Getting Your Life Ready for Self-Employment

taking the plunge to self-employmentYou’ve just come up with an outstanding idea for a business. Your business plan is in place, and you have an impressive list of contacts related to the new venture. You’re ready to start your business, right?

Not necessarily. Having a great idea and business plan are important, certainly. But there’s one more thing that you need to do before launching your business, and that’s getting your life ready for self-employment.

Self-employment is about much more than simply launching a business, and this is particularly true if you’ve never been self-employed in the past. Being an entrepreneur will affect much more than just your career. Self-employment is virtually holisticit will affect everything else in your life.

This is more important than is commonly assumed; businesses can fail for personal reasons as much as for business ones. For that reason, you need to look beyond the business itself, and at the various areas of your life that need to be prepared for the change.

Preparing your family

If you have a family, you’ll need to make sure that they are on board with your new enterprise. A beginning business owner can expect some or all of the following changes in their family lives:

  • There maybe less income, especially when you are trying to get the business up and running. In fact, it may be several years before you reach your former income level.
  • The reduction in income will almost certainly lead to a change in your family’s lifestyle. There may be no vacations or eating out for a long time, and some cherished services and purchases may need to be eliminated.
  • You may have less time to spend with your family. Again, this is especially true in the upstart phase of the business. You’ll almost certainly be working more hours than you were on your job.
  • As a result of the above, your family may need to learn to become more self-sufficient. While this is possible, and even beneficial on some level, the transition can be painful.

Make sure your family understands the challenges that they will face when you start your business. Set the proper expectation, including the ultimate benefits that you hope the transition will bring.

Paying down or paying off your debt

Since income will be on the light side, and you will need to cut expenses, one of the best ways to do this is by paying down or paying off your debt. The best outcome would be to payoff all of your debt, but if you are unable to do that, the next best strategy is to payoff individual debts. Those that you select for payoff should be the ones that will most improve your cash flow.

In addition to enabling you to live on less income, paying off or paying down debts will also free up your credit lines in the event that you need them to sustain your business or your life down the road. Businesses always need credit, but personal credit has to fill the bill at least until the business is established enough to get formal business loans.

Building up your savings

There are business ventures that are instant success stories, but those are truly the exception. In the vast majority of upstart businesses, the owner is faced with the task of getting the business from 0 to 60 – income-wise – in the shortest amount of time possible. But even if that is done fairly quickly, there will still be a period of time that can last anywhere from a few months to a couple of years when income will be scarce. If you are not prepared for this possibility, your business can fail before you even get out of the starting gate.

The best way to deal with this issue is to have a sufficient amount savings before starting the business. At a minimum, you should have enough in savings that you can survive for at least six months without an income. Hopefully you will create a livable cash flow before your savings run out. In the meantime, you’ll have to rely on the money that you saved beforehand.

Developing outside income sources

In addition to building up savings, your business will have a greater chance of success if you can maintain outside income sources, particularly in the early days of the business. The idea is to have one or more income supplements, which will provide cash flow before the business actually develops one.

There are several ways that you can approach this:

  • You can continue your current job in a reduced capacity, working either part-time or on a contract basis.
  • You can act as a subcontractor for other companies in the same line of business that you are going into.
  • You can take a side job that is completely unrelated to either your current job or your new business.
  • The side venture can be part-time, contract, temporary, or even seasonal.

Having at least one source of steady income can increase the chance that your business will succeed. It will provide you with a source of income during the startup when the business doesn’t have any. If done in combination with a six months savings reserve, you may be able survive for a year or more until the business begins making money.

Creating a back-up plan

Some people think that it is self-defeating to start a business, but to have a backup plan. I think it’s just common sense. And if you have a family to support, it’s virtually a requirement.

Not all businesses succeed, and that’s a reality you need to be familiar with even if you are nothing but optimistic about your prospects.

At a minimum, you should at least be mentally prepared to go back to your previous career in the event that your business doesn’t make it. That means that you shouldn’t burn any bridges when you leave your current job! In addition, you should continue to maintain contacts within your previous career and keep an up-to-date resume. Ideally, you can cover this by using your current career as an outside income source while you are building up your business.

