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5 Hard Lessons For Employees-Turned-Entrepreneurs
The popularity of entrepreneurial books, podcasts, and television shows like “Shark Tank,” give the impression that everyone is starting a business. The truth is that while many people are, not everyone who does is successful. If you are making the jump from corporate America into full-time entrepreneurship, you are likely to find that there are some hard lessons that you must learn.
The following five lessons are some of the most difficult for many business owners to master and are surely at the forefront of the reasons why employees-turned-entrepreneurs are unsuccessful in their new ventures.
Lesson One: Become a Real Negotiator
In the book Getting to Yes by Roger Fisher, William L. Ury, and Bruce Patton, the authors clearly explain how a “hard negotiation” style will destroy a “soft negotiation” style every time.
If you have spent any time in corporate America, the chances are that you learned how to get along well with others. You use phrases and words like, “Win-Win” and “Partnership” when you think of negotiation. You want to reach a mutually beneficial agreement and you yield quickly to the demands of others to keep the peace. You are a “soft negotiator”. While this is valuable in a corporate context, most likely you were shielded from the myriad of aggressive negotiation tactics, “hard negotiations,” used externally, and in some cases internally, by your company.
The reality is that when you are first starting out as a business owner, you are playing a game whose rules are vaguely familiar. Furthermore, you are probably unaware that the game even exists in first place. Your opponents are well-equipped, and they are looking for fresh meat. My intention is not to frighten you, but not everyone in the free-for-all that is the modern global economy is thinking about creating “win-win” situation. “Hard negotiators” are not as easily swayed and will stop at almost nothing to get what they want.
The most important (and possibly expensive) lessons you can learn are:
- How to effectively negotiate when you no longer have the resources of a large corporation to give you leverage by understanding the various negotiation tactics.
- If you think you are a good negotiator and are not an attorney, you need help.
Lesson Two: Make Your Accounting Useful For YOU
I admit upfront that I hate accounting because it makes me feel unintelligent. Many of the small business owners to whom I speak say the same. There are many reasons for this but here’s what you need to know:
- Develop a system for tracking your real cash (not just profits) that you can manage daily. Learn enough so that you can design your accounting system to be useful to you in the way that you will use it.
- Tracking your cash must become a habit. You will be shocked at the number of people who will confidently do their job with absolutely zero understanding of your financials even when they have access to them. They are counting on you to know what is going on.
You cannot delegate having a firm grasp on your financials to anyone else. If you do, then you will not be running a business, you will be working for someone else wondering where all the money went.
Lesson Three: Create a Culture
What would your front yard look like if you never paid attention to it, never watered it, never mowed it, in short never cared about it? Can you imagine that? Can you picture it?
Now know this: Your company culture will look worse if you treat it the same way.
Any system composed of living organisms will grow and evolve, constantly. Moreover, it will do so with or without your permission. That is what they do.
Your business is a living organism. It is a system made up of people who are very different. The behaviors of those people will define its culture. Now you might get lucky, and that group of people may produce an incredible culture without much effort. However, and this is common, they could produce a cancerous growth that kills their host. There are two lessons here:
- Recognize that it is your responsibility to create the culture you want. When you become an employee of a company, chances are the owners or employees previously established the office culture. However, now you have to create it yourself.
- Learn the skills necessary to establish a culture on purpose.What happens if you do not? Remember the image of your untended front yard? You will get a culture, but it will happen by default. In my experience, very few business owners are happy with the culture they get by default.
There are tools and techniques to build the culture you want. Look for them. Learn them. Use them. It is hard, but it can be the difference between feeling like you cannot wait to get to the office every morning and dreading what awaits you when you get in. Learn how to cultivate the culture you want.
Lesson Four: Master Your Marketing
Unless you are starting a marketing company, chances are you have no idea what marketing entails. Moreover, you are probably unfamiliar with what the word means. You might think you know, but you probably don’t. Why? Because the word is so overused and abused, it is hard to understand what marketing is, why it is necessary, and what to do to create an effective marketing strategy. Further, so many people want to sell you “marketing” that the real purpose and nature of it gets lost in the weeds. For example, we have deeply fixed terms like “sales and marketing” as if sales can precede marketing.
Here is the hard lesson: Marketing is lead generation.
That is it!
Those who will profit from confusing you (and many people do), will disagree with me. I do not care!
A marketing plan is a plan to generate leads on a budget, in a given time frame.
If you do not generate leads, you will not get sales. It is that simple.
So no matter how fun it is to buy beautiful pictures or sexy ads, the hard lesson is to stay focused on what will grow your business. Leads. Leads. Leads.
Sounds too simple? OK, go ahead and try it.
Here’s a bonus lesson: Simple does not always mean easy. I had personally witnessed people waste tens-of-thousands of dollars before they learned this lesson.
Lesson Five: Making Money is Not The Same As Earning Money
This last one is the craziest lesson of all. Most employees have years of conditioning which reinforce the entrenched belief that it takes personal effort and application of skill to earn money.
It is not an unreasonable perspective for someone collecting a paycheck, but it can be a serious handicap for an entrepreneur. You will work hard. By the measure of income, the most successful business owners I know work very long hours. However, there is an enormous difference between owners who believe they are earning money and those who are working to manage systems that make money. Here’s the difference:
- If you think you are making money, you will focus on your business as a way to collect a paycheck. You are working x-amount of hours to earn x-amount of dollars.
- If you are managing a system that makes money, you focus on creating a system of generating cash-flow. You become the leader those that operate the systems that run your business.
To explain further, working for a paycheck will hold you back because it constricts you in two dimensions. Focusing on the all mighty paycheck will drain precious cash that your business needs to fuel its growth. Of course, you should get paid, but you will have to determine what is the BEST use of that cash- saving or reinvesting in your business. Moreover, most detrimental to your company’s growth is that you cannot imagine working hard enough to be worth what people are willing to pay.
It sounds crazy, I know, but the salary/earning mindset can interfere with your business growth because it leads you to sell your cost instead of your value.
The truth is that most salaried employees people do not personally experience the kind of exponential income growth that a business can produce when it is marketing, sales, and operating systems are well-tuned and working together to reach a concrete goal. Typically most people can only grow their income incrementally over the course of many years. A business, on the other hand, can leap forward and double or even triple if the conditions are right. Most former employees do not have the experience to recognize that kind of jump is even possible even when they see it first hand!
The hard lesson here:
- Understand that your job is not to earn a paycheck
- Know how your effort improves a scalable business model which makes money
Most of these lessons are not complex, but they do fly in the face of our working experience.
- We learn to play nicely, which gives us a false sense of our negotiation prowess.
- We rely on accounting departments, so we never learn about setting up effective financial systems.
- We join companies whose cultures are already in place, so we do not learn how to create a beneficial one of our own.
- Our personal experience with the biggest brands hides the exact function of marketing, so we do not learn its real purpose.
- The most important skill, the one that drove our career – earning a paycheck – can ironically hold us back. The career that made it possible for us to start our company can make it difficult for us to imagine systems that can generate income out of proportion to our personal effort.
Business owners can master all of these lessons of course, but they require a new perspective and a new context. To build a business, you have to transcend being an employee. You have to become something more. You need to become an Entrepreneur.