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Hey Chuck,
I've been working my small business while I'm still at my day job. What should I be doing now to get ready for the day I leave -- hopefully very soon!
Bart, MN
Bart, before you ditch your day job to become your own boss, please remember that being a successful entrepreneur isn't something to just fall in to. Starting up a business entails not only excitement and being your own captain, but also risk, stress ... and lots of time! Here are four things I recommend you include in your plans:
1. Keep working two jobs ... for now. Get your new business set up and operating (as much as you can) while you're still drawing a steady paycheck and benefits. Focus on getting your work done in a concentrated timeframe being sure not to cheat your employer of your results. If you can get your regular 40 hours of work done in 30 and convince your employer to let you work from home 1 or 2 days per week, you'll free up a full day per week (almost 1 week/month) to focus on your new venture. A good resource for learning to make the transition to working part time from home is the 4-Hour Work Week by Tim Ferriss.
2. Make a plan to live on your new irregular income ... and write it down! You need to think very realistically on how much it will take to get your business going full time as well as how much you'll need to support your family while you grow your business income. Because you should expect that period to last the first year -- or longer -- you should set aside at least 12 months of living expenses in an emergency fund. An alternative to this is to moonlight during this time to reduce the amount of savings you'll need to launch. In this case, you should not leave your job without at least 6 months of expenses set aside.
3. Keep your benefits in tact ... always! Under COBRA rules, you can continue coverage under your previous company's plan for up to 18 months; however, understand that you will be paying the full premium for the policy. An attractive alternative is to take out a high-deductible HSA (Health Savings Account) policy that will typically carry a much lower premium than COBRA. If you have a family member with conditions that may keep you from qualifying for private health insurance, you may need to check into a state-sponsored risk pool insurance (Google your state's name and "health risk pool" for more info). Due to my wife Lori's cancer several years ago, we've been in the Texas Health Insurance Risk Pool since 2003. We've found it to be very good coverage (provided by Blue Cross Blue Shield), even including doctor visit and prescription copays. Also, be sure to take out Long Term Disability coverage (take out as much as you can afford in your budget) and roll your 401(k) into your own IRA.
4. Make your first sale be ... your family. Your new business should eventually give you more flexibility and balance in your life, but not when it's starting up. Far too many well-intentioned folks begin pulling themselves out of their business way to early and before it's on solid footing operationally. They may do this in the form of reducing their hours, hiring people to manage their business, depend on their bookkeeper / accountant to watch the bottom line, etc. Be sure to give your spouse and kids a heads-up that you won't be around as much as they'd like in the early year(s). Ask them what they think of your plan (see Step 2) and for their support. When things get stressful, you don't want to add family issues on top of it!
Take these steps and you'll be on your way to running your own successful gig! Don't, and you may be heading back into the working world from which you came ... ick!
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