There comes a time when you can reach that intersection. Is it time to bet 100% on me and my dreams? How can I take my business more seriously and only invest what I have? The never-ending juggling act of having a traditional job while pursuing your passion projects can often leave you overworked, coupled with a laundry list of things that require your attention. Before turning your sideline employment into a full-time job, let's explore the steps below to best prepare you for your new, exciting (and most likely scary) transition.
Take into account all of your expenses
Before we can fully dedicate ourselves to our own business, we need to take a step back and evaluate – how will my household expenses be covered month after month? What are my total recurring expenses? Based on this, how will my family make adjustments? Check your budget as it is today and don't make any adjustments at this point. The next thing to do is to check your most recent bank statements. Are you really keeping your budget? What are your discretionary spending habits? Are there any areas that could be improved? While we hope your business will start (or continue to generate) revenue, there are a few very important things you need to be aware of. If your business is not benefiting for a period of time, how long can you comfortably cover your personal and business expenses?
If you still have a full-time job, use this transition period to save as much as possible. Not only do you need to cover your overheads, but there are start-up costs as your business continues to grow – which affects your overall budget. The last thing you want to do is remove your safety net and put yourself in a constant state of fearful frenzy trying to figure out how to keep yourself and your family afloat. Running a company in any capacity requires that other areas of your life maintain some level of peace. Moving early can have a long list of negative consequences in the future.
Pro tip: If business expenses have been charged to a personal card, start tracking business transactions by adding custom categories and tags in the Mint app. That way, you get a clear picture of how much you're spending, even if the fees are on multiple cards!
Save as much as you can
We all know the saying "patience is a virtue". Well, you can save too! If you already have an emergency fund, feel free to increase this amount. Remember, the money you are used to receiving per Pay Period will no longer flow into it. To make sure your transition to full-time entrepreneurship goes a little smoother, you should stash as much as you can. This can start gradually to build momentum and gain traction over time. Remember that home repairs, car bills, and other life events will not spare you. Do the necessary work in advance to avoid excessive financial demands later.
The next big category of savings is dedicated to business expenses. Did you receive funding through grants, loans, or small business programs? Depending on your type of business, you may need to invest more money in technology, advertising, or inventory. Understand that when you are self-funded, it is best to position your finances so that they can handle anything that is thrown in your way.
Review and evaluate your current general business health
How much revenue is your company currently generating? What are your monthly business expenses? If you have a product-based business, take a look at your best and worst months. Seasonality is something that needs to be considered regardless of the industry.
If you run a service business, look at your net income as well. Are your prices for either type too low for what you are offering to the consumer? Many entrepreneurs believe they are charging an attributable premium. While this can happen while you still have a full-time job, it may not do so in the future. This is a good time to revise and implement some ideas depending on where (and how) you want your business to grow.
If you are having a hard time being impartial, think about it from the perspective of a chartered accountant or a potential lender. Is there enough information for a third party to evaluate your company? You can hire someone you actively trust – or invest in the help of a business coach. Whatever the method, it can help you take the right steps not only to survive but to excel in your business endeavors.
Create a backup plan
In case things are not developing as quickly as you hoped – make sure you have a plan in place to increase your earning potential if the business doesn't go as planned. This doesn't necessarily mean going back to the traditional 9-5 job (although it's always an option). It could be accepting a part-time position that still offers the freedom and flexibility needed to run a business. This could also be an emergency fund used to run household or business expenses. All in all, you want to make sure your basics are covered and do your best to keep your pride in check. You don't want to fall into a deep debt hole in the process.
Learn to embrace the storms
Life paths can be quite unpredictable, which means that we don't always understand how things end up as they are. When a company is in the idea phase, a lot of time is spent making sure things start well but are sustainable over time. Because of this, home life can look and feel a little different. Your time, once devoted to family and friends, is devoted to making sure your business is how you envisioned it. As situations arise, remember that they serve as a stepping stone. Do you remember learning how to complete something the first time? It seemed so daunting. There have likely been occasions when you were afraid you didn't want to try again. Running and running a business is no different. As the business matures, things get more seamless and less intimidating over time.
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Marsha Barnes (19 posts)
Marsha Barnes is a finance guru with over 20 years of experience committed to empowering women worldwide to be financially successful. Financial literacy and education are a passion for Marsha, providing practical information for clients to build their general confidence in their personal finances.