For many individuals in the corporate world, it may be tempting to leave a job and venture out to start a business. However, it can be a big undertaking and there are many factors to consider when doing so. According to outlets like Fortune, Forbes and various industry reports, approximately 70 to 90 percent of startups fail within the first five years.
Although this may sound like a significantly high number, aspiring entrepreneurs in the corporate landscape should not fret. Armed with a good idea, the right attitude, business plan and resources, leaving behind a corporate job to start a successful business can go from dream to reality.
“For a lot of people with corporate jobs, the grass is always greener on the other side,” says Dane Dickler, tax partner and leader of Marcum LLP’s New York/New Jersey business enterprise services group. “Many times, there is a natural progression for individuals to think about starting their own business and work for themselves. However, it is not an easy process. It requires taking risks, having patience and understanding the type business they want to get into.”
Dickler says that, most of the time, individuals who leave their jobs and start a business go into the field in which they work, or in which they have expertise.
“Most people know better than to start a business in an area in which they have no prior experience,” he says. “However, I have seen many people who had a corporate job with good pay decide to start a business in a different area. So, they quit their job and found employment in the industry they wanted to venture into. And, most of the time, it was with less pay. Then, over the next few years, they learned as much as possible about that particular field. The hope is that, at some point, they would acquire the expertise where they feel confident in their ability to start a company in that new area.”
Entrepreneur Christina Dorando had gone through a similar experience of working in the corporate world, but then decided to open her own business that had a different focus. Dorando was a consultant for a company that provided clients with research, data, consulting and advisory services in higher education. However, her mother, who was a preschool teacher, had to take a leave of absence from her job. So, Dorando took a “sabbatical” from her corporate job and filled in as a preschool teacher. When her mother came back, Dorando then returned to her position.
“After going back to my corporate job for a few weeks, I realized that it wasn’t what I wanted to do anymore,” Dorando says. “So, I took a leap of faith and found a preschool teaching job in Jersey City. I taught for a few years and I absolutely fell in love with it.”
Today, Dorando owns and operates Hillcrest Preschool & Daycare in Lyndhurst and Cresthill Academy in East Hanover – two schools that focus on caring for and educating children ages two to five years and six weeks to six years, respectively.
“In order to start your own company and become successful, it all starts with a passion about what you want to do,” Dorando says. “I have a passion for teaching children and making a difference in their lives, and that played the biggest part in getting to where I am at today. … In addition to that, when going out on your own, you have to wear many different hats and deal with different aspects of your business – compared to only focusing on one, or possibly two areas of work at a corporate job. You are constantly being bombarded from all different angles and it could be a challenge. So, it is important to seek out the resources and the guidance to properly obtain the information you need to start a company. It is a constant learning experience.”
Having passion and proper guidance when starting a business is not all that is required at the get-go, however. “Having a clear and strong business plan to act as a blueprint for the business’ development is a very important first step to take,” says Deborah Smarth, chief operating officer and associate state director, of America’s SBDC New Jersey. The NJSBDC helps entrepreneurs prepare a good business plan (business purpose and mission, marketing assessment and strategy, customer portfolio, financing components and projections). Without a business plan, an entrepreneur cannot get to first base in applying for a loan or getting capital.”
And of course, “Obtaining proper financing and capital is one of the most vital factors in starting a business,” says Rahbar Ameri, vice president, SBA director at Kearny Bank. “A lot of times, potential new business owners underestimate how much money they are going to need and are overly optimistic as to how much cash the business is going to bring in. So, when a potential new client comes in, we compare their projections with existing [comparable] businesses, as well as other industry averages to make sure their numbers make sense.”
When discussing money and finances, Ameri says that one of the biggest challenges he sees from individuals leaving a corporate job is whether or not they can substantiate their personal income.
“It’s always a challenge when you have a steady paycheck every week and you leave that behind,” he says. “Do you have the finances, a spouse, or other resources to rely on until your new venture starts bringing in money?”
“Leaving a corporate job and starting a business is a big financial risk,” adds John Cromie, attorney and chair of Conell Foley’s corporate and securities practice. “If someone is leaving the security, or the perceived security of a corporate position, they are also leaving behind the infrastructure and potential benefits and perks that go along with that.”
Cromie says that in many cases, corporate employees, as a condition of employment, sign documents which typically cover confidentially, non-disclosure, non-solicitation and non-compete clauses and agreements.
“It is important for individuals to note whether they have any employment obligations or restrictions by virtue of their current position that would limit, or in any way prevent them from starting their business,” he says. “They may have to sign a document that simply says, ‘You are going to be exposed to confidential and proprietary information. So, you need to keep that confidential during the course of your employment and beyond.’ The employee would have to agree that while they are working there and also once they leave – for a certain timeframe – that they will not solicit customers, other coworkers, vendors, etc., of that corporate employer. We help our clients establish what those parameters are. Then, we will help them identify what their goals are and what type of business they are endeavoring to start.”
“When you are leaving corporate America, you really need to have a strong understanding for what you are getting into,” says Kellie LeDet, regional administrator for the Small Business Administration. “What is your niche and where can you carve out that niche in the marketplace? You need to do your homework and figure out whom your target audience is and if there is a need for the product or service you are offering. You need to have a competitive edge in order to be successful as an entrepreneur.”
LeDet stresses the fact that it’s important to establish and maintain relationships with entities like the SBA, as well as other business advisors, in order to help alleviate any of the aforementioned roadblocks or mistakes a new entrepreneur may make.
“There is so much the SBA has to offer,” she says. “And working with our partners like NJSBDC and SCORE – that provide no cost business counseling – is a ‘no brainer.’ We are all here to serve you and to provide the resources to help you start a business. Our doors are always open for business, to make sure you get and stay open for business.”
Leaving a corporate job and starting a business can prove to be quite overwhelming. There are myriad steps to take when transitioning from “9 to 5,” to becoming an entrepreneur. “You need that strong business plan, those steady finances, the proper capital and dependable advisors,” LeDet concludes. “It may be tough, but you have to go into it with a fearless face and say, ‘I’m going to do everything I possibly can to make it work.’ You have to have the passion, faith and commitment in staying the course to be able to succeed.”