Mistakes employees make in rush to launch own ventures

Eight years ago, two men met in a hotel over a usual cup of coffee and planned to start a business that would change their fortunes forever. Although their age differences qualified them to be a father and son, they were both equally worried about their future prospect in employment.

Joe, in his late 40s, was working for the government and although job security was not an issue, he felt retirement was fast approaching and he needed to start a business to take care of his financial needs but did not know where to start. Mike, 26, a sales manager in a family owned business, felt that although his job was well paying compared to most of his peers, job security was not guaranteed.

Last week, Joe shared with me how a couple of meetings led to the establishment of a joint venture that they hoped would lead to financial stability for both men. But as things turned out to be, it was the beginning of his downfall.

Mike had a bright idea. Being the head of sales, he was privileged to establish relationships with clients who he could easily persuade to do business with him, once they started a similar business. Joe did not know anything about the business but he would provide capital and moral support while working before the business picked up.

After incorporating the business as a limited liability company equally owned by both, it was agreed that Mike should resign immediately and start the ball rolling while Joe would continue working until retirement when he would join him and do any appropriate jobs since he would not know much about the business.

They pumped in their savings and supplemented the money with a bank loan taken by Joe using his pay slip as security. Everything went as planned until eight months later when they started running out of money. Mike had only managed to get a few clients and bills were piling up.

Joe got impatient and started pushing Mike to deliver as he had no more money to inject into the business since he was still repaying the bank loan. mThree months later, the pair parted ways after a bitter fallout.

Joe blamed Mike for pushing him into debt and casting a shadow on his retirement plans. Mike blamed Joe for convincing him to leave his promising job and pulling out of the project midway.

This is just one of the many cases of people who venture into businesses, either as individuals or in partnership, without proper plans. It is clear that this business was destined to fail from the start.

First, the pair did not have adequate business knowledge. They did not have a plan of acquiring and offering unique products.

It is a common misconception among most workers that employers are mean and they don’t get returns commensurate with the services rendered. The majority think that if they left, their employers’ customers would follow them wherever they go. This is hardly the case.

There are a few cases of employees who left their jobs and started a competing business successfully. However, these are isolated cases. The majority fail or only succeed after learning hard lessons.

Before starting a business it is important to have a well thought out plan of acquiring and retaining customers other than poaching from your former employers. In most cases customers are loyal to the company brand and not employees.

As a cardinal rule, never start a firm or invest in a business you do not understand. Always put your money where you have control.

Mr Kiunga is the author of The Art of Entrepreneurship: Strategies to Succeed in a Competitive Market. [email protected]