18 Jul 13 things to consider before moving from employee to owner
Do you daydream about making the move from Employee to The Big Boss, or Owner of the Business? It’s tempting to want to be your own boss if you are tired of working for “the man.” You’d love to see YOUR NAME on the shingle outside. It’s exciting! You have the potential to make a lot more money, but you will also take on a lot of risk. It can be overwhelming. Are you prepared to take responsibility for not only the success, but also the failures that will come your way? Ask yourself these questions if you’re pondering a move from employee to owner.
Compare your current situation to a realistic future situation
As an employee, you (should) have a steady salary. As a business owner, you may have to start with a much smaller salary than you were used to when employed by others. The runway to earning the same and grow to higher wages than your past career may take some time! That said, it is good to be prepared to decrease your personal spending and set aside some cash reserves to help you gain momentum and owners pay in your new business.
Can you afford to keep up with all the operating costs of the business?
Don’t forget about things like insurance, permits, and taxes. Will you need financing, and are you eligible for it?
Remember that the business’s money isn’t YOUR money
Keep your personal finances separate from the business finances. You’ll never get a clear picture of how things really stand if your personal and business finances are intermingled.
Plan for future growth
If you grow (which is a good thing!), you’ll very likely need to hire more staff or move to a new location or add new technology. Have you researched how to go about doing all of this?
Know how to budget and forecast
Have you ever had to budget and forecast? Make sure you know how to do so. You don’t need any surprises, and you need to know “the big picture”.
Document all business processes
Do you have all business processes documented? If not, do so ASAP. It’s kind of a pain to go through it, but it’s worth it in the end. What if one of your key employees suddenly can’t work anymore? Make sure that all responsibilities of each employee are documented in a detailed fashion, so that someone else can pick up and help with those tasks if needed.
As you go through the process of documenting all of this, you will see opportunities for adding controls to help mitigate the risk of things falling through the cracks. Start with a simple flowchart and add all the details from there. This will also help keep check on responsibilities of each employee, protecting you against internal theft and fraud.
Understand how to manage your cash flow
Are you ready for “dry spells” that may pop up unexpectedly? Do you have enough money in reserves to get you through the tough times? Some experts recommend having up to 6 months of business and living expenses in an emergency fund.
Lay out your vision
Do you have a detailed vision, goals, and objectives? This will help you stay on track. What sets your business apart from others? What is your business’s purpose?
Have good numbers and understand what they mean
Do you know the story your financials are telling you? You need to have accurate bookkeeping in place in order to use your financials to make sound business decisions. Otherwise, how will you know if you can afford another employee, new software, new anything?
Implement Profit First from day one
As a Profit First Professional at the Mastery level, I strongly recommend that you set yourself up for permanent profitability and PAY YOURSELF FIRST from Day 1. Read “Profit First” by Mike Michalowicz!
Consider outsourcing where you can
What can you outsource? You should focus your time and energy on the areas where your strengths are. If Marketing or Bookkeeping are not your areas of expertise, outsource them to a professional. Learning how to delegate will help you reap many rewards! You’ll be more productive if you don’t have to work on every single aspect of your business, and you will avoid burnout.
Find a Mentor or a Mastery Group
It’s great to have someone hold you accountable and help you grow as a business owner. Why recreate the wheel every time you run across a new problem? Your Mentor or Mastery Group can help you because it’s likely they’ve experienced the same growing pains.
Get clear on your personal life vs. professional life
Be prepared for eating, breathing, and sleeping the biz, especially in the first year (or few years, if we’re being honest!). Set boundaries early on to avoid burnout. Do you have a family? Make sure you have plenty of help with kids and their activities, and that you and your spouse are in agreement on your time commitments. I recommend reading “Clockwork” by Mike Micalowicz!
Get ready for an exciting adventure!
Don’t let these considerations and potential pitfalls burst your bubble! If you do your homework before you jump into business ownership, it can be a very rewarding experience. After all, as a business owner you get to call all the shots! You just need to be able to live with the decisions you make. If you are well-prepared, then you should be able to overcome all the hiccups of new business ownership.
Want to know more about business strategy and building a healthy company? Reach out, or check out the business strategy category on our blog.
