Losing your job can be very stressful and challenging, especially if the job loss came as a surprise. Obviously, you have to deal with the psychological impact of being laid off and with the loss of income. And then there is the subject of trying to get a new job.
The search for a new job takes an average (mean) of 37 weeks. And many people take well over one year to find a new position. These statistics are scary. And it gets worse.
People who have been looking for a job for more than six months are perceived as obsolete. Hiring managers wonder why they have not been able to get a job. Instead, they hire other candidates who have been unemployed for less time. Mind you, we are in one of the worst hiring environments – where long-term unemployment is common. However, hiring managers are biased against people with “big unemployment gaps” in their resumes. Fighting against this current seldom works. Ditto for trying to explain yourself.
A better strategy is to find a way around this issue by differentiating yourself from other candidates. There is a way to do this and position yourself in a better light. It’s simple – start a company
In this post, I will focus on starting a business as a strategy to land a job elsewhere – unless, of course, your side business succeeds. If that happens, more power to you. You just became an entrepreneur.
Closing the gap: start a company
There are three reasons why you should consider launching a company if you suddenly become unemployed. The first reason is that it may generate income and help you out. Keep in mind, this is very difficult to pull off, but it could happen. The second reason is that it keeps your skills updated. You can use this experience to learn additional skills that are valuable to potential employers, such as:
- Project management
The third reason is that starting a company closes the employment gap in your resume. You will have continuity of employment and your resume looks more attractive than those of other candidates.
What business to focus on?
I’d suggest you focus on the type of company that has low start-up costs. One great alternative is to become a consulting freelancer in your prior occupation. For example, if you worked in the marketing department of a corporation, become a marketing freelancer. You can do this for almost any specialty.
The advantage of keeping your new consulting business related to your old employment specialty is that you will be able to keep your skills updated. I would avoid starting a business in something completely different unless:
- You want to change careers
- It provides a skill you are looking to develop
- It interests you
- Your are pretty sure you want to do it
Setting up the business
There is a lot of information on the Internet about starting a business, so I won’t rehash all of it. However, I assume you will be operating as a one-person business, so you obviously need a work space, materials, a computer, and an Internet connection.
Unless you have the money or the experience, delay building a website – or build a very simple one on the cheap. This advice may sound counter-intuitive, but remember that the main objective is to land a new job.
However, consider buying a domain for your business and using an email address at that domain. This is easy and cheap to do. More importantly, it looks professional. It definitely looks better than using a Gmail or Yahoo! address (AOL, anyone? ).
By the way, you need to decide the structure in which to operate the business. Here is an article that will help you make that decision. My only advice on this matter is to spend some money and consult a CPA. This is very important because each structure has definite advantages and disadvantages. Additionally, accounting for revenues/expenses varies by structure. A CPA will help you make the right choice. Consider that $300 as money well spent.
Also, while on the subject of CPAs, talk to a CPA about how this business will affect your unemployment benefits. You will need to comply with the law and reporting requirements.
How to finance it?
Ideally, starting your business should not cost a lot of money. However, this cost varies based on what type of business you choose to start. If you need financing, you should consider reading our post on business financing strategies for the self-employed. I am a big fan of the SBA Microloan program because they provide funding and advice.
However, keep in mind that getting financing as a self-employed individual is nearly impossible. The fact is that few institutions, aside from the SBA, will lend you money to start a business. However, if your business is running and producing revenue, you will have some options (such as this one, which we offer).
Running your business
How to operate your company goes beyond the scope of this post. However, run your business like a real company and mean it. Make every effort to get customers and revenues. Give it your best. Don’t make the mistake of starting a company and then doing nothing – basically leaving it as “window dressing” for your resume. Doing the latter will fail, as most hiring manages will see right through it.
The resume strategy
There are many ways to handle including your new venture on your resume. I am not sure which works best, but here’s what I would do. Start the company soon after getting laid off, but leave it off your resume at first. Split your time between running your company and trying to find a new job. If you find a new job quickly, congratulations!
If you don’t find a job after four or five months, put your new business on your resume. Here is an important detail. I assume you started your company soon after losing your job. Although it wasn’t listed it in your resume, the business was there and you were active it in. This means you can use a start date for the new business that is close to the end date of your old job. Therefore, you have a minimal gap in employment. Now, your resume looks competitive.
Will potential employers see right through what you are doing? Absolutely! That’s what I wrote the next section.
What to tell prospective employers?
There is always the chance that a client will want to hire you. And if this happens, you have succeeded. However, you will probably also look for employment at other places.
Obviously, your prospective employers will notice that you became a freelancer shortly after being laid off. They may start to ask questions about this, and some of these questions could be uncomfortable. If they ask, I can offer simple advice: tell them the truth with no sugar-coating and no apologies.
Tell them how you started a company shortly after being laid off so that you could generate income and keep your skills sharp. You may want to address how owning a business has given you a more global view of things. You no longer have the view of a sole contributor with a narrow focus of expertise. Instead, you have expanded your skills and have a better feel at how things are connected in the business and how they impact each other. It’s the truth, and, in my opinion, it makes you more marketable.
Could some folks view this negatively? Yes, some could. Some interviewers may start questioning your desire to get a job if you already have a business. Some may ask if your business is failing. These are uncomfortable questions that you can tackle head-on. I don’t think there is any shame in telling them that the business did not work as you expected. You saw an opportunity, you took it, and you learned from it. At least you had the courage and initiative to pursue it.
Good luck finding a job!