Do I Pull the Trigger and Start My Own Business? – Part 6: Hybrid Option

If you have been following along in the series, we have covered 1) Personal Situation, 2) Go To Market Strategy, 3) Business Partnerships, 4) Validating Your Concept, and 5) Creating a Budget. Let’s assume you have taken all these steps and decided that for whatever reason, starting your own business is not a viable option. Perhaps you current personal situation does not permit you to take on such a risk or your budgeting exercise illustrates that you do not have sufficient capital.

Starting your own business is not the only way to transition your career to entrepreneurship. In this blog we will discuss the hybrid alternative of transferring from a large company to a small one. This is a way of making a transition to entrepreneurship while decreasing the level of risk.

The decision to join a small business offers many potential rewards:

1. Compensation: By obtaining equity or a robust bonus structure, there is an opportunity to earn more in the long-run than a fixed salary at a large business.
2. Higher Title / Authority: It is very common to receive a promotion when moving to a small business, especially at an early stage. You will be given more responsibilities and the authority to fulfill your job duties. However, this comes along with more accountability for results.
3. Upward Mobility: I will caveat this point with the fact that in a flatter structure, it may be difficult to achieve a title promotion, whereas large companies offer multiple stepping stones. However, in a small business, if you demonstrate leadership and are proactive, you can forge your own path and even potentially carve out new roles for yourself in an unstructured environment.
4. Greater Exposure: It is common for employees in small business to wear several hats and have an opportunity to see more facets of the business. By getting exposure to other areas outside your core competencies, you gain a more holistic understanding of how a business works.
5. Quicker Decision Making: With less bureaucracy, you may find it easier to get things accomplished. You are typically able to respond to changes quicker and be in a position of nimble pivoting whereas large corporations may have several levels of approval to effect change.
6. Greater Control Over Business: In a small business on a smaller team, everything you do has a greater impact on overall corporate goals. Your contributions mean much more and you can see direct results from your efforts. When Fortune 500 companies provide stock options to employees, they very rarely are effective in driving greater performance. It is hard to believe that anything you do as a junior to mid level employee in a large business has any impact on the bottom line. Therefore, in a small business, you can feel a greater sense of achievement with the direct impact you personally make.

However, there are a number of trade offs you should expect to make if you are used to working in a large business:

1. Compensation: You will likely need to sacrifice some fixed compensation in exchange for more upside. When I made this transition early in my career, I took on below market salaries in exchange for equity or a more robust bonus structure. It will be some time before the company is able to provide group benefits and/or a pension plan.
2. Administrative resources: With less administrative support, you may be responsible for aspects of tasks from beginning to end. An early stage business probably does not have an IT department, HR department, or administration assistants. You will need to set up your own computer, complete your own expense reports, book your own flights, and I have seen businesses where the staff all pitch in to take on janitorial services.
3. Unstructured Environment: The reporting structure is still likely a work in progress with unclear roles and responsibilities. There is probably no employee manual or documented processes to help you complete your job. You will need to be creative in finding solutions for areas where you are inexperienced.
4. Unestablished  reputation: As a small business without an established brand, sales become much more difficult. Even bringing on suppliers and vendors becomes more difficult as they question your ability to pay or stay alive.
5. Expense Control: Get used to a much tighter expense budget. Small companies often ask employees to share hotel rooms when traveling and cover more of their own expenses.

As you are likely to make trade offs joining a small business, individuals should do a considerable amount of due diligence before committing. Do research on the executive team and their track record of success. Do you agree with their vision and marketing strategy? Find out if they’re in it for the long-term or if they’re looking to make a short-term exit. What’s their philosophy on people management and where they see you progressing in 3-5 years.

I strongly believe that not only is joining a small business a great way to transition to an entrepreneurial career while taking on less risk; it is also makes a great stepping stone for your own business launch. You will have the opportunity to observe great practices that lead to success and you will be able to observe mistakes early stage companies make that you can avoid. Most importantly, this is a great opportunity to learn about yourself. Do you thrive in an entrepreneurial environment, or are you better suited working in a large structured company?

If you discover the transition to a small business to be too difficult, you can also consider a transition to a medium size company. Growing a business is an evolution, and companies will outgrow the start-up phase and be in a position where they need to implement more structure. Your skill set may be ideal for a company with 50-100 employees that are starting to look into completing process maps or implementing an ERP system, and a medium size business may offer some of the upside of a small business mentioned above.

Entrepreneurship is not for everybody. If you don’t feel comfortable in unstructured environment, there is no need to feel ashamed or think less of yourself. Having individuals who thrive in large corporations is a vital part of our economic ecosystem. However, it must comforting to know that there is a way to find out if entrepreneurship is right for you without having to sink tens of thousands of dollars of your own capital in order to find out.