If you’ve always been an employee and are finally determined to go into business for yourself, you may not be prepared for the jump into entrepreneurship if you don’t plan ahead. In fact, you may not realize just how much is actually involved in becoming your own boss and preparing to make the huge leap from one to the other.
There are a number of issues concerned, not the least of which is the need to be financially prepared for the transition. Here is a checklist of basic needs with which you want to be at the ready when the time comes to launch your new self-employment campaign.
Business Plan and Budget
You should never embark on a business venture without a clear, precise plan and a budget. Flying by the seat of your pants may sound exciting, but it is no way to run a business. You are simply setting yourself up to fail if you have no idea how much money you are going to spend or in what direction you intend to take your business. Since you’ll either be contributing personal capital to fund your new business or hoping to receive a paycheck from it your personal finances are tied to the planning and budgeting of your business.
Insurance Coverage
As an employee of a corporation, you were probably provided with health, dental, vision, and life insurance for yourself and your family. Now, as an entrepreneur, you can no longer take this provision for granted. It will be your responsibility to make sure you have coverage for your own needs as well as your family’s needs. Also, if you have any partners or employees, you will need to make plans for their insurance benefits as well.
Vacation Time
Again, as a part of a large company, benefits for employees include paid vacation time, holidays, and personal time or sick days. However, as your own boss, you will find that if you don’t work, you don’t get paid. Part of your business plan should include company holidays and the hours you intend to keep, and you should budget ahead for times when you intend to take a vacation.
Retirement Planning
Here is yet another service you have probably been provided with and taken for granted as just another employee in the service of a corporation. However, you will no longer have a company that matches your contributions to or manages an account for your future retirement. Any 401K or other retirement account you intend to have will be your sole responsibility, and again, if you have employees, you will need to provide something for them as well.
Emergency Funds
While working capital is required for you to make any progress toward building your entrepreneurial campaign, you may not realize the amount of time and effort it takes to get a new business off the ground. In addition, more than 80% of all small businesses fail in the first few years. For these reasons, it is important to have emergency funding as a backup, both to care for you and your family should your business take longer than you expect to get going and in case you need to infuse your business with additional funds to get it off the ground.
Contingency Plan
If, for some reason, you were to meet a roadblock to your success, you should not only have backup funding but also a contingency plan that will help you and your family survive the rough times. Perhaps you can maintain close relations with your previous employer and either take up a part time position there or continue consultation work with them to help bring in a salary until you begin to profit from your business venture.
As you can see there’s a lot to consider when striking out on your own. Although you’ll likely establish a business separate from your personal finances, they are still closely intertwined with your small business and heavily dependent on it’s success. After spending years working in the role of an employee and depending on benefits offered by a corporation you mustn’t forget to address these things as part of your self-employment plan. Make the time to research the options that are best for you and it could help determine the success of your business.