By Charles Odii
Week 2 of #AskCharlesOnY!
Question: I’m currently employed in the Financial Services Sector and I’m sure you must have heard of the recent mass sacking in the banking sector. Even though I was not affected, I have started to think critically about starting something of my own as there isn’t any job security anymore. The fact that I haven’t been affected thus far is no guarantee that I would never be affected.
I can’t resign right now because I would lose all the benefits I currently enjoy as a senior management staff of the bank.
Please can you run me through the RISKS involved in starting something of my own?
Hi Mr. Banker,
This is very interesting. I can imagine you have been in paid employment for a long time and you haven’t had any reasons to learn the skills required for entrepreneurship. I’m going to be as granular as possible in addressing the possible risks involved in starting a new venture.
Based on your description of your career path, I am assuming that you are a Senior Manager or perhaps an Assistant General Manager in one of the commercial banks. This implies that if you are laid off you get some benefits/compensations which may or may not be available should you decide to resign voluntarily. You may have made some permutations which would lead you to believe that the money you get from your benefits would be instrumental in you starting out on your own but let me use this medium to remind you that the best time to plant a tree is today.
You have obviously worked in the banking industry for a while now and risen through the ranks. This means you have gathered a wealth of knowledge and experience which may have given you the insights to identify some fundamental needs or gaps in the business world and now might be the right time to start something.
If this new venture you have being thinking about critically is something that comes naturally to you and you enjoy doing, then it’s all for the better!
Have you seen some of the Newspaper headlines lately?
“Crumbling Economy – Two million Jobs doomed: 20,000 workers sacked in 3 months, many more jobs threatened, banks phase out public sector departments over TSA, Foreign investors pull out of capital Market, Sunday offerings have reduced –Clerics, Mass sack will create more social problems – Senate”
Your decision to start a business right now, would not only assist in giving you the security you crave but would also help to reduce the high rate of unemployment in Nigeria and contribute to socio-economic development when you start employing staff of your own.
Most often, people in positions like yours keep working and start something on the side. This has become a common trend as everyone is looking for an alternative source of income to survive. However, I am inclined not to support this choice as it is quite unfair to your employer especially if this side venture requires you to allocate to it, time and resources meant for your employer. I am also of the opinion that doing this causes you to limit the potential of the venture because it never does have your full attention. If you believe in that business idea or passion you know can become profitable, it is time to give it the attention that it requires.
No doubt entrepreneurship itself is all about risks. Having said that, let’s look at 10 risks involved in starting out;
- Lack of a Steady Cash Flow: You cannot guarantee a large or even steady income at the beginning especially when you start small. Economic trends, stiff competition, economic policies and change in consumer behavior can all affect your business cash flow as a startup.
Right now as a person in paid employment, you are used to receiving your salary on a specific day of the month and receiving benefits such as healthcare for your family etc. You have to adjust your mind to prepare for the change in lifestyle that an inconsistent cash flow would bring at the beginning.
- Having to Prioritize: You must earn enough to sustain yourself, so you might need to support yourself in other ways while seeing your idea take off. It is hard to take on extra activities when you are passionate about one major business idea/venture but you have to open your mind to multiple sources of income while you are trying to build this big idea. Research has it, that the average multi-millionaire in US dollars has seven sources of income. In my case, I am the Executive Director of SME100Nigeria and I am also a Marketing and Communications Strategist.
- Multi-Tasking: Working on your own means you are responsible for the day-to-day running of the business. This may mean doing tasks that you dislike. As a senior level staff in paid employment, you may have gotten used to delegating tasks and basically supervising and making strategic decisions. However, as a startup entrepreneur you would have to get your hands dirty on many occasions.
- Getting Your Product/Service Right: Sometimes you have a fantastic brilliant business idea, but unfortunately the market for it is not large enough to establish a compelling business case. You need a product or service with a sizeable market and demand. Getting your product or service right would involve you asking yourself pertinent questions such as: What need does my product/service meet for my customers? What differentiates my product/service from the other players in my field? If your product is new in the market, ask yourself is the market ready for this? Imagine if Uber for instance had come into Nigeria when internet penetration was low and data wasn’t affordable? They would not have gotten the adoption they are enjoying now. There are free business canvas model templates you can download online to make sure you are on the right track.
- Decision Making: As the founder of your startup a lot of decisions would be made by you and you alone. Therefore, you stand the risk of making certain decisions which may be detrimental to the business. As a person coming from a structured work environment, you probably report to a Director, who reports to the CEO, who reports to The Board who in turn report to The Regulators. This shares the risk of decision making across various levels and helps to make sure that decisions are well thought out and contingency plans put in place just in case. As a startup entrepreneur, you report to no one but yourself. To mitigate against this risk you have to come up with your own system for weighing your options when faced with strategic decisions. It could involve having a more experienced mentor or even inaugurating a small board of your own.
- Doing too much or not enough: As an entrepreneur, sometimes when the business is doing well you may be tempted to want to expand too quickly, introduce new product lines, employ more staff, move to a bigger building etc. This can be good and it can be disastrous if your business is not ready. Also, you may be so crippled with the fear of failure that you miss opportunities because you are being too careful. To mitigate against this risk, you should have a five year plan for your business. This plan should give indicators as to when you should expand, employ more staff etc. if you are able to accomplish certain things before the timelines in the business plan, then by all means take the bold step but if not tread carefully and wait till your business is ready for the next step.
- An Undefined Schedule: As an entrepreneur you may discover you are often time poor. You no longer have defined working hours unlike when you are in paid employment and you can no longer take a planned vacation. Even public holidays and festive seasons may not feel the same because you find yourself working round the clock to meet up with client demands.
You must prepare for this by learning how to manage your time. Fortunately you can leverage on technology to achieve this. Have skype meetings instead of driving long hours in traffic, keep a daily schedule on your phone or laptop and stick to it etc. Most importantly ensure you get enough rest so you are always on top of game.
- Unprecedented Expenses: As an employee there are certain work tools and resources that come with your role such as laptops, computer software, phone sets, pool cars, office drivers, printers, scanners, office assistants etc. When you become an entrepreneur you have to provide all these things yourself. A lot of people forget to factor in these seemingly little details in the startup cost of the business and get frustrated halfway when they realize all the little things they have to spend money on to make the business functional.
To mitigate against this you have to have a very detailed inventory of all you need to get started.
- Low Moments: As an entrepreneur especially one who gives up a lucrative job to start out on your own, you will experience moments of frustration. Sometimes, your proposals get turned down at the last minute, sometimes great ideas blow up in your face and you feel you made a huge mistake. You have to keep reminding yourself of why you started out and why the business would succeed and not let the setbacks affect your confidence level or take the joy out of the journey for you. Unfortunately there is no way to mitigate against this risk, just ensure you learn from your mistakes and always have a contingency plan!
- Taxes: Yes you have to pay your taxes. Do not be tempted to evade this at any point because it would become a huge debt looming over your business and may eventually lead you to bankruptcy. Also as an entrepreneur you have to make sure you set up a pension fund and health insurance for yourself as there is no employer setting aside a portion of your salary for you. You are your own employer and the responsibility of this rests solely on you.
I honestly hope these risks have not made you change your mind about your decision to set out on your own. The path of an entrepreneur is not smooth but it is very rewarding. As they say nothing good comes easy!
All the best in your start up and remember SME100 Nigeria is here to support you as you embark on this wonderful adventure!
Op–ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija
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