One of the first things you need to examine before deciding if entrepreneurship is right for you right now is your finances. When starting a new business, you’re more than likely going to spend at least a few months in the hole and, despite the fact that your business will be losing money, there will be startup costs and your living expenses that will need to be paid anyway.
When you’re deciding if you’re financially ready to start a company, begin by looking at your savings. Until you start generating a profit, you’ll be living off those savings. How much do you already have saved up that’s available for your living and startup expenses? Are you comfortable spending it and depleting your nest egg to get your business off the ground?
Also take a look at your monthly living expenses. All of your regular expenses: rent, utilities, cell phone, tv and internet, health insurance, food, gas, and everything else will still need to be paid. The bills don’t disappear just because you quit your job and launch your own business. You need to figure out, in advance, how much you need to survive each month so you can compare that to what you have saved up and see if leaving your day job is doable right now.
While you’re thinking about living expenses, also think about an emergency fund. Your monthly budget is what you’ll spend if all goes well. What if your car breaks down or your roof starts to leak? Will you be able to handle these little emergencies if you don’t have your regular paycheck coming in?
Finally, you need to factor in the costs of actually starting up the business. You need to estimate how much you’ll need to get started and combine that with your living expenses, emergency fund, and savings to decide if you can walk away from the day job yet or not.
Now, if this money talk has crushed your dream a bit already, shake it off. It’s important to be realistic about your finances, but, as I mentioned, realizing you’re not ready to turn in your resignation letter tomorrow doesn’t mean your entrepreneurship dreams are dead just yet. It just means your path to fulfilling them will be a little longer or more circuitous. If you want this, you should keep moving forward. You’ll just have to also maintain your current job until you’ve saved a bit more.
After thinking about your financial situation, are you ready to take the plunge into entrepreneurship or not? Leave me a comment and let me know if you think you’re prepared to jump in. If not, tell me why and what you plan to do to make it happen in the future.
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