4 things to do before leaving your job to start a business
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Interested in starting your own business? You’re not alone. Business start-ups have exploded since fall 2020, according to Census Bureau data.
I am certainly biased towards entrepreneurship. It is the path that I have chosen for myself and with which I have had much greater success than what I believe I could have achieved in a more traditional employee role.
But that doesn’t mean starting a business is for everyone, or that if you choose to take the plunge, you can skip the planning phase. If you want to start your own business, preparing yourself financially will allow you to stay long enough to find your own success.
Here are a few points you will want to consider.
1. Know where you are today
Doing a little financial audit can help you better understand how much leverage you have, where your weak spots might be, and what steps you can take now to strengthen your position before taking the risk of starting your own business.
Do you have an emergency fund or some kind of cash reserve? You will probably want more
than normal or that you could have maintained before exploring entrepreneurship.
Are your consumer debts repaid? If you have a lot of credit card debt or large student loans, making a plan to pay them off first may be the right way to go so you don’t have to deal with that burden on top of the stress and challenges of getting started. from a company.
Do you have many financial responsibilities or obligations that you need to consider when starting your business? This may also need to be factored into your planning.
A single person and a tenant may be able to take more risk than another aspiring entrepreneur who is married, has children, a mortgage, and is currently the primary breadwinner.
It’s not to tell you can not Start a business if your life is more like it, but you may need to do more planning or consider different paths to your end goal to make sure you don’t take too many risks that you can’t actually afford.
2. Understand what you need to get started
Hard work and a commitment to your goals and values ââwill give you a long path. But you might also need tangible support, in the form of assets or capital, to start your business.
There are many options when it comes to managing start-up costs and can range from simply minimizing expenses in every way possible to pitching your idea to venture capitalists who will provide the funding you need to get started. .
Can you start your business and manage as little as possible? Can you finance yourself for a few months until you generate income, or will you have to go through investors? Do you have family or friends who want to support you in some way?
The right path depends on a number of factors, but at this stage of financial planning, the most important thing is to accurately estimate your upfront costs and identify potential sources of funding for them.
3. Define your trail – and know how to bail out
It may sound negative, but two essential aspects of financial preparation for starting a business are:
- Know your lead, or how much time your finances will give you to bring your business to a profitable state.
- Know when this trail is coming to an end and it’s time to bail out to avoid future financial damage.
Understanding your lead can help you plan better and make smarter decisions. For example, if you know that you have a cash reserve that will cover your personal needs for six months, you know that your business must start earning before that date if you want to continue without going into debt.
Knowing when that trail may be short can also help you weigh choices like, should you get a part-time job to give your business more time to generate the income you need? Do you need to look for more investors, or should you look for a partner who can contribute?
Define this reference before starting out will also help you stay more objective if you have to make the difficult decision to quit.
4. Have a plan B (and C, and probably D too)
In a perfect world, you can create a nice, organized, and neat business plan and execute it to the letter. In the real world, however, you have to be quick and nimble and ready to change.
Having at least a plan B is essential so that you know how to iterate or rotate if things aren’t going exactly as you hoped. If you map out a few different scenarios and how you will react to each, you can just focus on making the changes needed if these situations occur – and you won’t need to spend the time, energy, or money to understand What to do.
The combination of all of these factors can help you determine what you need to start your business. It will vary from person to person; maybe you realize you need a bigger contingency fund before you start, or you need to spend more time adding contingency planning to your overall strategy before you get started.
Once you know where you are today and what you’ll need to move forward, you can reverse engineer to the ultimate goal of starting your business.