We all get that itch periodically to chuck our day jobs and do something crazy and fun and risky with our lives. That “something crazy” can often be interpreted as going into entrepreneurship.
Our personal finance article today gives good advice on a to-do list for people who have taken concrete steps to follow this entrepreneurial craving.
- Assess how much savings you have. Since most business owners source most of their capital from their personal savings, we assume that you will do the same. Sit down and write how much savings you have. Look not just at your bank accounts, but holdings in mutual funds or unit investment trust funds, or even equities. Are these enough for your share in the starting capital of your business. If not, then you may be thinking that you will earn through the business anyway and will be able to put in additional capital. We caution you against this thinking, as the business may or may not grow as expected in the timeline projected. It would be better to ensure that you personally have enough in your savings to meet capital needs even before you start your business operations
- Keep your day jobs — for now. Don’t expect to earn salary from your business from day one. It may take time for the business to prosper, and until then, you’ll have to make sure that you will have earnings to meet your living expenses. Otherwise, you’ll have to dip into your savings. Since you’re going into the business with partners, discuss who among you can take an active role in the day-to-day operations. That person may go into the business full-time now for a start-up salary (as long as she has back-up savings to meet her living expenses). Then as the business grows and expands, you may all see the need to focus on the business—that’s the time to let go of your day jobs.
- Start small. While the business is still in the startup stage, keep your costs small. Consider having the office in a home to save on office rent. Hire only enough people you need. Instead of buying a new delivery or utility van, buy a good secondhand one, or use your personal vehicle. Outsource some jobs such as accounting to keep overhead costs low.
- Do everything right from the start. Keep personal and business funds separate. Make sure you have all the required permits and paperwork before starting your business. Pay business licenses and taxes correctly and on time so as not to incur penalty. Otherwise, penalties and surcharges will eat into your business coffers.
- Don’t neglect keeping your personal finances healthy. Continue saving from your salary. At least 10 percent of your gross pay is a good start-up point but higher is better. Aim to have an emergency fund covering at least six months’ worth of personal expenses. Should your business fail, then you have a fund to dip into until you are ready for your next move.
- Expand only after much thought. It’s tempting to open another branch right away if the first one picks up well. Some also buy new equipment and other fixed assets during the first year even when the business cannot support such purchases yet. Before going into any expansion for the business, study your cash flow and the costs to be involved. Make an intelligent decision based on your financials.
- Seek a mentor. It’s good to ask someone for business advice, preferably a successful entrepreneur, so you won’t make costly mistakes. Find a mentor you can trust and meet that person regularly. Joining business organizations will also be helpful to you in terms of learning from others and expanding your network.
From MoneySmarts: make sure setting up your own business is something that you REALLY want, and not an escape from office blahness. Good luck!
March 28th, 2008 at 7:55 am
Although it is prudent to hold on to a “regular job” in case your attempts at entrepreneurship fail, a certain urgency is created if you plunged into it without any safety nets.
One key point is that “to fail” disappears as an option, its either you make it or go hungry, and this may lead to the extra mile which might eventually decides whether the business you took on would succeed or flop.
thanks
March 25th, 2008 at 1:22 pm
i agree with you seriouslynuts.
i’m starting up my own business, i’ve been itching to jump out of my job.
but, as they say, the difference between a gambler and an entrepreneur is, an entrepreneur knows and calculates the risk he/she will take.
so, here i am, still working. not that being an employee is a wrong thing, but it’s just that, having your own business is so much more liberating and you always have room for improvement.
March 25th, 2008 at 8:26 am
I want to have my own business too. Now, im just having a sideline from my hobby which earns a little but still rewarding. I agree that I still have to keep my day job to survive.
March 25th, 2008 at 5:30 am
You’re advice of keeping your day job is for me a very important. Sometimes we get so eager to take the plunge without any safety net.
There is one more thing we can add on this list - never get into a business you don’t understand. Learn as much about the business - especially the risks involved.