the success equation.
All of the things you took for granted in your company are gone. There are no resources at your disposal. No departments, no staff, no supply chain, no existing customers. The job of the entrepreneur is to invent resources, to build an infrastructure.
You used to manage situations, people, and politics, now you need to get things in market and invent distribution streams, usage and revenue. You are no longer managing a system, but building one. The tasks you did in the company are rarely what you’ll do when starting from scratch. Employees tweak an existing machine – they are maintenance managers. Entrepreneurs need to be inventors, builders, creators, they need to make something from nothing.
In a company we manage budgets. We spend allocations on projects and manage a P&L. In a startup we manage cash flow: money in and money out. Startups need to remember they can go broke while making a profit, but going broke is not possible while a company is cash flow positive.
You’ve got to want the lifestyle more than a successful outcome, because the latter has a low probability. You’ve got to want it, for what it is. The having needs to be in the doing. If you want to get rich, just stay in corporate and get good at property and share investing – that’s a more certain path to wealth. Entrepreneurship is about the human spirit and exploration – that needs to be the ‘why’.
There is no paid annual leave, no paid public holidays, no weekends, and no official hours. The 15th of the month will roll around without a pay day. You need to be able to cope with that. Slack days or weeks for that matter aren’t something you can ride and the company picks up the bill on with a wage. You’re fully exposed.
Business and startups are not the same thing. Startups are about building something new. If you want to own and run a business, then buy a system which has proven success, like a McDonalds franchise. You need to know whether you really want to create something, or just have more independence in your working or business life. There are other options outside of employee which might suit you more. Be honest with yourself.
It’s mostly the opposite to what happens in established companies. Companies test off market , startups test in market. Companies are risk averse, Startups are risk tolerant, Companies avoid failure, Startups must fail often & quickly. Companies reward internal performance, Startups reward external performance. You need to flip your perspective pre-exit.
If you’re well off enough to be reading this (you’re on the web) then if your first entrepreneurial venture fails drastically you won’t go hungry. The sun will come up and your human spirit will be better for the journey. So while entrepreneurship is hard and different, remember life is about having a crack and seeing what’s possible. Best you get started soon.