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From Salaried to Solo: 7 Financial Strategies
How to Keep
the Money Coming In When You're Starting a Business
There are
ways you can still bring in money while starting a business.
A 40's something woman was talking to me the
other day about her growing sense of frustration over "working for someone
else" and her longing to "do my own thing, drive my own wagon".
But, she said with consternation, "I have family counting on me and a standard
of living I don't want to sacrifice."
Everyone has
to decide for themselves what level of sacrifice and risk they're willing to
undertake in order to enjoy the satisfactions of working independently.
Knowing some
strategies for managing the risk of starting a business will allow you to make
a well-informed decision.
Of the seven
financing ideas for starting a business included below, the first two suggest
ways to gradually transition from salaried to solo, instead of diving off the
edge. The second two are ways to stretch the dollar and the final three are
ideas for getting started without stopping.
1. Continue to draw a (reduced) salary.
Leaving your
current employment in order to develop your new business may look like the only
option, based on an assumption that you won't get approval for reducing your
hours. While this may prove to be the case, asking yourself why and how your
company will profit from retaining your skills and experience for a
transitional period can provide the basis for approaching your employer.
Be
sure to do your homework first, however, and be able to back up your request
with a solid rationale.
Also consider
the issue of timing when starting a business. You want to weigh informing your
employer of your wish to leave with being prepared to leave if the answer to
your request is no.
Equip
yourself with the skills you need to improve the impact you make
2. Develop another income stream.
If you need
to leave your present employment, is there a skill in your toolbag that you can
resuscitate and put to work without a significant expenditure of time or
energy? Is moonlighting or freelance work an option? E-lancing websites (such
asElance.com and Guru.com) may be
worth looking into for short-term professional service opportunities.
For example,
a community mental health worker transitioning to private practice used his
conflict resolution experience to sell a training package to public schools. A
woman transitioning out of an insurance brokerage created and sold seminars on
long term care financing at local retirement centers.
3. Reduce expenses.
Another
financing idea for starting a business is seeing what you can save. Apart from
fixed expenses - mortgage, taxes, insurance, etc. - are discretionary expenses
that make up the larger part of budgets. Doing a careful analysis of these
expenses and choosing what you can forego for a while can often save thousands
per year.
Carefully
analyzing hidden expenses - credit card interest rates, bank charges, late
fees, auto debits, phone plans - or "lost money" from low interest
rates on savings may generate several thousand more per year.
4. Borrow.
It isn't
necessary to wait to borrow for start-up costs until you have a well-documented
idea to submit for a business loan. Refinancing a home or taking a line of
credit are relatively low-cost ways of generating capital when starting a
business. Depending on your credit rating, you can also get time-limited
low-interest loans from credit card companies.
If you choose
this financing idea for starting a business, applying for loans or refinancing
packages while you're still employed is strongly advised. Your rating as a
borrower declines quickly once the regular paychecks stop.
You don't
have to wait! Get started on your new business idea while you're still
employed. Several of the all-important first steps (below) can be started while
standing in the grocery line or running on the treadmill. They involve asking
yourself some questions and doing some informal research to get crystal clear
about your idea. This can take weeks off your actual start-up time.
5. Identify your niche.
When starting
a business, think about the services you're uniquely qualified to provide, as
well as the ones you most enjoy providing. Be specific! Write them down! Then
think about what group of people would get benefit from those services and have
the ability to pay for them. Again, be specific: age, where they congregate,
habits and values, how they define the problem your services are going to
solve.
If you don't
know, ask. Find someone who fits your "ideal client" profile and get
permission to ask some questions. People generally love to be helpful.
While what
you need from a marketing plan will get more sophisticated as your business
develops, for now it simply means answering the question, "How is my
business going to make money?"
What is the
product or service you're going to sell? How will you describe it so people
quickly recognize the value? How will you package it? (Fee for service? By the
project? On retainer?) How will you price it? (What's being charged for
comparable services?)
For most
people, anything involving money involves some level of fear. It's important to
acknowledge to yourself and to others that you are taking a risk, and you've
decided it's a risk you want to take. So consider the fear of starting a
business natural, and find ways to manage it.
Getting
support from people who believe in you and in what you're embarking on is
number one in fear-management tactics. Don't assume that you'll get it from the
people closest to you or that if you don't have it you shouldn't proceed.
They're probably the ones most impacted by your decision and so may be least
ready to offer support. Their consent - a willingness to go along with your
plan -is helpful, but support may have to come later.
It's also
helpful to set a
goal (and a date for completion) that's key to your new
venture - arrange financing by a particular date, or sign a lease - and
announce it to at least one person. You'll find that making that commitment to
that financial idea for starting a business, saying it out loud, and following
through will in turn generate more confidence and more forward momentum.
To all of you
who are tired of marching to someone else's drum and are eager to go solo,
these financing ideas for starting a business should help you take prudent but
positive steps toward realizing your goal. Good luck!
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