Transitioning from an engineer to an entrepreneur

Are you an engineer that wants to build a meaningful technology company, but don’t know where to get started? Do you know what are the best practices, strategies and mistakes to avoid? How do you plan on getting started on your entrepreneurial journey? How to find talented people to join your organization? What are the financial concepts that you need to understand? What is it really like to build a successful company?

Most engineers have the desire to become an entrepreneur at least once in their career. The motivation to become a businessperson usually starts with the thought, “I have a great idea and I think this idea would make a great business.” To start a business of your own, all you need is a patent, a pile of money and someone willing to manufacture the product or establish your service offerings. However, unfortunately, it is not really that easy.

As someone who has made plenty of mistakes along the way to becoming an entrepreneur, I’d like to share my experience of some of the drawbacks I’ve encountered.

My entrepreneurial journey was self-funded. During my short-term exposure to the industrial world, I felt uncomfortable with the long-term outlook of job stability as an advance-development engineer in the field of power electronics. This field was, in reality, new at the time, when good jobs were scattered throughout the country. I started out moonlighting as a consultant, developing a product that I could not afford to market, and eventually became a full-time consultant with an emphasis on contract research and development. Finally, I became a manufacturer with my own product line. With each twist and turn, I made my share of mistakes and had to learn new skills to survive—both in technology and in business. It took years to understand the ins and outs of running a business. Reinvesting in the business and myself was always a first priority. Even with ample opportunities to obtain cash infusions, I always felt ownership was the greatest long-term reward.

With the experiences I’ve had so far, I’d like to share with you the tips and tricks which may help you in making your transition from an engineer to an entrepreneur smoother.

When you are venturing out on your own, the first step is not that you have a great idea, but that you have something to tell. This might be against your engineering instincts and a difficult hurdle. Say, you have a product which you think is great and may actually be great. However, it can be worthless if there is no one to buy it.

A competitor analysis is quite important. If your product is not better and less expensive compared to your competitor, then there are many chances that you might fail. A great product idea or business, whatever your vision, expect tough competition. There are many other smart people out there who may have greater resources and talents. Understanding your competition and finding out ways to compete with them are important steps to survival.

I don’t want to scare you, however, starting a business of your own from nothing is a scary move. Overnight, you become totally dependent on yourself, with very limited resources. However, it is important that you believe in your vision.

A very common funding method is to partner with a venture capitalist who is ready to take the journey with you. This offers a minimum short-term risk poor long term rewards. The reason is obvious: You are asking someone else to gamble with his or her investment funds and not yours. There are also some secondary effects that are often overlooked in using this mode of funding. Firstly, you may miss out on some important learning experiences in your successful transition from engineer to entrepreneur. This is because usually, it takes a few hard knocks to understand what an engineer does not know in the business world. Secondly, if you do not spend your money on your own, it can be very difficult to spend money wisely. Many a times, start-up funding disappears quicklyand a secondary round of funding is required. And this secondary funding does not come for free; company shares can get diluted very quickly, weakening long-term rewards if the start-up venture is successful. Venture capitalists want to see quick growth in start-up ventures, hoping to offset losses in other ventures that have failed.

Family and friends are another way to secure your capital. If you take this path, you place the risk on people you know and trust and have with whom you have long-term relationships. However, while such a funding means can be gentler than that obtained with venture capitalists, failure may produce negative feelings with the people you care most about.

The third option you have is self-funding. It is the highest risk method to getting the venture started. If you believe the idea is a sure winner, then you should go ahead with this. I have asked many would-be entrepreneurs about taking the self-funding risk.Only a handful of them were willing to take the gamble. The long-term benefits of self-funding offer the highest reward and greatest control over your future.

No matter what funding is used, the initial years are going to be very tough. It is during this period that most businesses fail. You logical and methodical training can get virtually useless and if you have any past industrial experience, it can actually be a hindrance if your business focus depends on what you have done in your past and not what you want to do in your future.

Your question always has to be “What am I going to sell and why would someone want to buy it?” Starting your own firm with with only the thought of “This is what I want to do or what I can do” or “This is the great product that I want to develop” is a sure path to failure. From the very first day, you should plan on making a profit and how to deal with the obstacles that may come your way while making that happen.

The first lesson that I learnt in the business world is that not everyone plays by the same set of rules and some of the new experiences may be viewed as ruthless. Never expect anyone to play fair because they will not. When you write a business proposal, tell your prospects what all you can offer them rather than how you plan on doing it. Learn how to anticipate down falls even before they happen.

My advice for you would be to think based on experiences rather than logical and methodical problem-solving. Your potential clients may view your new business as fragile. So, be prepared to do what it takes to land your first clients even if they may not be high paying clients.

Let us assume that your business gets off the ground and you are breaking even. The next big hurdle is hiring your first employees. This can be quite a challenge. When you are a small organization, you will have to compete with larger companies which may offer better security, benefits and salaries. Honestly, the best way I have found to deal with this hurdle is to try and understand the motivating factors of the employees by using their point of view.

The point of this blog is not to scare you off, but to make you aware of how you must readjust your thinking to make the transition from an engineer to self-employed business owner.

Having been in business for quite some time, and having dealt with many of the issues described in this blog, I am happy with the rewards for the many sacrifices I have made to become an entrepreneur. I am still enthused to go to work and eager to face all those unexpected challenges. I wish all would-be entrepreneurs the same success in their journey.