5 Steps To Not Let The Power Of A Paycheck Stop You From
Starting Your Own Business
I recently ran a survey and asked people the question: "If you
are not happy in your current work situation, then why haven't
you changed it?" The top rated response was "fear of losing
financial stability."
The financial stability of a paycheck is a big fat illusion. If
you are an employee, you probably have a salary, which is
divided in monthly or weekly paychecks. Because you get the same
amount in each check, you may believe that you have a stable
source of income and can live your life without fear of
financial instability.
This is dangerous thinking that puts your financial life at
risk.
Layoffs, downsizing, mergers, takeovers and incompetent managers
are a well-documented part of corporate life. I have seen all of
them in my career as a corporate employee, and even more in my
career as a corporate consultant. I have been witness to
conversations where managers had to lay off long-time employees
with no notice. These employees were shocked, hurt, scared and
angry. This work was horrible and gut-wrenching but I learned
something very important from it: Never rely on your status as
an employee to insulate you from financial instability.
So if this reason has stopped you from starting your own
business, follow these steps to see if any of your fears are
warranted.
Step 1: Get crystal clear how much money you will need to start
up your venture
- If you have written an effective business plan, you should be
able to predict how much money you will need to start-up and
sustain your business. You haven't written a business plan yet?
You better get cracking at it. In addition to clarifying your
idea, it will force you to organize your thoughts, financials
and start-up plans which will only help you to make it a
reality. Good sources are Rhonda Abram's The Successful Business
Plan, Rich Dad's The ABC's of Writing Winning Business Plans and
the free resources of SCORE.
- Make a budget of your monthly living expenses. This will give
you a picture of your overall cash needs.
Step 2: Meet with a solid, professional, well-researched and
well-recommended financial planner
- While I don't believe the illusion that a full-time job =
security, I don't want you to make a foolish decision that will
adversely impact your family and financial health. You need to
look at implications of leaving your corporate job in the areas
of insurance, investments and retirement benefits. Get the whole
picture before you make a quick move. I recently spoke with a
smart, competent and capable government employee who wants to
start his own business but has just 5 years to go until
retirement. While I think he has what it takes to be successful
on his own, I would never counsel him to quit without consulting
a professional financial planner and doing tons of research to
test his business plans.
Step 3: Set specific financial goals to meet your cash needs
- Savings: how much of your paycheck will you have to save per
month in order to meet your goals?
- Raising cash: How much cash do you need to raise from outside
sources including investors? (note: although some people
recommend it, unless you have no alternatives, I don't recommend
borrowing money from your family and close friends. There are
too many emotionally charged issues around relatives and money,
and you could damage critical relationships that you need for
personal well-being. That is just my 2 cents.)
Step 4: Get creative about funding strategies
- There may be ways that you can cover the costs of start-up
expenses by bartering with friends and colleagues. Do you want
to start a coaching business? Maybe you can barter some coaching
sessions with your accountant.
- Clean out your house of unused valuables and hold a sale. If
you live in a warmer climate, have it outside. If not, jump on
eBay. Convert things that take up space in your house to money
that you need to fund your dreams.
Step 5: Learn everything you can about your new venture
- Write a solid business plan and get honest feedback from
knowledgeable experts.
- Read every book you can get your hands on about your business
topic.
- Google websites, blogs and online forums to learn about your
marketplace.
- Identify very successful entrepreneurs in your field and
follow their work, study their business models and ask them what
it has taken to be successful.
- Attend teleconferences, webinars and in-person classes.
- The more that you know about your business, the greater chance
you have at being successful at it.
It takes a huge amount of work to launch and grow a successful
business. Don't get scared off by a perception of financial
risk. If you do very careful research and make sure you have a
viable plan, you can have some concrete data to weigh your
important decision. Whatever you do, please do not be lulled
into complacency by your regular paycheck.