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Why redundancy can be the ideal start-up springboard

Monday, 27 February 2012 | By Emily Ross

feature-redundancy-thumbIn 2011, Sally Porteous put her hand up for a Voluntary Separation Program (VSP) redundancy from her role as a senior sponsorship and events officer with the Queensland Government.


“I decided I didn’t want to be a bum on a chair doing tasks for someone else anymore,” Porteous says.


She already had experience working part-time in music and event promotions but had never been in a position to dedicate herself to her own business.


“I decided to take the money and take my work to the open market,” she says.


Porteous set up her Brisbane-based events business Red Lanyard in August 2011. The redundancy payment made it possible.


In 2009, lawyer Jacinta Peck* could see the writing on the wall at the property fund management firm where she was company secretary.


“I knew the business was not likely to have a future so I negotiated an exit,” she says.


The payout was not big, but enough to set up her boutique legal and corporate governance advisory service in October 2009.


It was Peck’s second redundancy after taking a payout with a major bank in 2007.


Redundancies on the rise


A significant wave of Australian workers are facing redundancy as organisations including the Victorian Public Service, Qantas, Toyota, Holden, Alcoa, SEGA Studios, University of Sydney, Hydro Aluminium and ANZ shed staff.


For most, facing redundancy is one of the most stressful professional experiences of their careers.


Frantic CV writing, job searching, outplacement services and uncertainty – “and the feeling you are on the heap, walking around with a big R on your forehead,” says Peck.


However, in the midst of all this turmoil are a lucky few, for whom redundancy is a little like winning one of Willy Wonka’s golden tickets. The payout is seed capital for the business they always wanted to start.


Graeme Page, managing director of outplacement specialists Audrey Page & Associates, says that starting a business after redundancy is unusual.


Only about 2 to 3% of his clients do so.


“It’s not an easy transition out of a big corporate into running your own business,” Page says.


People tend to be highly specialised and entrepreneurs need to be a jack-of-all-trades.


“They need to be the COO, the cleaner, the sales expert. They need to be everything,” he says.


Page is wary of those whose motivations to start their own business come mainly from not wanting to get hurt by employers again.


“It can’t be fear that is the main motivator,” he says.


Peck’s payout allowed her a year to get her business off the ground “without earning a dollar”, however, she did not have to wait long for cashflow.


Her former employer offered her three month’s part-time contract work.


Peck then had the freedom to spend six months on networking and business development without the pressure of urgently turning contacts into paying clients.


“I was able to develop much deeper and richer relationships,” she says.


She hasn’t looked back since.


Porteous did not have such an easy start with Red Lanyard. For starters, she couldn’t come up with a name for the business.


Then came two months “where I had to sit on my hands” while branding and trademarking issues were sorted with the assistance of an IP lawyer.


She really only began marketing the business in late November 2011, precisely when the event season ends. Porteous sat tight and persisted.


“All I was doing was networking breakfast, lunch and dinner, talking about what I was going to do with Red Lanyard and how I was going to deliver,” she says.


By February 2012, clients started planning events again and her patience and networking paid off.


She is now trying to figure out how to do all the work that has come in the door.


One door closes…


Starting their own businesses has been more than a career move for both Porteous and Peck. Both admit to plenty of soul searching.


“I realised I wanted a lot of diversity in what I do,” says Peck. “I had got myself to a level of seniority where I saw some questionable behaviours that weren’t really my style.”


So Peck traded in a substantial, secure salary and inflexible 8am-7pm working weeks for the freedom of running her own business.


Now she has the portfolio career she wanted to create for herself: several board positions, legal consulting work and time to support one of her daughters who is currently studying for VCE.


Porteous tested the viability of her business during annual leave while still in her role with the Queensland government.


“I earned twice as much doing contract work as I did on a wage,” she says.


That got her thinking. She had also gained sector experience volunteering, managing events for a non-profit organisation, mentoring others in event management at Queensland University of Technology, working on the Fostering Executive Women Committee, QUT’s Business Executive Club and working for a contact on a major conference project.


Another secret weapon was support from one of QUT’s mentoring programs.


Says Porteous: “I have 20 amazing women that I can go to for advice.”


While there is a lot of information available on how to write business plans and all the obstacles to small business success, Porteous thinks more support is needed for people whose start-ups quickly take-off.


“Everyone talks about ‘what if it doesn’t work?’ But what happens when you get clients straight away?”


Porteous already has a part-time staffer just months after launching: “You can crash and burn really quickly.”


Going through the redundancy process can be a positive thing.


“It’s a chance to reinvent yourself,” Peck says.


“I reinvented myself and can recommended it for people who are interested in different lifestyle and career choices.”


* Name has been changed.


Five top tips to starting up after redundancy

  1. If the redundancy payout is generous enough, put aside time for pure business development/client relationships without the need to be earning income - build this into your business plan.
  2. Just because you have a lump sum, don't get slack. Stick to the ethos - keep your overheads low and give yourself a chance to grow.
  3. Make sure you are not starting a business to avoid being made redundant again. Seek honest feedback on your state of mind.
  4. Network like crazy.
  5. Make the most of this brilliant opportunity.