7 Hard Lessons That Turn Entrepreneurs Back Into Employees
Entrepreneurship is not a profession. Most people who identify as entrepreneurs today really don’t like it. If you give them a good offer, they will gladly sell and become employees.
African countries have some of the highest numbers of entrepreneurs relative to their population. While some people hail this as the tenacity of the African people, the truth is that many are in it because they can’t find a good job.
The media glorifies entrepreneurship because of the few people who are very successful by it. But there is also the case of the 9 out of 10 that fail every 5 years. It is a tough world out there. But some people seem to be trapped illusion of easy success as an entrepreneur.
The possibility of huge success lure employees to take a chance at entrepreneurship. They read books, listen to podcasts, maybe attend a few seminars and take the leap. And the result unfolds with time.
Some become successful. Many struggle and continue to hold on until they can’t anymore. Many go back to being employees if they can.
The interesting part is that they may hate employee life before becoming an entrepreneur. But after a few years, they wish for the employee life again.
Here are some of the hard lessons that give them this turnaround:
1. Living Expenses is No Joke
When most employees or unemployed take the plunge into entrepreneurship, they usually have savings to back themselves up. Sometimes it is a financial instrument like a mortgage. The plan is to use the money to build the business and take care of living expenses.
The only trouble is that people don’t know how expensive their lifestyle is until they are out on their own. This is especially in the big cities around the world. All of a sudden you need to start monitoring what you do with every cent. Then you realize how much it really means to get by.
This becomes an object of worry when the savings are running out. It becomes super worse when you are the breadwinner of a family. It is not about you anymore, instead, it is about those their livelihoods depend on you.
People often underestimate their living expenses. But it is one of the first things that hit them hard when things get tough. You see things you used to do but cannot afford anymore. You see your friends continue a lifestyle you cannot afford to live anymore. Not everybody can bear that pain.
2. Admirers are Not Buyers
People: Oh, it’s very nice
[Entrepreneur makes a lot of it to sell to them]
People: I don’t really need it now. Maybe later
We are all guilty of this. I am sure you have done it for a business one way or another. Maybe you even did today. We admire the product and we don’t buy. The more interesting part is that we are never going to buy it.
I once told a storekeeper I would be back for a something in his store I admired. He was angry as I left. He said I should just tell him I am not buying. I felt his pain. I really thought I would come back soon to get it. But lots of things happened and I relocated from that city not too long afterward.
Humans admire a lot. Never interpret that as an interest to buy. Many fresh entrepreneurs do not understand this. So they create products or services for imaginary customers. And then they learn the bitter lesson that admirers are not buyers.
This hard lesson can be avoided with a simple sales tactic: preorder. If they really love the product, let them preorder it. And then they must pay a certain percentage to make the preorder valid. That is how to separate the mere admirers from the buyers.
I love what Tesla did. After they unveiled the Cybertruck, they made it possible for people to preorder it at just $100. So, the company is not looking at how many people praised their design and innovation. They are only focused on those who have preordered it.
3. Investors are Not Your Friends
Investors are not friends. Rookie entrepreneurs think of their relationship with investors as one embedded in friendship. And it is totally not.
Investors are in for one or both of these two things:
- To make more money or hold the value of their money in a good asset
- To bet on a future trend because they believe in it
If an investor thinks of you as a friend, you will never get money from that person. It is always about them putting money into more things, to make more money. Or to bet on something they believe in and don’t mind losing money on. That thing can be you as an individual, it could be a technology, it could be a product, a system, etc.
There are investors that come in for the second reason and stay (long term) for the first reason. The vice versa is also valid. There are also those who maintain their initial reasons. The point is that none of this is about friendship. If you negate their reason for investing with you, they will not hesitate to throw you under the bus. They can do this by pulling out their funds or taking the company away from you.
I have heard a lot of stories on hostile takeovers. I am talking about takeovers where the founder gets zero or next to zero. It happens a lot. When this happens some entrepreneurs just get humbled and go back to being employees.
4. Publicity Doesn’t Equal Customer Acquisition
Maybe you have seen some of those startups that begin by blowing money on ads everywhere. There are TV ads, internet ads, Billboards, and the likes. And then they get a lot of traction but very few customers are acquired. In the end, the amount spent doesn’t justify the sales made.
This leads to running out of money. And when a business is out of money and there is no reasonable income, the end is near. More publicity won’t bring in more customers. I have explained before this using a billboard ad. Publicity is part of marketing but there is so much more to marketing than publicity.
Ordinarily, it would seem that if you make a better product and advertise it (like the big companies do), you would outsell all the competition. But many learn that this is not true the hard way. There are lots of better products and services that have failed.
Making people buy is art. Entrepreneurs that do not understand the significance of this art go back to become employees.
5. The Competition is Always Unfair
People expect a business game to be fair and square. Perhaps because of what they have been taught in school. But in the real world, games are rigged and competitions are unfair.
An example is an entrepreneur who brought a unique product to the market but didn’t file for the patent early enough. A wise competition secretly filed for the patent and got it. Then they produced their own version and sued the original company who started it.
It is painful but it happens. The competition is not going to be fair. There are companies that love to prey on young businesses. Beating them takes a lot of courage. Many entrepreneurs simply do not have that courage, especially when they have made a mistake at the start of their business.
The fortitude to fight competition is not something a lot of people think about when they become entrepreneurs. They soon go back into wishing they could just create without having to deal with all of that. Thus, the move back into employee life.
6. The World Doesn’t Like Change (And Moves Too Fast)
The world is an interesting place. One moment everybody is buying your product, the next moment it is obsolete. Meanwhile, the new thing people are into was introduced to them by you 2 years ago. Nobody liked it. But now, they are all buying it. The world is just like that.
The world doesn’t like change. But when it moves, it moves very fast. There is no prediction that is set in stone. People who predict the future often lose a lot. This is because even the fundamentals that their assumptions are based on is subject to change. The patterns are too unpredictable.
One moment you land a huge client, the next moment you lose the 2 clients responsible for 75% of revenue. It doesn’t have to be something you did right or wrong. The clients could be moving office or they could be merging with another company. This level of uncertainty pushes entrepreneurs to the edge and make them reconsider the employee life.
7. Getting Acquired is Success Too
Most entrepreneurs are still entrepreneurs because they haven’t gotten a good offer. If you are offered 4 times your revenue today, would you still hold on? Some entrepreneurs even regret rejecting an offer.
One of the subtle realizations by entrepreneurs over time is that getting acquired is a success too. Most people choose an idealistic view of entrepreneurship. They often realize too late that it is success to be acquired also.
There will be interested buyers when the company is going up. But when it starts dropping, the buyers will name ridiculous prices because they now have the leverage.
Smart entrepreneurs sell at the peak of business and walk away. Some get acquired and become employees in a bigger company. Those in the worst category are those who had offers (but rejected all) and ended up bankrupt.
Getting acquired and going back to being an employee is not a bad thing at all. But many do not realize that until too late. Some eventually do this, but on less favorable conditions than if they had realized it way earlier.
There are several other reasons entrepreneurs go back to becoming employees. But these above are from lessons learned the hard way.
I hope you don’t get too stubborn and relearn these same things the hard way.