When you decide to become an entrepreneur, freelancer or consultant, the financial aspect of the early months can be scary. It doesn’t have to be if you approach the situation with caution, a clear mission and expectations of what to realistically expect financially during early growth months.
We asked Jane Harrell, entrepreneur and owner of ‘cause Digital Marketing, for her advice. She coaches businesses with social missions of all sizes on everything from content strategy to business development. She’s also a partner in a business just for “petpreneurs” called Working with Dog.
Here are her best tips for surviving your first year building your own income.
Take the Time You Need Before Jumping
“I took a year to plan ‘cause Digital,” says Harrell. “It gave me time to think about overall vision, what I was willing to live on financially, daily time commitment and lifestyle,” she says. “I also used this time to prepare myself and my family for the real financial and benefits cut that would come in the first year of entrepreneurship.”
If you’re newly graduated from college or new to your profession, you may want to wait a few years to make the leap to full time entrepreneur, she says. Starting a business has a huge learning curve, so you don’t want to tackle the learning curve attached to your craft at the same time as tackling the entrepreneurial learning curve.
One of the often-overlooked parts of leaving your regular job are the costs of not having a 401K or health insurance. The good news is there are people who can help you figure out these costs for free.
Create Profit and Loss and Cash Flow Projection Statements
Several small business organizations exist specifically to help you figure out how to create cash flow and profit and loss projections statements. The most common of these organizations are the Small Business Association and SCORE. Both operate nationally and offer free services.
These associations can also help you with thinking about costs of benefits on your own and how to plan for them. “I hate bookkeeping,” Harrell says. “I waited too long to get a bookkeeper, but utilizing services from SCORE helped me figure out accounting until I hired someone.”
Talk to Mentors While Still Working
While you’re still employed, you want to build contacts and get advice for building your own business. Don’t forget to talk to other entrepreneurs or freelancers, complementary or competitive – not only have they done what you want to do, but they can tell you about the ebbs and flows of their business, Harrell says.
For instance, many entrepreneurs and freelancers find July and August are slow months, but they wouldn’t be slow for someone in the travel industry. You’ll feel better when you know slower business months are universal and not just for you.
Other entrepreneurs can also help you with timelines for how long it may take to hear back from clients and contract new clients. If you don’t happen to know other entrepreneurs, contact professional organizations in your field.
Create a Worst-Case Scenario Plan
When you plan to create a business of your own, you also have to decide how much financial stress you’re willing to endure in the building process. “I can’t sleep unless I can pay my mortgage,” says Harrell. “Thus, if I wasn’t making enough to cover my mortgage within two years, I would have hit the kill switch.”
This doesn’t mean your business won’t have to endure a pivot or two in direction. This is quite common. But it has to be profitable within the time period allowed. Harrell hit her financial marker within two months. After two years, Harrell built a $250,000 company. But knowing she had a breaking point where she’d have to give up gave her and her family the courage to do what was needed to succeed. What you quantify as success is an individual choice as much the choice to start a business itself.
What are some ways you prepared financially for starting your own business? Let us know in the comments below.
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