There comes a point in time when you might come to this crossroads. Is it time to bet 100% on myself and my dreams? How can I take my work more seriously and invest everything I have in it? The never-ending hard work of working a traditional job while pursuing projects of your passion can often tire you out, along with a laundry list of things that demand your attention. Before you make your side hustle a full-time job, let’s explore these steps below to help better prepare you for your exciting (and likely scary) new transition.
Consider all your expenses
Before we fully commit to our own business, we have to take a step back and assess – how will my household expenses be handled month after month? What is the total of my recurring expenses? How will my family make adjustments based on that? Check your budget As it is today, no modifications are being made at this point. The next order of business will be to review your most recent bank statements. Are you actually sticking to your budget? What do discretionary spending habits look like? Are there areas that could require some improvement? While we hope that your business will start (or continue) to generate income, you should consider some very important things. If your business does not generate a profit for a specified period of time, how long can you comfortably cover your personal and business expenses?
In the example where you still have a full-time job, take this transition period to save as much as possible. Not only will you need to cover overhead, but there will also be startup costs incurred as your business continues to grow – affecting your overall budget. The last thing you want to do is remove your safety net and put yourself in a constant state of anxious frenzy trying to figure out how it will keep you and your family on their feet. Running a business in any capacity requires other areas of your life to maintain a certain level of peace. Taking any early moves can lead to a long list of negative consequences in the future.
Pro tip: If business expenses are charged to a personal card, start tracking business transactions by adding a custom Categories and tags In the Mint app. This will help you get a clear picture of how much you’re spending, even if the charges are on multiple cards!
Save as much as possible
We’ve all heard the old saying, “Patience is a virtue.” Well, save too! If you already have a file emergency fundFeel free to increase this amount. Keep in mind that the money you used to receive for each paid period will no longer be traded. To ensure your transition to full-time entrepreneurship goes smoother, store as much money as possible. This can start gradually to build momentum and gain traction over time. Remember that home repairs, car expenses, and other life events won’t make it any easier for you. Do the necessary work up front to avoid a lot of financial stress later on.
The following major savings category is for business expenses. Did you get any funding through grants, loans, or small business programs? Depending on your type of business, you may have to invest more money in technology, advertising, or inventory. Understand that if you are self-financed, it is best to put your money to deal with anything that might be thrown your way.
Review and evaluate the overall health of your current business
How much revenue is your business currently generating? What are your monthly business expenses? If you have a product-based business, take a look at the best and worst performing month. Seasonality must be taken into account, regardless of the industry.
If you are running a service-based business, also take a look at net income. For both types, are your prices or prices too low for what you offer the consumer? Many business owners think they are charging related premiums. While this may be the case while you still have a full-time job, this may not apply from now on. This is a good time to refresh and implement some ideas based on where (and how) you want your business to grow.
If you’re having a hard time being neutral, review it from the perspective of an auditor or potential lender. Is there enough information for a third party to evaluate your business? You can benefit from someone you actively trust – or invest in the help of a business coach. Regardless of the method, it can help you take the right steps to not only survive but also excel in your business endeavours.
Make a backup plan
In the event that things don’t work out as quickly as you hoped – please be sure to create a plan to increase your potential earnings if the work does not go as expected. This does not necessarily mean a return to the traditional 9-5 function (although this is always an option). Choosing a part-time job can still allow the freedom and flexibility needed to run a business. This may also be having an emergency fund used to handle home or business expenses. In general, you want to make sure you cover your bases and do your best to shake off your pride. You don’t want to fall into a deep pit of debt in the process.
Learn to accept storms
Life’s journeys can be quite unpredictable, which makes us not always understand how things turn out the way they are. When a business is in the contemplation stages, there is plenty of time allotted to make sure things start off well but are also sustainable over time. For this reason, home life may look a little different. Your time that was devoted to family and friends will be diverted to ensuring that your business is everything you have envisioned. As situations arise, keep in mind that these serve as starting points. Remember the process of learning how to do something for the first time? It seemed very daunting. There may have been instances where you didn’t want to try again out of fear. Running and running a business is no different. As you mature at work, things will get smoother and less intimidating over time.
Marsha Barnes is a financial professional with over 20 years of experience dedicated to empowering women around the world to become financially prosperous. Financial competence and literacy is a passion for Marsha, providing practical information to clients which increases their overall confidence in their personal finances.