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Episode Host: Henry Lopez is a serial entrepreneur, small business coach, and the host of this episode of The How of Business podcast show – dedicated to helping you start, run, grow and exit your small business.

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Transcript:

The following is a full transcript of this episode. This transcript was produced by an automated system and may contain some typos.

Henry Lopez (00:12):

Welcome to this episode of the How of Business. This is Henry Lopez. If you’ve ever dreamed of leaving your job to start your own business, but you feel stuck maybe by fear, uncertainty, or maybe golden handcuffs, you’re making way too much money now or the prospects of too much money, then this episode is for you. I’m going to walk you through what I’ve observed as some of the challenges having made the shift myself to transition from the corporate world to business ownership. I’ll address some of the common challenges that I see and that I faced as well as what I think is required in a way of a mindset shift and the practical steps to help you make that leap from the corporate world or from the job that you have today to becoming a business owner and an entrepreneur. You can find all of the how of business resources, including the show notes page for this episode and learn more about my one-on-one and group coaching programs @thehowofbusiness.com.

Henry Lopez (01:03):

I also invite you to consider supporting this podcast on Patreon and joining the Howa business community on Patreon, and please subscribe wherever you might be listening so you don’t miss any future episodes. Let’s start with why the transition can feel so hard that letting go of a job or a corporate career to going to the perceived risk, and actually there is a lot of risk, but mostly the perceived risk of starting your own business. Why is that transition so hard for most people, including myself when I was making that transition? I have found that it is as much the emotional or mental aspects of it that are more difficult than even the real financial risk components of why we don’t make the transition, and I’m going to explore both of those, but certainly what comes to mind as it did for me is am I ready to lose that study paycheck?

Henry Lopez (01:51):

What am I going to do about health insurance or retirement benefits? You’re not going to have all of the infrastructure, HR, it, finance or a legal team to lean on, and you’re going to have to make all the decisions. I explored this topic and rereleased episode 2 45 recently, that episode, which I call the two responsibilities of business owners must embrace, which are decision making and accepting failure. For most of us in our jobs now, even if we have a very senior position, we’re probably not the ultimate decision maker or we’re not the ones that typically have to worry about do we have enough money in the bank to make payroll? And so that is a whole other level of responsibility above what you might have in your job today. You might have limited capital to start your business, and that’s a real concern. That’s that financial risk or exposure that I was referring to, and you might just struggle with letting go of your professional identity, especially if that’s what you studied.

Henry Lopez (02:47):

You studied a related field and now you’re in that career and you feel like, wait a second, I’ve got all of this invested. It’s that sunken cost theory that comes into play, which interestingly enough also comes into play for small business owners not being able to pivot or let go of a broken business model, but it applies to us mentally because this is what we studied for, this is what we wanted. We’ve worked hard, we’ve put in the years to build that career, and now I’m looking at throwing that all away or so it seems for a much riskier proposition. Often people will say to me, oh, you’re a risk taker because you’re in business and you’ve done so many different business ventures. You must be a risk taker. But I’ll tell you that I do not see myself as a big risk taker. I think I’m very conservative when it comes to business decisions and finances, but it’s the perception that people have because they see me doing something that from their perspective, from the perceived security of a job seems risky, and I get that.

Henry Lopez (03:45):

I understand that, but I can tell you, or I don’t have to tell you that a job is just as insecure in some respects as having a small businesses, and the way that I look at it is at least I’m in control and it’s up to me whether I succeed or fail as opposed to being at the mercy of a corporation that might decide tomorrow that I’m no longer needed. So it’s really a mental perception. It’s a mindset, this concept of risk. Now I’m talking about the emotional risk of it. Certainly there’s real financial risk, and that’s why I always ask people when they’re contemplating a business venture, when they’ve planned it out and they understand the scope of what they’re starting with, the question I always have people ask themselves is, if this business fails, I give it my best effort and a year or two years from now, I have to shut it down.

Henry Lopez (04:32):

What’s my worst case scenario? If the answer is that we will go homeless and they’ll have no money for the kids to go to school and I’ll have to really struggle to put food on the table, well then the risk that you’re taking upfront is too big. You need to scale down and take an MVP approach or a scaled iterative approach to what you’re building, and that’s often a common mistake I see people make is they want to start with the full blown vision of where they want to get, and instead, they should probably scale down and get started smaller and then grow over time, but most likely, as long as that’s in check, as long as that risk or exposure makes sense, then really the biggest risk is the risk of the embarrassment of failure, that personal embarrassment of failure, and that is a real thing.