Having a backup plan doesn’t mean that you’re fatalistic about your business. Instead, it means knowing that you have a “safety net”, and that should give you the confidence that you need to press forward without fear of failure.

If you’re taking the plunge into self-employment, make sure to get your life ready for the change first.

Photo Credit: lukethomas.com

Join our newsletter

If you like Critical Financial, subscribe and get our latest content via email.

Powered by ConvertKit

Share this post:

Related Posts

2 Comments

  1. I doubt that I have the guts to go full time, but I think some of the lessons are applicable even for a side business. Avoiding debt, expecting a period of low or no income from the business…that probably applies to any enterprise.

    • I suspect that those reasons are also why more people don’t strike out on their own. Either their finances don’t allow it, or they fear going without a paycheck. But if you’re prepared for both, your chances of success go up exponentially. A business – full time or side business – require patience and steady performance. It’s more of a jog than a sprint. And it’s never get-rich-quick!

Leave a Comment

*

People count the money to buy a house in future success.

Avoiding Mortgage Scams: Don’t Fall for Unreasonable Promises

If it sounds too good to be true, it probably is. That’s sound advice for almost all aspects of life, including the search for... more →
Eat for free for a whole month via the meal kit companies discounts for new customers.

How To Get a Month of Free Food: 9 Meal Kit Companies Offering Discounts to New Customers

Play your cards right and you might be able to line up a month’s worth of free meals if you were to try out all nine of the meal... more →
Generate extra cashflow -- here are 97 ways.

96 Awesome Ways to Generate Extra Cashflow

Who doesn’t want more money nowadays? We’ve got you covered on that front. Here comes a long list of different ideas on... more →
Valentine's Day gifts that won't destroy your budget

Valentine’s Day Crafts Are Romantic Rescue from Crazy Inflation

Fall for the hype this week and you’re out an average of $143.56 for Valentine’s Day. Crafts and other do-it-yourself tactics... more →

Ultimate Guide to Bitcoin — FREE Ebook!

Have we got something for you: a free ebook about bitcoin! more →
Get a flu vaccine.

Why You Need To Get a Flu Vaccine Right Now

Flu vaccines aren’t just for the elderly  anymore. Here are 25 reasons you should go get vaccinated. more →
Financially successful

Acquire the Trait All Financially Successful People Have

Financially successful people tend to all have a lot of self-discipline. Improving your discipline in one area of your life often spills... more →

What’s the Best Free Recipe App?

The Apple Store and Google Play together offer more digital cookbooks than you probably have room for on your mobile device. So which... more →
New tax law might slow down housing market.

What Will the New Tax Law Do to the Housing Market?

The new tax law will have a profound impact on the housing market, although in ways that go beyond the deductibility of mortgage interest... more →

4 in 5 Households Will Get a Tax Cut in 2018

Four out of five U.S. households will get a tax cut as a result of the legislation that President Donald Trump signed into law today. more →
Will bitcoin reach $100,000?

When Will Bitcoin Reach $100,000?

Bitcoin has accelerated its pace of appreciation in recent months, and if the current levels between $15,000 and $19,000 make you itch... more →
The Dow Jones topped 24,000 -- now what?

The Dow Jones Crossed the 24,000 Threshold. Now What?

Stocks appear to be increasing in volatility, yet the markets closed on Monday, December 4 with the Dow Jones Industrial Average is... more →
Peer mortgage

Should You Get a Peer-to-Peer Mortgage?

If you can’t get approved for a home loan from a bank, you might want to look into applying for a peer-to-peer mortgage. more →
Investment gifting is awesome.

4 Things To Know Before You Donate an Investment

While donations of any kind are appreciated, gifting investments benefits both the giver and the receiver. Here are four key things... more →
Are you wondering: What's the Relationship Between the Stock Market and Federal Debt?

What’s the Relationship Between the Stock Market and Federal Debt?

Wouldn’t it be wonderful if gains in the stock market could actually reduce U.S. government indebtedness? If that were true,... more →
Get A Mortgage When You’re Self-Employed

What It Takes To Get A Mortgage When You’re Self-Employed

What it takes to get a mortgage is tough  these days, but it’s even more complicated – and frustrating – when you’re self-employed. more →