Many of us have the dream of leaving our jobs to start our own business. We often find ourselves saying “if this was my company I would do it this way”. We have great ideas in our mind on how to run a successful business. For those of us who have taken the plunge, we know the reality of walking out those ideas are a lot different than just having a concept in our mind. There are many things to consider before leaving your job to start your own business and one of the biggest things to consider is the financial impact.
Being able to have your own business is a positive step towards financial freedom, but it can also be financially stressful if not properly planned out. I have outlined some steps you should take before exiting your job to join the world of entrepreneurs.
Step 1
Evaluate your personal finances. Are you currently able to save money? Starting a business can take some time. You want to make sure that you have saved at least six months to a year’s worth of living expenses for the months where your business revenue cannot support you personally. In addition, look at ways that you can cut down on your monthly expenses. By doing so, it will help you to save more money and ease some of the stress of your monthly obligations.
Step 2
Research what the start-up cost will be for your business. I also recommend starting a savings account specifically for your business. Leverage the income you are making from your full-time job to help fund your business idea. The planning stage can be one of the most exciting stages of starting your own business. By researching your startup cost, you will at least have an idea of what your cost will be. In many cases you may even be able to work your business part time while you still have a steady paycheck coming in. If that is the case, any money made from the business I would divide between the savings account for living expenses and the business startup account.
Step 3
Draft Out Your Business Financial Plan. A key component to your business plan is the financial plan. Based on your research, draft a budget for your business. The budget should include your anticipated revenue and your expenses. As part of your Financial Plan, you will want to consider if you are going to manage your own books or hire a professional to manage your books for you. If you decide to have a professional manage your books, make sure to include the expense for a bookkeeper in your budget. If you are planning on applying for any funding for your business, at minimum, investors will want to review your Profit and Loss, Cash Flow statement and your Balance Sheet.
Quitting your job to pursue your dream of owning your own business sparks a spirit of freedom that can be easily dampened if you are not financially prepared to take the plunge. Giving yourself a cushion relieves some of the financial stresses of starting a new business. You will find that there will be many unexpected expenses that will come up and the budget you initially created will probably have to be doubled, but at least you will have some allocated resources due to your initial financial planning.
Founded in 2015, DNA Financial Services LLC has pledged to Educate, Empower and Equip the financial DNA of its’ clients now and for generations to come. The company offers several financial services including tax preparation, bookkeeping, personal and business financial coaching. These services have been designed to bridge the gap in wealth building and functional money management, while promoting financial literacy for people from every walk of life.