The idea of leaving the 9-to-5 grind to start a business is a dream for many Americans. In fact, a recent GOBankingRates survey found that nearly 59% of people would launch their own business if given the opportunity, while just over 32% of respondents would want to start a business within the next 6 to 12 months.
If you’re thinking about making the shift from employee to business owner, it’s important to be prepared. Here are some things to consider before leaving your current job and venturing out on your own.
Why Do People Want To Become Business Owners?
There are many possible reasons people want to leave the traditional workforce to start a business. One common reason is the pursuit of freedom and autonomy.
“For me, I wanted to be in charge of my life and my schedule. I can work whenever it suits me,” said Alise Saunders, owner at Tales From An Untamed Soul. “In my corporate job, I felt powerless over my life, how and when I could live my life, feeling ostracized if I didn’t unprioritize my emotional, mental, physical, and spiritual health. Today, I can prioritize what’s important to me… My life is so free, inspired, and I feel empowered to live my life on my own terms.”
Another big reason why a lot of people start their own business is to seek purpose in their lives.
“Life is about purpose. Often people think they’re unhappy because they’re not making enough money, but the truth is they’re unhappy because their lives don’t feel purposeful,” said Dennis Consorte, founder and digital marketing consultant at Brand Boba. “People dream of starting a new business because they long for purpose in their lives, and deep down they believe that having control over their own decisions brings them closer to finding purpose and meaning in their work. Chances are, their idea for a new business is aligned with their personal values, and success means living a life of purpose.”
But of course, the reasons are often multifaceted as well.
“I left my job as a director of operations for a software startup in pursuit on launching my own business. My reasoning for wanting to strike it out on my own was multifaceted,” said Blake Love, co-founder of VulCreate. “I didn’t like feeling trapped, I knew someone was making more money off me then they were paying me, I couldn’t be creative and, frankly, I just always wanted to do something myself.”
Danielle Sabrina, founder and CEO at Society22 PR, added, “I believe allure and accessibility is a driving factor in why people are dreaming of leaving their jobs and starting a business. However, I also believe many companies have outdated culture and expectations of newer generations of the workforce.”
Take some time to truly define your reason or reasons for wanting to leave the workforce and start your own business before you do so. Once you’ve figured that part out, the next step is to make sure you’re as financially prepared as possible for the shift.
Ways To Ensure You’re Financially Prepared
While starting a business can be incredibly worthwhile, it’s also a major undertaking. That’s why it’s essential to prepare as much as possible before getting started. Here are some key ways to do just that.
Start Building a Business While Working
“There really isn’t any way to be fully prepared to make the shift. If possible, you are better off building your business on the side. This allows you to make mistakes and changes before you jump into the business full time,” said Lou Haverty, owner of Tank Retailer.
“If you’re able to make your business profitable while making those early mistakes, this gives you an indication that your business can work,” added Haverty. “This is a good stage to consider making the leap to going full time since you know you have something that is working.”
Create a Business Plan
Having a business plan can give you a clearer picture of your business goals and how achievable your venture is. “Get a clear understanding of your market and your potential income,” said Gene Caballero, co-founder at GreenPal. “Don’t just dive in; make a realistic business plan.”
Make sure your plan includes a clear budget for your business, as well.
“Estimate the costs involved in launching and running your business. This includes not only startup costs but also ongoing expenses. Having a clear understanding of your financial needs helps prevent surprises,” said Ben McInerney, founder at Home Garden Guides.
“Remember, the transition to entrepreneurship involves risks and uncertainties, so careful planning and preparation are essential,” McInerney added. “Financial stability can provide you with a solid foundation to pursue your dreams and navigate the challenges that come with building your own business.”
Consider Your Financing Options
The GOBankingRates survey found that 17.78% of people who are thinking about starting their own small business would look into getting a loan before anything else. While this is an option, it might not be right for everyone.
“Look into different ways to get money for your business. You could use your own savings, borrow from friends or family, find investors, or use crowdfunding websites. Pick the option that fits your money situation and business goals,” said Kimberly Carter, owner at KiChe Consulting.
When seeking financing for your business, Rohit Arora, CEO and co-founder at Biz2Credit, suggested asking for more than you think you’ll need.
“Inevitably, there will be unexpected surprises and unanticipated delays that cost money and push back the business’s opening and revenue generation,” Arora said. “You have to have enough money to survive these things. If you are borrowing money, ask for more than you think you’ll need. If you borrow more than you actually have to spend, you can simply pay back the surplus money.”
Reduce Everyday Expenses and Debt
“Remember that entrepreneurship involves inherent risks, and success might take time. Being financially prepared can mitigate some of these risks and provide a more stable foundation as you work towards achieving your business goals,” said Kraig Kleeman, the CEO and founder of The New Workforce and Kraig Kleeman Live.
Considering this, Kleegman suggested reducing personal debt as much as possible before launching your business. “High debt obligations can add stress to an already challenging situation,” he said.
While you’re at it, try to live more frugally to lower expenses and have a greater financial cushion while working on your business. “Adjust your lifestyle to minimize unnecessary expenses. This personal discipline can help stretch your financial resources as you work to establish your business,” added Kleeman.
Consider Healthcare and Paid Leave
“Health insurance is a high cost that’s usually a shared cost with your employer,” said Jane Goodrich, photographer, small business expert, and founder of Picsello. Be sure to account for your family’s healthcare needs and the potential costs associated with health insurance before leaving your current career — especially if your employer offers healthcare.
Goodrich also suggested being prepared for other costs, such as paid vacation, sick time, parental leave, and other possible emergencies that will take you away from your business.
Launching your own business can be highly rewarding, but it’s vital that you’re as financially prepared as possible beforehand. Make sure you have enough money to cover day-to-day expenses and emergencies while building your business. Make a business plan with a realistic budget that accounts for the expected and unexpected — including things like retirement costs and self-employment tax.
Doing all of this and more can help you get started on the right foot.
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