Why redundancy can be the ideal start-up springboard

In 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.