Covering living expenses while waiting for your business to generate income is a major concern for many entrepreneurs. An old adage says, “It takes money to make money.” One reason this is true is that in a new business there are often upfront expenses–inventory, supplies and rent, to name a few–that must be paid while waiting for customers to pay for goods or services. At the same time, you have personal expenses that can’t wait. The following entry strategies will help you lower your risk while transitioning to self-employment.
Keep your day job and start your business on the side, during “off hours” on evenings, weekends and vacation time. Variations on this strategy include finding a full-time job with flexible hours, working the nightshift, and negotiating with your employer to work four 10-hour days to free up one day a week for your business.
Part-time work can provide regular income to cover the essentials—food, clothing, rent, and utilities—while you grow your business. You can cut back your hours as your business generates income to replace your wages.
Use Your Nest Egg
If you have a financial nest egg such as savings, investments, a disability settlement, an inheritance or other financial reserves, consider using those resources to support yourself while you get the business up-and-running. It is advisable to have enough resources to cover one year of living expenses, including unexpected expenses.
Turn Your Employer Into Your First Customer
Talk to your current employer about becoming an independent contractor. By turning your current employer into your first customer, you can build a solid foundation for your business while gaining increased independence and flexibility in your work. At the same time, your employer retains your skills and experience while saving money on benefits.
If you have a spouse or partner that works, figure out how to reduce your living expenses so that you can both live off of his/her income. You’ll both have to make some sacrifices, but it is worth it in the long run—especially if it means not having to go into debt to start your business.