Thinking About Starting A Business? (Book Excerpt)

Following are some typical recommendations I make about money management to my clients who are considering leaving employment to start a business:

Make sure you have money set aside to pay monthly expenses in a “liquid” vehicle, such as a Certificate of Deposit or Money Market at the local bank. Two to three years’ expenses is a good amount to set aside for this purpose. These funds should be available at any time and should not be invested in a volatile vehicle such as the stock market. With most new businesses, it takes time to build a steady income on which the business owner can depend for personal income. These funds are for personal expenses only, not for business-related expenses; additional funds should be set aside for start-up purposes.
Run the numbers before giving notice at your current job and review them with someone who is financially knowledgeable such as an accountant with whom you have a good relationship. Are your assumptions valid?
Have two “fall-back” options in case transition funds are exhausted. Two examples are a home equity line-of-credit or an agreement with a family member who is willing to provide funding. These arrangements should be set up prior to leaving employment.
Meet with your partner and other household family members to discuss the pros and cons of making the leap from employment to self-employment. Involve others in the household who will be affected by the change. If needed, meet together with a therapist, mediator, or life coach who can facilitate the discussion.
Develop a business plan, including financial projections, and get feedback from a mentor who has been successful in the type of business you plan to launch.
Partner with a consultant or coach who can connect you to resources and can help you think through your transition plan

Take Action:

Talk with someone you know who has run a successful business and ask them what recommendations they would make to someone who is thinking about starting a business. What did they wish they knew when they started theirs? What do they like about having a business and what challenges them?

From: Your Blueprint For Personal And Financial Transitions

Copyright 2012 Connie Livingston All rights reserved