Henry Lopez (05:17):

I get that none of us like to fail, and certainly if you’ve never taken the chance or taken the risk, that can be a really daunting thought, a paralyzing thought that you’ll have to tell everybody that matters to you, that great idea that you were so excited about, you had to shut it down. That’s a hard thing to do. I get that, but we must get over that fear. If you’re going to be a business owner, you have to accept that there is a probability for failure, but move forward in courage nonetheless and shift your mindset that perceived security that you have in your job. It’s really just a perception, at least for most of us. I know there are exceptions. You may have a great career, and so it may not even be about that, but I just want to start with that, that most people assume that they have a job for life and that’s just not the case in most situations.

Henry Lopez (06:08):

So let’s dig a little deeper into some of the common reasons why people stay in a job or in a corporate career and don’t ever take that leap or that chance or that move forward to start their first business. And these are some of the things that I had as reasons as well before I transitioned into full-time business ownership. We talked about the fear of failure and uncertainty, and so that’s a given. You might think, well, at least I know what to expect every two weeks. I’m going to have a steady paycheck and I know I have benefits that are paid for and they’re good benefits, and those are all real things. You can’t argue with that. In fact, that’s one of the biggest things that people underestimate is allowing for and budgeting for. How are you going to replace that income, at least in the first year or so of the business startup, and we’ll come back to that point because it is critical.

Henry Lopez (06:59):

You have to cover for that, you have to account for that, but we might have stock options or a great salary or great upward mobility, so those things are hard to leave behind. I get it. When I started my first business back in 1991 with a business partner, my friend Renee, he ran the business day to day. We paid him a salary, but I kept my day job in part because that business model could not support both of us making enough money from the business, and I was making very good money fortunately in my corporate career, and so I spent most of the nineties, in fact, all of the nineties doing both things, having businesses on the side and keeping my full-time job. I could never get that business to the point where it could justify or compensate me equal to what I was making in my corporate job.

Henry Lopez (07:43):

It’s hard to walk away from that money, especially when there’s no assurances. There’s are no guarantees that we are going to be successful. If you work for a large corporation, we feel a sense of security that that business is going to be around for some time, although certainly again, we’ve seen in recent history that that may not be the case If we think back to 2008 when some of the largest financial institutions that have been around for, gosh, probably a hundred years or more failed, so it can happen and it can happen even when we don’t think it can happen, so there is that exposure, but certainly there’s that confidence that space somewhat in reality that that paycheck is steady and will be steady for the foreseeable future. I think the other thing that holds us back is you have no clear idea or plan for where to even start and that’s legitimate.

Henry Lopez (08:34):

I don’t think you should start a business if you just have a half-baked idea and haven’t fleshed it out and figure, well, we’ll just get started and figure out as we go. That’s a mistake. Now, on the other side of it, I don’t believe in over-planning, which I have a tendency to do, but you do need to have some level of a plan that’s been vetted, that you’ve gotten input on, and most important component of that plan is the financial projections. You might have family and financial obligations related to that family or may not even be financial. It could be time obligations, and so right now you may not be able to afford that sacrifice of time. Maybe you’ve just had children or your children are young or whatever the case might be in your personal life, and again, I can’t argue with that. Those are legitimate reasons, but I will say, speaking of kids, I always remember back to when we were having our first child, my wife and I figuring out pretty soon that you’re never ready to have a child, and so similarly, I don’t know that you’re ever perfectly ready to have a business.

Henry Lopez (09:33):

I think you just have to go in it with courage, but sure, the timing needs to be right in that respect. From a personal perspective, if your health isn’t right, if you’ve got significant obligations at home or in your family, then you’re right. I think you should wait and you’re not ready to take on this level of a risk, but be sure that you’re not hiding behind that and that you’re not waiting for the perfect time, which just with trying to time the stock market, it usually doesn’t work, right? I’m always asked, is this a good time to start a business? And I always quote Dickens, as much Dickens as I know, which is it’s the best of times, it’s the worst of times. I think that’s the way it goes, and what I’m saying by that, sure, there are obvious things. Going back to the 2008 financial crash.

