Things to consider before you quit your day job
February 02, 2011
Sometimes entrepreneurs can get so caught up in their idea or product that they overlook a few key things to consider before they make the leap into entrepreneurship and give up that 'real job' (otherwise known as 'steady paycheck'). In addition to the obvious items such as refining and defining the product, service or idea, and having a market or customers, here are some things to consider:
- Business Structure. Will you form a Corporation? Sole Proprietorship? LLC? It's important to fully check out the consequences wtih your tax advisor, not only for tax purposes, but if you have a high growth business that you will be seeking investors or shareholders, it is important to know your options.
- Financial Security. The comment about the steady paycheck was only meant half tongue-in-cheek...If you are taking the plunge into owning your own business, are you ready to give up an existing job in this economy? Not to mention benefits such as retirement or insurance?
- Financial Planning. If you have not done a business plan or any sort of financial projections (i.e., how many customers/sales you need, how you will make money, manage cash flow and pay bills), you should do this. Here's a great quote from an INC. Magazine article on Start-Up Secrets from America's Coolest Young Entrepreneurs: "Be really clear about the assumptions you're making about the business you're going into, and check those assumptions as quickly as you can -- whether it's building a prototype and testing it with people, or just talking to other people in the industry."-- Can Sar, Apture. There are even free templates that will take you step by step through the worksheets. You often hear financial professionals say you should have X months' of expenses saved for your home emergency savings, and it's good business advice as well.
- Financing. If you are planning on getting a grant or loan to finance your start-up, please read this. You will want to become very familiar with the term 'bootstrap financing', which means using your own resources (family, friends, savings) to fund your venture.
- Contingency Plan. What if things take longer than you plan? Do you have orders you need to deliver but your equipment isn't here yet because you couldn't get a loan in time?
- Does your contingency plan have a contingency plan? How about when you've got your customer orders, and have the equipment installed, only to realize that it doesn't work exactly how you envisioned? Do you have the funds to hire additional help? What about those other expenses that come up such as permitting, licensing, etc. It is unlikely that you have thought out every possible scenario; sometimes things just come up that interfere, for example the weather or someone is on vacation. The more due diligence and homework you do will prepare you for the unexpected.
- If you are a one man show, will you have the time and energy to find new customers, deliver the product or service and run the business?
The list can go on and on. The main point here is that there are numerous things to consider before you start a business. A lot of entrepreneurs have started new business ventures on the side while they are refining their idea/product/service, which isn't necessarily a bad idea. Read more...Five Tips for becoming a part-time entrepreneur. Keep in mind if you do this though, that you will want to decide on your business structure and get all applicable licenses in place. This may not work if you are planning on manufacturing a new type of solar panel, but if you are going to start an online store or business service, you might be able to work out some of the kinks with 'friends of the family' before going full board. If you aren't sure where or how to start, we've got some classes coming up that are right up your alley. Visit the events pagefor more information on the Working Lunch Series - learn if you are ready to start, how to start a business, and how to market and finance your business.
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