27 Apr How to Transition From Employee to Entrepreneur

Written by Lifebook Member Melissa Emerson

Have you had it with the daily grind?

Now is the perfect time to start planning to become your own boss. But before you start drafting your resignation letter, let’s discuss how you can prepare to transition from employee to entrepreneur. Take some time to make sure the entrepreneurial life style is for you before cutting the paycheck off.

On average it takes 12-18 months for a small business to break even, let alone replace a corporate salary, so the more you think through how you are going to run your new business, the better your chance of success.

Start using evenings and weekends to craft your new business enterprise. Building a business will require you to stretch yourself in ways you never thought. An honest evaluation of your skills, network, discipline, niche, optimism and ability to be coachable will determine whether you’re ready to start.

I created the Emerson Planning System in my book ‘Become Your Own Boss’ to provide a roadmap for business success. Here’s a breakdown of my six-step system to make the transition from employee to entrepreneur.

Develop a Life Plan First:

Figure out what you want out of life, and then build a business that supports the vision.  Too many people start businesses that are not good for them or their families.

A life plan should outline your financial, personal, learning and retirement goals.  For example, know up front how much money you need to earn in order to be happy. Personal goals should play a role in just about every decision made in your business. Decisions like how to structure your life or your business, and whether you will take on a partner, try to pursue investors, have one great store or a build a chain, etc. All of these decisions must be measured against the big picture goals.

Develop a Financial Plan:

The money to start your business will come from your personal cash reserve. The ability to save has everything to do with your ability to become your own boss.

Before quitting your job, I suggest planning your exit for at least 12 months. Work on saving 20%-40% of every paycheck and start living on a budget. Raise your credit score to 750 or higher. Eliminate as much debt as possible. Starting a business while carrying a bunch of credit card debt will put a lot of pressure on you.

Position yourself financially to so that you can go without a paycheck for a year or two, fund your first year of working capital and have an emergency account for your household.

Evaluate Your Skills:

Look at what skills you have and what skills you need to run your particular business.  Be honest when making your list of skills. If you are not sure about them, ask three people close to you what they think. You might be surprised by their responses.

Update your computer skills while you are still working and particularly start learning social media. You can always grab a copy of my ebook How to Become a Social Media Ninja to give you a head start. Don’t forget the business financials and operations. You might want to learn accounting software or something about email marketing to help manage your business.

Who’s Your Paying Customer?

As you are making a go/no go decision about your new business idea, think about these two questions: Who are your customers, and why will they buy from you?  You must identify a niche customer.

As you are starting in business, you will have limited time and limited resources. I suggest you develop a marketing plan before the business plan to make sure there is a viable audience for your product or service. If you can’t answer these questions, then you need to go back to the drawing board and come up with another business idea.

Write A Business Plan:

You must plan for success; it will not just happen to you. As you write your business plan, you will think through how you are going to run your business. It is very helpful to think through what happens when a sale is made and how many sales you will need to generate each month to meet your revenue goals.

Don’t be one of those business owners who spend more time planning your vacation than on developing a plan to run a successful business. Use business plan software such as www.enloop.com to get started. Then, enroll in a business plan course to finish it. And don’t forget to use your business plan to run your business; in fact, it should be updated every 2-3 months to make sure your business is on the right track.

Launch While Working:

Ninety percent of all small businesses get business from referrals, which means the person in the cubicle next to you could be your first customer or provide the first referral. Take the next twelve months to build and reconnect with your network, research your target customer, and make sure you define how you will be different in the marketplace.

If you can, work out the kinks in your business model while you still have a paycheck. You’ll be glad that you took time to plan before jumping out of work and into a full-time business.

About the author:

Melinda F. Emerson, known to many as SmallBizLady is America’s #1 small business expert. As CEO of Quintessence Multimedia, Melinda educates entrepreneurs and Fortune 500 companies on subjects including small business start-up, business development and social media marketing. Forbes Magazine named her #1 woman for entrepreneurs to follow on Twitter. She writes a weekly column for the New York Times, and hosts #SmallBizChat Wednesdays on Twitter 8-9pm ET for today’s entrepreneurs. She also publishes a resource blog http://www.succeedasyourownboss.com