Henry Lopez (10:18):

If you told me you were going to start a mortgage brokerage or something related to mortgages or even real estate, I’d say you might want to wait and see how the dust settles here during COVID. If you told me I’m going to open a restaurant now, that would’ve been obvious. Bad timing, right? But other than those things, it’s so hard. The thing that I’ve been hearing for five years now, oh, we’re going to go into a recession. Well, maybe we are, maybe we’re not. The thing is that if you keep waiting for the perfect timing based on outside factors, on exterior factors on the economy, as an example, you’ll never get launched. There’s also, of course, imposter syndrome, and I’ve spoken about this in various recent episodes because it is such a real thing. I still suffer from it at times. Who am I to run a business?

Henry Lopez (11:01):

I don’t have the experience or the background, and so you might tell yourself that, but the reality is nobody had that experience or background when they first did it, and plenty of people do it. You’re smart enough, you’re capable enough, and I’ll chat about in a moment, a lot of the skills that do transfer from your corporate or job experience to owning a business, so it’s not like you’re throwing it all away. There’s a lot of knowledge and experience that you’ve built there that does transfer, but you’ll educate yourself. You’ll get help or your partner with someone who does have that experience. Going back again to the example of my first business venture, which was a pizza delivery franchise, I had no idea how to make a pizza. I still don’t, but my partner, Renee did. He had worked in that same franchise system through high school and through college, and so he had that experience of operations, plus of course it was a franchise, and they helped us with training and recipes and so forth so that we could do it even without having any experience.

Henry Lopez (11:59):

You might also be not in a position to give up that routine and that structure because one of the biggest challenges in transitioning from a structured environment like the corporate world or maybe a military career is in the business world, there is nobody telling you what to do next. There’s nobody holding you accountable except for you and perhaps a business partner. It’s up to you. You’ve got to decide to get up every Monday morning and go do what needs to be done, whether it’s selling or delivering or making it, whatever it is that you’re doing, you’ve got to do it. Nobody’s going to be there to force you to do it or encourage you to do it. You’ve got to be accountable to yourself. You’ve got to embrace wanting to do that, and if you depend on and rely on somebody else giving you those marching orders, you’re going to struggle if you’re always exhausted because you just don’t have enough time in the day or enough energy, maybe that’s because of your job and that’s one of the reasons you’re looking to get out of that job, but maybe it’s health reasons or other challenges as I mentioned earlier, other commitments that you might have that you cannot sacrifice.

Henry Lopez (14:17):

That fear that’s very persistent is that fear of failure and also losing status or starting over. You’ve earned that title, you’ve earned that position through hard work, education perhaps being dedicated, and now it feels like you’re going to throw that away and to some extent you are, but I will say that going back to my question about what’s the worst case scenario with most people, I’m not saying this necessarily applies to you, but think about it. If a year from now or two years from now you had to go back into the job market, most people will answer that, yeah, I can get another job. That may not be that same position, but you can get another job in that field and leverage that experience. So again, that minimizes when you think about it that way, the exposure of having to go back to what you were doing before, it’s not the end of the world typically.

Henry Lopez (15:08):

So let’s flip it here and talk about some of the things that I do think can carry over from either your job or your corporate experience. Now, obviously if we’re talking about the trades and you’ve been working as a technician, an HVAC technician or an electrician or a plumber or something like that for someone else, and that’s the business that you’re starting, well, then obviously all of that translates that knowledge that you have now of how to do the craft, how to serve customers, all of those things, of course transfer. What you may not have is the knowledge of how to run the business, how to manage the finances, how to get the funding, but you can learn all of those things, and if you’re in one of those positions now and you don’t think you’re quite ready, then I want to challenge you to absorb as much of the knowledge as you can to learn to ask questions and learn the business side of things in addition to the technical side of what you’re doing.

Henry Lopez (15:57):

But if you’re in the corporate career or in a job, other things that are transferable, communication skills, as with anything in life, and it definitely applies to small business, the better communicator you are, the more likelihood of success, whether it’s in selling, whether you’re formally selling or simply selling the idea or selling your team on why you’re doing what you’re doing or inculcating yourself into community communication is key. As you lead your team, as you train people, as you inspire them to do the work that has to be done as you communicate to them the importance of delivering great customer service, that is something that a great communicator and then a great leader does. So those skills that hopefully you’ve developed or if you have developed those, translate those come over. If the job that you were in had any kind of budgeting or project management, those are skills that definitely transfer.

