How many of us have heard advice during this recession to start a new business, go back to school or change careers completely? Perhaps taking these paths less travelled will be all that we hoped for, or perhaps not.
In my occupation, we talk to people each day on a search for the right path. A recurring theme of late is the notion that extraordinary times require an extraordinary response to take the path less traveled. There is an ‘energy’ among some people that the time is right to do things you wouldn’t have dreamed of or hoped for during the old days of lore. Let’s review some of these alternate paths and some of the pitfalls of which to be wary.
Going Back to School–
While education is always a positive in a person’s life, some expectations are ill conceived.
- Enhancing a Career- When considering a new degree or finishing a degree, consider if this new achievement will take your career in a new direction or if the degree is an enhancement to the career path you’ve been on for years. An enhancement to skills accumulated over years in the workforce is a wonderful thing to do. It may increase your chances of getting that new job or the promotion at your current company. It can strengthen your resume and your outlook.
- Changing Career Paths- If you are obtaining a degree in a new field where you have little or no practical experience, it may come with some costs.
The career you begin will truly be a new career and as such the salary will be that of entry /mid level. You may have 10 years experience in one field or industry, but only modest value will be placed on that in your new career with your new employer. Therefore, be prepared to truly start all over again, both in terms of salary and career level.
Real Life Examples -We recently had a person with 10 years high level finance experience obtain a law degree and wish to pursue that field. While accounting and law frequently complement each other, there will be a time when you will be an entry level attorney learning the ropes with all recent graduates. If this is the path you choose, be mindful that it may take several years to get your salary back to the point it was when you decided to change careers.
I am also aware of a talented person whose focus was on banking. This person decided to study and obtained their CPA and work at a regional CPA firm. However, it came as a surprise the salary was approximately the same for this accomplished banker as it was for a recent college graduate. While I believe this person may be able to rise through the ranks faster by calling on their years of experience, there are basic audit techniques to learn and master….at the entry level pay scale. Therefore this person will have several years at a much reduced salary while learning the ropes.
- Planning School around Work or Work around School- It is important to consider your priorities. Is your priority finishing the last year of a degree or obtaining another degree? As such, are your savings enough to afford you the opportunity to lay out of the workforce for a year or so while having this additional educational expenditure? Or are you going to school part time and keeping the work day available for your career as you continue to look for work?
Starting a Business–
Just as you hear advice about going back to school during this recession, there is just as much talk about starting a business. There is a lot to consider in this venture and one must think through the capital requirements and lack of salary for a few years as a major factor in your decision.
Small businesses are the backbone of America employing nearly half of the private sector workforce. To make that statement even more powerful, ‘small business’ is defined by the government as having 500 or fewer workers.
The failure rates are worth a mention when it comes to starting a new business. Many factors go into this rate depending on the industry or geographical location etc. Overall, according to Scott Shane, author of Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investor and Policy Makers Live By, only 29% of businesses will survive 10 years and only 45% will survive after 5 years of business. Also, according to Wells Fargo/NFIB Series on Business Starts, over the lifetime of a business, 39% are profitable, 30% break even and 30% lose money, leaving 1% unable to identify. While being your own boss may sound sexy, obviously the data shows it is very difficult to be successful in the long-term while maintaining profitability.
If life has handed you lemons and you’re currently out of work, this may be a good time to start a business IF…
- You have saved enough to support your lifestyle for a year or two while you start this business. Don’t expect salary and profits for quite a while.
- You have saved enough as capital to start this new business or will be a good candidate for a new business loan….and are willing to take the risk. Banks will be more hesitant to loan money to new ventures in this market.
- You have studied your product/service and related competition for a good long while and are sure you really have something special.
- You have done your homework and have a Business Plan, Marketing Strategy, etc. to properly estimate the cash flow needed the first few years.
Starting a business is not something to do on a whim. It could make being unemployed even worse if you spend through retirement savings or keep yourself from earnings for an even longer time. Also, starting a business can be wonderful if it is your passion, you have done your homework and are properly capitalized before jumping in and you are willing and able to assume the risks.
Best of luck considering the pros and cons of the ‘fork in the road’ you may choose!