Are you one of the millions of people who are thinking of starting your own business?
There were 4.3 million businesses that filed paperwork last year, so if you’ve always wanted to be independent, you’re in good company.1
Since we’re a small business, we often provide a perspective across a financial plan, our clients often ask us to weigh in on their business and how it will impact their wealth.
To us, it’s about the trade-offs. So here are a few things to check off your list before making the leap.
1. Ensure You Have an Income Runway
As a business owner myself, I can tell you that not having an income runway is like sky diving without a parachute. And while entrepreneurship may bring you riches down the road, the early days often mean you’re dealing with no income for months or even years. So, you must get your cash in order.
Write down your cash balance at the start when you plan to launch your business and set a timeframe or a runway. After that, determine what your initial monthly expenses may look like for both your business and your personal life. Think rent, food, electricity, kid’s school, technology, all of it.
The key is to get the total picture. And finally, determine your current cash balance at the end of your runway.
This will help set the stage for how long you have before you either need to get an investor or generate positive cash flow.
2. Get Your Business Plan or Idea in Order and Tested
After you have your idea on paper, it’s time to test the concept.
Generally, there is no hard and fast rule, but getting in front of 50 potential customers or clients can give you a signal to test any new business idea.
The best way to do this?
Aim to reach out to 100-150 people to get 50 interviews.
Document the information and feedback you receive, and at the end of it you should have a path forward to build your small business.
3. Get Comfortable with a New Schedule
When it comes to entrepreneurship, not only will there be trade-offs with friends and family, but you’ll be pulled in numerous directions and must wear multiple hats.
Accounting, sales, product, marketing, finance – in most small businesses, one or two people are doing these functions in the first 3-12 months.
And if you’re not careful, you’ll spend too much time working in the business rather than on the business.
Therefore, it’s critical to respect your time and your calendar.
The easiest way to do this: Time blocking. Setting aside chunks of time through the day or week to tackle heavier tasks.
There’s nothing quite like the experience and autonomy that comes with launching or being a part of a small business.
But just like anything else in life, there will always be trade-offs, and being an entrepreneur is no different. Speaking with a trusted resource, like a financial advisor, can help you think through and navigate the ins and outs of the start-up scene.
1. NY Times: Start-Up Boom in the Pandemic Is Growing Stronger
Please feel free to reach out with any questions you may have. Connect here