Henry Lopez (16:52):

If you’ve got strong discipline and in particular as it applies to time management skills, that’ll be a huge advantage to you in your business career. As I mentioned a moment ago, you’ll have nobody holding you accountable except for yourself and perhaps a partner, so you must have the discipline and develop or leverage the time management skills that you have so that you can get the most out of each day that you work on the business. If you have any experience with systems, either developing systems or implementing systems or that accounting component of it or anything in that realm, all of that will transfer and be applicable to running your business. Also, your professional network might become a source of referrals or it might be a way to get started depending on the product that you’re offering. Of course, you have to be aware of conflict of interest or non-compete agreements, but that network might prove valuable depending on the business that you’re getting into, so that corporate experience in addition to those skills that are transferable because they’re generic, they’re general in nature.

Henry Lopez (17:59):

It also, I think if you’ve come from a lot of job experience and career experience and you’ve been successful in your job, you’ve probably built resiliency, you’ve developed a level of professionalism. Hopefully you’ve been educated and have learned how to do strategic thinking. All of those also are skills and traits that transfer to being a successful small business owner. I have a great quote related here from the book Escape from Cubicle Nation by Pamela Sim, and she says, related to this quote, your corporate experience is not a liability. It’s your greatest asset. Now, that’s not always the case, but I think that more than you maybe have thought about does translate and does make you capable certainly of being a business owner. Now, let me share with you some more practical strategies to navigate that transition from a job to becoming a business owner. As I said already, you want to reframe the risk.

Henry Lopez (18:59):

A job is no more of a guarantee perhaps than a business. Now, certainly business can be risky and certain business segments are particularly risky. The restaurant category in particular is high risk, but I think that if you look at it from the perspective that it’s up to you, if you believe that you can get it done and you take the right steps and you have confidence, then through courage, you develop that confidence to do this and you give it your best shot. I don’t know that that’s any more risky than being at the mercy of somebody else, your boss, the corporation, the board of directors, the markets at large dictating how long your career will last. You want to though create a runway, and again, as you’re planning, depending on what stage you’re on, but as you get into the planning stage of a business idea, the thing again, as I said that a lot of people overlook is well, they’re delusional in thinking that the business is going to immediately compensate them at a level or close to what they were making in their job, and that’s just usually not realistic.

Henry Lopez (20:07):

So you’re going to need one way or another about six to 12 months. Typically, that’s just a general range. Every business is different, but I found that for most small businesses, it should be about six to 12 months what you were bringing into the household that the household needs to live on. You need to have that put aside in savings, separate from the business, the business needs its own working capital or savings, and of course the startup expenses. So that number sometimes can be significant and that might well be what keeps you from ever being able to make the transition, which then ties to, and I won’t get too far off into this tangent, what sacrifices are you willing to make or are willing to start making to get your personal finances in order so that you can make this transition? You want to start to think about building your team as you get into the planning phase, A CPA to help you with determining things like the type of legal entity and validating perhaps your financial projections and attorney at some point in particular, if you’re going to be in partnership with someone and a mentor or a coach.

Henry Lopez (21:09):

That’s one of the things that I offer is one-on-one coaching and accountability programs, and so I help people through this transition all the way through launching and growing a business. So if you’re interested in perhaps engaging me as your business coach, I invite you to go to my website, the how of business.com, and click on the schedule an appointment or schedule a free consultation link. That’ll be at the top of the page, and what that’ll do is that’ll schedule a free 30 minute consultation with me. We’ll talk about what you’re thinking about and where you’re at in the process. I’ll share with you how my coaching program works and then we can determine if it’s a fit or not. So go to the how business.com, and if you’re looking for or thinking you could need a coach, schedule a free consultation with me. I’ve mentioned this already, but I love this way of summarizing things related to business success.

Henry Lopez (21:58):

You need to plan to succeed, but also be prepared for failure. Now, that doesn’t mean that I’m looking at things ready to fail. I don’t want to fail, but I am realistic that things could fail, and when people ask me, is this a business that makes sense or that is going to succeed? I have no idea. I can help you with navigating and avoiding some of the obvious things, but I don’t know. There’s a lot that comes into play in determining if a business is successful or not, including a little bit of luck. However, we cannot just plan on luck and we cannot just jump in blind and be completely optimistic that things will work out. You must develop a solid business plan, and that business plan must include solid and validated financial projections. I believe in starting small and in iterating so that you minimize that exposure and then you grow over time as the market validates that what you have to offer, they’re willing to pay for.

