Here is a letter I would have written to my old self with suggestions about what to think about before quitting my job at Goldman Sachs to start my own business. I hope you will find some useful lessons on the realities vs myths of entrepreneurship.
Johannesburg, 15 July 2015
My dear old employed York
I understand you are thinking of quitting your job at ________ where you seem frustrated that you are _________ (not making an impact / stuck in a routine / having to deal with corporate politics). In principle it is a great idea and I commend you on playing with the thought of becoming an entrepreneur as — after all — we know that the real contributors to an economy are entrepreneurs and not large multi-nationals (did you know that in South Africa alone, 67% of all people employed work in SMEs with under 50 employees?).
But before you make the leap allow me to suggest — with the benefit of hindsight — some things I would have done differently:
1. Don’t do it yet! First find yourself a start-up or another entrepreneur whom you can invest a portion of your earnings into to (even if just a % of your monthly income) whose business is exactly or close to what you always wanted to do. That way you can start your business without risking everything and can tweak it and get clients so that when you do make the jump you’ll be hitting the ground running. The only caveat here is to ensure there are no conflicts of interest and that you disclose fully what you are doing to your current employer! Your reputation matters and doing it behind your employer will come back to haunt you one day.
2. As much as you think your business idea counts, it doesn’t. It is all about implementation. Hence why I suggest you really consider point 1 above. Think of it as your dating phase where you are getting to learn all about this partner you are going to marry. This is the phase where you will learn if you really like each other and whether you could live with each other (obviously, once you get married things could still change, but at least you will hopefully have seen some of the chinks already).
3. Once you quit your job you will quickly realise how very few friends and you have left. I am not talking about let’s-have-a-drink friends. I am talking about those that have always welcomed you, made introductions etc because they hoped one day you would repay them in kind through the position you had at your current company. Once your old business card is gone so too will all the large company ability to open doors for you. Realise that unless your new business solves a very pressing and urgent need and you are just about the only one able to solve that need, most of your corporate friends will not really care about you anymore.
4. Your income will dry up almost immediately and you’ll be living off your savings — so make sure you have savings! Also, if you’ll allow me to suggest, try and get already a list of all the possible resources for funding lined up (as an aside, it will take ca. 9 months to 2 years for investors to decide to back you, regardless of what they say and how excited they appear to be).
5. Any potential large deal that you think will materialise soon after you have taken the step into entrepreneurship will just vanish into thin air or will slow to an absolutely frustratingly crawl… which means that the big income you were expecting will NOT materialise. No. Don’t even think it. It won’t. Whatever you think will materialise is hope over experience. Oh, you will continuously get signals from your counter-parties that make it seem that the deal is just about to go through, but it will take a year or longer before it does… and all the while you will be burning through cash and it won’t be long before you will be emailing friends, fools and families to borrow money with the promise that the big deal is about to happen.
6. You do not need a fancy office or gadgets. You will not need to attend conferences and networking events. Focus all your energy on zeroing in on who your clients are going to be… do nothing more than courting your clients (and I am talking about real clients, not wannabe decision makers). If you want to spend some of your time on other things, spend it on ensuring that everything — business cards, website, blog, articles, etc — is focused on solving the client’s problem.
7. All the luxuries you got used to? E.g. someone dealing with PC issues, travel arrangements, organising your PAYE, sorting out your accounts, arranging for the overhead projector to work, etc? Gone. You will be the jack of all trades… and friends will only help you so many times before they become too busy. Learn all the tools for your business before you make the jump. Business class and fancy hotels? They are good for the ego, not the wallet of an entrepreneur.
8. CASHFLOW IS KING!!! AND QUEEN. It is everything. Don’t be tempted to spend your money unless absolutely necessary. Watch out for those things that you want but you justify to yourself that you need. You don’t need them. Stretch the cash for as long as humanly possible, and then add an extra mile (this is a good attitude even once you start making money in your business — always ensure you have enough in the kitty for a rainy day… and a snowy day… and an autumn day… you get the gist).
9. Yes, there are and always will be competitors to you out there. Don’t worry too much about them in the sense that in some markets there is enough space for everyone. By all means do make sure you can match or be better than your competitors, but the reality is that you will not have the resources to stay abreast of their developments, hence focus on getting your service/product out there, in the door, working and generating revenue. The “Africa expansion” strategy is nonsense at this stage of your business. Start by getting a few good reference clients first and then worry about expansion, staff etc.
10. Having a sales force and a good team is irrelevant right now. If you don’t have all the skills within you to make your business work then don’t bother (I am aware that there are exceptions). Make sure you are the jack of all trades within the company and the master of one in the eyes of the customer. Sure: pretend to have a team, but don’t get your costs up until the revenue in on track.
11. People WILL change once money is involved. It doesn’t matter how much you are getting along now — once revenue starts trickling people will change. One partner will want to cash out a little, another one will want to buy this and that and you may want to re-invest it in the business (the truth is that all of you in the business will be so deeply in debt that you’ll be tempted to pay back all the loans you took to get to the business you are in today).
12. You will experience a big bump in your business growth. My personal experience? Around 5 clients. The first 5 clients are the coolest… they are the ones you can personally attend to and the ones you built relationships with over the last years. The next ones are the tricky ones… the ones that never heard of you and don’t really care to give you a lucky break. I don’t have a solution for this… just remember to keep it in mind because it also has implications for your finances (as you were SO close to breaking even, but instead your cash burn rate continues).
13. You will constantly juggle the question of when you ought to walk away and call it quits. It is a very personal question to answer. Don’t listen to anyone. ESPECIALLY do not listen to those who are still sitting comfortably in their corporate offices. Doesn’t matter how much they have read or think they know what you are going through, they haven’t. That is not to say that they mean badly — it is just that this is YOUR entrepreneurial adventure and you must decide.
14. You are your company. People will buy your services because of you and not just because of what you are selling. It may be a drag later on, but for now use it to your advantage. Make it personal. The saying that it is not personal, it is business? Forget it. It is personal and it is business.
15. … and finally, my dear employed York, you will experience a roller coaster of a ride. The highs and lows you experience in a month at your current job? Well, you are going to experience them all compressed in a single day — every day — for the whole month — 7 days a week. But that is good. You will feel alive again. The lows and the highs will take you through a whole range of emotions that you had forgotten you had… Yes, there will be VERY stressful times ahead of you, but also incredibly rewarding ones too. The journey you will make is one YOU created. Every little success is proudly yours. It is a testament to your ability (and a little luck) that you will succeed. And if you fail? Fuck it… you have at least got off your seat and tried it and for that all your friends and colleagues ought to give you a standing ovation. I know I will!
Good luck my dear York and hopefully your receding hairline wont get worse.
Your present day York
Johannesburg, 15th of July 2015