Business can make you very rich very quickly. If you look around, some of the richest people you know have made their wealth from entrepreneurship.
This has caused many people to jump from employment to business in a quest to get rich. Many of them have failed. In Kenya, data from the Small Business Administration shows that 1 out of every 5 businesses fail within the first year.
Half of those that survive fail within the following five years. This high rate of failure is one of the reasons why you should not dismiss employment and switch to entrepreneurship blindly. In fact, there are ways that you can make employment work for you.
Change your mindset
Change your mindset for employment to start working for you. Arese Ugwu the author of ‘The Smart Money Woman’ recommends that you adopt entrepreneurial thinking in your 9 to 5 job.
“Mark Zuckerberg started Facebook but Sheryl Sandberg was the Facebook chief operating officer who brought structure to its operations. It’s okay to be Sheryl Sandberg too instead of trying to become Zuckerberg only,” she says.
Ms. Arese adds that a change in mindset will demystify the myth of entrepreneurship as the only way to make good money and live a comfortable life.
“In the past, we had favoured employment over entrepreneurship and now we force-feed and sell the myth that the only way to become rich is to become an entrepreneur. This is why many people are starting subsistence-styled businesses with zero structure and low ability to scale,” she says.
Your career
Your wealth portfolio will only be as good as your career. In employment, money and salary increases are fueled by value. The more value you give your employer, the longer they’ll pay you, and the higher your chances of getting a salary increase will be. Prioritize your career growth, value, and returns on the salary you’re paid. Move up the job scale.
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“Don’t be too comfortable in one position or pay rank in the name of preserving career longevity. Be valuable, exhibit value, and negotiate for better remuneration,” says Perminus Wainaina, the managing partner at Corporate Staffing Limited. “Get a combination of being good at your job, consistent delivery of high performance, a good profile of yourself, and an appealing presentation of your abilities.”
If you are good at what you do, your career and position at work can give you extra opportunities to earn. These include your personal brand which you can sell as a side hustle.
Where does your money go?
If you receive your salary on date 30, do you know where the money goes to within the next 30 days? To get a clear answer, you need to carry out a lifestyle audit to determine what you spend your money on and what you are left with.
“I had more needs than money in the early years of my career. I wouldn’t save or invest because I was waiting for more money to show up. This changed when I learned the power of tracking expenditure,” says Mutindi Muema, an advocate in Nairobi. Create a personal balance sheet, profit and loss accounts for a year, and calculate your net worth.
Get smart with your salary
It is not about how much money you make but how well you spend what you make. Start living below your means.
“Adopt the silent millionaire strategy. The majority of rich people are silent millionaires. You won’t find them spending tons of money because they save and invest more than they spend. They perfect the art of living way below their means,” says Dr. Thomas Stanley, the co-author of The Millionaire Next Door, a financial lifestyle survey book of some of America’s richest persons.
One of the common money mistakes you should avoid is spending unexpected income haphazardly.
If you get a raise, don’t spend it on things that won’t generate additional income. For example, don’t be too quick to upgrade your vehicle or move to a new neighbourhood. Instead, use the increased percentage to accelerate your investments.
“The strategy is not to deny yourself a good lifestyle, but to ensure you’ll be able to enjoy that good lifestyle in future when your earning power will be limited,” says Raymond Ochieng’ Ogutu, an investment and financial consultant.
Get out of debt
There is good and bad debt. Bad debt is like cancer. It eats up your money and wealth. Get out of any debt that doesn’t bring you any additional income as fast as possible. If you are servicing a loan, talk to your lender and agree ways you can accelerate payments.
For example, if you have a reducing balance type of loan, increase your principal payments to offset it faster and cut down on interest charges. Dr. Stanley recommends that once you’re through with loan repayment, you can dedicate a percentage of the money you were paying to an emergency fund.
Address your retirement
Start planning for your retirement right away even if your plan is to retire in the next 20 to 30 years. Start by identifying the type of lifestyle you’ll want and contrast it with the amount you’ll need to have saved.
“Estimate how much you’ll need and begin with 80 per cent of your present living expenses,” says Godwin Simba, the managing director of Octagon Pension Services. Automate and accelerate your contributions to grow your retirement fund and maximize the impact of compounded interest.
Takeaway: 3 ways to switch to business successfully
Why business
Have a fundamental reason why you want to quit employment for business. Don’t switch to business out of convenience or to copy someone else who’s made lots of cash.
“The majority of those who tell you they made big bucks will only be telling one side of the story. You won’t hear about the debts or the losses they incurred,” says entrepreneur Tonnie Mello.
Partnership: If you can’t do it alone, look for like-minded partners who will add valuable capital to your venture. This means that you might have to sell your idea to angel investors.
Start before you switch
Your chances of failure will skyrocket if you start a business after quitting. Your transition should start way before you quit. “Start a side business, grow it, and only jump once its revenues and cash flow are adequate to sustain the business on its own without supplementary support from you salary,” says business coach Christine Muthoni.
The side business will be the best way to test the waters. Maintain a high level of integrity and ethics when doing this. It’ll be unethical to start a side hustle that is similar to your employer’s business or to steal time and stock for your side hustle.
Desperation
Don’t start a business immediately after losing your job. Ms. Muthoni says that your desperation to start earning again might lead you to bad business and investment ideas.
“It’s not wise to start when desperation is high. Take your time, research or find a professional to guide you, and preferably go into an area you’re familiar with or which can be supported by your networks,” she says.
For example, if you’ve lost your job as a medical doctor, don’t rush to venture into the matatu business.