Can You Afford the Leap From Employee to Entrepreneur?

Starting a business is a massively exciting time. You’re working harder than ever, turning plans into actions, and serving the world with your talents.

However, unless you’re launching the latest, VC-funded tech company, you probably have a day job. After all, you need a little cash to keep you going while you wait for your hustling to pay off.

As I’m sure is obvious, when you, an entrepreneur, feel stuck in a day job, you get restless. You start to feel like your time is better spent building YOUR business—not working for someone else’s. It’s tempting to leap into the unknown without a backup plan, but you know it’s risky.

Photo credit: Rick Harrison

Photo credit: Rick Harrison

 How do you know when you can afford the leap from employee to entrepreneur? Here’s a step-by-step plan for staking out on your own:

1. Determine your monthly expenses…really.

 One big mistake that transitioning entrepreneurs make is in thinking they can live like a minimalist after leaving their j-o-b. They’ll say, “I just need enough to cover my bills. After that, I’ll eat ramen, stop buying stuff, and avoid going out for a while.”

Life might go as planned. But it also might not.

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Knowing that you’re better off with more than less, track your REAL expenses for a month, including irregular purchases like gifts, nights out, car repairs, “oops” purchases, etc.

Also, consider any new expenses you’ll have once you stake out on your own, like insurance!

 2. Stash away 6 months of living expenses in a savings account.

Six full months of living expenses might seem like a HUGE amount, but with cash on hand, you’ll be in a great place to weather any unexpected issues.

Your savings will keep you from running back to a cubicle if a big client backs out, if you hit a dry spell, or if your car randomly starts sending sparks in the air.

3. Get enough clients or customers to cover your monthly expenses—for 3 consecutive months.

This is the most important milestone of all.

Having 3 consecutive months of work proves that your business idea is awesome, your market is hungry for your services, your prices are right, and your marketing systems are working.

What’s more, if you can do this while still working at your job, you can easily replicate it when you’re on your own.

4. Remember A-B-M: Always Be Marketing.

When your client roster fills up, you may be tempted to stop marketing yourself. After all, if you’re working a day job, serving clients, and trying to maintain even a hint of a social life, you might not feel you have time for marketing.

The problem with that is with no new marketing, no new clients! Without new clients, you’re likely to be a victim of the dreaded “feast or famine” cycle.

Programs like Creating Fame will show you how to ensure you’re always getting your name out there, and bringing in a steady stream of new prospects. Consistent marketing means you’ll bring in clients before and after your leap!

Conclusion

As a new entrepreneur, it can be frustrating to work a job when you really want to pursue your own business full-time. You can afford to make the leap if you just reach a few milestones:  build a 6-month savings account, complete 3 months of profitable client work, and commit to an ongoing marketing plan.

Taking these steps will ensure a smooth and LASTING switch from employee to entrepreneur.

Do you have any more tips to help from going to full time employee to full time entrepreneur? Share in the comments below!

 

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Leah Manderson is a personal finance blogger and Certified Financial Planner in the making. Join her FREE 7-day mini program for other tips on how to afford your dream life.

Comments

  1. Hey Leah:

    Awesome post. One of the things future entrepreneurs need to know how to do is calculate their break-even point with their desired salary included. So many business owners add up their monthly expenses and don’t include themselves in the plan.

    I’ve coached over 500 business owners across the country on this very topic and I am amazed that so many leave themselves out of the equation.

    Why do you think so many future entrepreneurs do that?

    I think that many people assume that you have to struggle as a business owner before you can become wealthy. With the right planning in place, that doesn’t have to be the case.

    This was a great post. I’ll be sharing it with my audience.

    Thanks again!

    • I think entrepreneurs tend to be antsy and a little risky by nature, and we want to consider the bare minimum we need in order to get where we want. If we think, “I only have to cover $X to cover my bills!” we don’t have to look at the fact that we really need $X+$5000.

      I totally agree though. Planning is everything, and with the right plan in place, you there’s aboslutely no reason to struggle to “make it” :)

      Thanks for your comment Eddy! I’ll be following you.

  2. Nicely written, Leah! I’ve seen this question pop up in several Facebook groups in the last couple of weeks. Must be spring fever in the air!

    • Love that. Spring is the time of awakening, blooming, growing and a call to us all do the same!

      Thanks for your comment Felicity!

  3. Well said Leah, I especially liked point 3, having 3 consecutive months of work as a milestone. Another option is (if possible) try to scale down to part-time work for a while – then you still have some income coming in but more time to build up your business.

    • Jane,

      I 100% agree about scaling down to part-time work. It’s a good way to ease yourself into entrepreneurship and out of the work force.

      The trouble is that it’s hard to swing if you’re already somewhat advanced in your career already. But there’s always the option of taking on a true bridge job (i.e. totally different from your main career) in the meantime.

      Thanks for your excellent comment!

  4. Oh, thanks so much for this, Laura, I’ve been full time for 1.5 years now in my business and I still push the ball to roll (I know that it may take a good few years), so your advice is awesomely timely :)

    Thanks agan,
    Llyane
    xo

  5. I’ve discovered that the 6 month stash is a great idea for employed people, and CRUCIAL to the self employed entrepreneur. Good point.

  6. You just gave me a lot to think about, Leah. I’ve wanting to start my own business (and have made baby steps towards getting started) and this article gave me a few more things to think about. Saving 6-month worth of income seems like a tall order for me (I was going to settle for 2) but your points are sound. Once I can do that, it would be interesting to see if my business idea is awesome enough to get sufficient clients during the first 3 months. :D

  7. These are all great tips! I’m in the process of preparing to make the leap and will take all help :)

  8. All great points! Especially a point on getting enough clients to cover monthly expenses for 3 consecutive months. Thanks a lot, Leah.