It doesn't cost a lot of money to start an online business, but you'll need some. I've heard aspiring entrepreneurs say "I want to start a business I'm quitting my job." Wait what??
No money saved, no exit strategy, just faith in their idea and the firm stance that they're tired of working for someone else. I mean no plan, no backup, nothing but this new business idea that they haven't researched or developed.
Listen, you need to have your 9-5 fund your business until it starts to make consistent money. Why struggle to start a new business, when you can be comfortable working your job until it takes off.
Financially prepare before you quit your job. This is your sanity and financial well being.
Here are 3 ways to know if you're financially ready to quit your 9-5:
1. Do you have enough money saved to cover all your household and monthly bills? Remember you're losing the income from your 9-5, so you need to know that your expenses are covered for a couple months. Don't forget to take into account the other benefits that your job offers as well, such as 401K Match, health, dental, and life insurance. These are now additional expenses that you need to consider because they're no longer provided to you. Let's be honest, healthcare is EXPENSIVE!
2. How much does it cost to run your business? Take a look at your last couple bank statements or financial reports to review your expenses. Do you know your breakeven number? What expenses can you eliminate or reduce because you're not using it or there's a free version?
3. Does your business bring in enough profit to cover what you make in your 9-5? You're giving up the salary from your 9-5 to work in your business so your business needs to already be making that. Make sure you're looking at consistent sales. You don't want to take into account seasonal, holidays or huge sales that won't happen on a regular basis.
Let's face it, you started a business to bring in more money to help lighten the financial load and to provide for your family. The last thing you want is to let that income go and not have a replacement for it. Or to be forced to find another job months later.
When I started my business, it was to fund our Fun Account. This was extra money to do fun stuff with and to add to my savings account. I work hard at it, but I can't image the stress and despair I'd feel if I didn't have both incomes. For several months, my 9-5 funded ALL my business expenses.
So before you take the big leap by quitting the job you hate, make sure you have money set aside for the ones you love.
Let me know your thoughts. Are you financially ready to quit your 9-5?
For more resources on how to understand your business finances check out our Finances in Formation replay, click here.