Henry Lopez (22:54):

The mindset component of this is the most important part. In some regards, you want to think beyond of course, the perceived security of the situation you have now and realize that the money is important of course, but there’s other things that small business ownership has provided for me and that it’ll provide for you. Autonomy, fulfillment, flexibility, all of those things are critical and were enough of a motivator for me in addition to money to take that leap to leave the perceived safety of the corporate world and leap into business ownership. Reed Hoffman has a great quote here. I think that makes a lot of sense, even if it’s a little exaggerated. He says, an entrepreneur is someone who jumps off a cliff and builds a plane on the way down. I don’t completely agree with that, but I buy into the sentiment, which is at the end of the day, you can do all of the analysis, all of the preparation, all of the business planning you want, and you still have to take a leap of faith.

Henry Lopez (23:51):

There are no guarantees, and perhaps that’s why a lot of people in the corporate world, as I did early on, is you start with a side hustle, a business that you develop on the side, but you keep your full-time job and for a lot of people, a lot of you listening who have a job now have a career that might be what makes most sense. In fact, a lot of people are starting to explore this with necessarily no intention of leaving their jobs anytime soon, but beginning to diversify and develop other streams of income and hedge against what would happen if I did lose my job or if I did want to leave my job, what would I fall back to? So you don’t have to always feel pressured to quit your job immediately if you’re not ready, you can use the side hustle either to test your idea to get started, or there are businesses that are exclusively developed as side hustles.

Henry Lopez (24:40):

There are franchises that are developed and designed exclusively for people who will keep their day jobs, but run the businesses on the side probably with a manager running it day to day. So franchise side hustles are a great opportunity to explore. You still benefit from all of the advantages of a franchise like the brand, the systems, the training, but there are again, franchises that allow for semi-absentee or part-time ownership, and sometimes those, again are structured as an easier step for you to make that transition from full-time employee to starting to be a business owner and eventually perhaps full-time business owner and entrepreneur. Here are my key takeaways for you for this episode. If you’re making or thinking about making that leap from employee to entrepreneur, it’s hard. It’s challenging, but it is possible and you are capable, and I would want you to think about that.

Henry Lopez (25:34):

Often, what holds us back is the mental or emotional things that we’re holding onto that keep us from taking that leap. Yes, there are some real risks, and so if you will keep that at the right scale, if you’ll start with the right size or version of a business or perhaps a side hustle, you greatly minimize that. So the experience that you have and have been developing, it does transfer, a lot of it really does transfer, and there are pieces of it that you don’t know yet, but that’s where you either learn or you get help or you partner, or perhaps that’s why a franchise might make sense either way or regardless of which path you take, whether it’s a side hustle or a full-time business that you’re going to leave your job for. Start small, validate the business model and then grow over time and always ask yourself that question, what’s the worst case scenario here?

Henry Lopez (26:25):

If you’re at the business planning stage or approaching that, then I want to challenge you to finish that business plan, get help with completing it, make sure that you put some numbers to it, that you create a financial projections as part of that business plan. Get help. Get help from a coach like myself, a mentor, a franchise consultant, another business owner that you know who’s been through it and has done it. Get that help and input, and when you’re ready, take that leap of faith because nothing is guaranteed, and at some point, no amount of extra analysis or planning or trying to time the market or your life will necessarily ensure greater success. If being your own boss is something that you just have to do, you must do it. Your why is strong enough, then don’t keep talking to yourself out of it. Don’t keep searching for excuses while you’re not ready.

Henry Lopez (27:20):

Get ready as I’ve laid out for you here in this episode, and as you probably already knew, and then take that leap of faith. Don’t be one of those people that remains on the sidelines, talks about it, and then eventually will regret never having done anything. You can do it. You can make it happen. This is Henry Lopez, and thanks for joining me for this episode of The How of Business. I wish you the best as you start and grow your successful and profitable small business. I release new episodes every Monday morning, and you can find the show anywhere you listen to podcasts, including the How a Business YouTube channel, and at my website, the How of Business.com. Thanks for listening.