I recently spoke with a small business owner who was sharing that her husband was getting ready to leave his job to make a go full time with their business. I asked her what she was doing to prepare for the transition, and it made my heart smile when I heard her say that they had been putting her husbands paychecks in the bank and living on the business income.
This couple was doing it right by making sure their business income could support them and also making sure they had a safety net in terms of savings.
Here are some considerations for those seeking to make this transition:
1. Don’t plan on taking any money out of your business for a year. Some may say this is unrealistic, but the reality is that most businesses fail for lack of finances. If you are able to start to generate income while still at your job (as this couple did), this will give you a head start on making your business budget work and seeing long term success in your business.
2. Consider what you will do for health insurance. Having a job certainly has it’s perks, and benefits such as health insurance is a big one. Even with the Affordable Health Care Act in place, you may find that paying for health insurance on your own is much more that you are used to paying. I recommend getting a health insurance quote before you leave your job, so you know how much to budget for. A great resource for getting a health insurance quote is the National Association for the Self-Employed.
3. Write a business plan. Many businesses start without a plan, and often business owners may think that if they are not planning on borrowing money, they don’t need one. Your business plan is your guide, it’s what will keep you on track and help you see that you are meeting your goals. And without a plan, you are less likely to succeed.
You don’t need to have an MBA to write a business plan. There are many great templates online, so let Google be your guide. Once you have your business plan, take time to periodically review the projections in the business plan up against your actual results, and adjust accordingly. If things are not working out as you expected, it might be time to consult a business coach.
4. Make sure you have a retirement plan. Many business owners assume that their business will provide them far more income (and much faster) than they often make. For this reason, many business owners put off retirement planning “until they reach a certain income”, and some even say that selling their business is their retirement plan. In either case, the best way to be prepared financially is to have a solid financial plan in place, so you are in control of your retirement, regardless of how your business does.
If you want to hear one of the best speakers on the topic of retirement planning, I recommend that you register for the Abounding Business Conference today to hear New York Times Best Selling Author Pamela Yellen (or one of her advisors) share some brilliant financial strategies including a financial vehicle that can provide a host of benefits including funds for retirement.
I wish you success in this transition. If you have any questions, please feel free to comment below or send us a message and we will do our best to find a resource to assist you.