
This is part one of a multi-part series where I provide tips, advice, and opinions on starting and operating a technology related business. You can read about me and my background in my bio.
So, you think you want to stop “working for the man” and start working for yourself. There are many benefits to being self employed, but it isn’t necessarily everything you think it will be. In fact, it is likely much more. Take it from me, I have been running my own business and surviving for five years.
Running a business and being your own boss can be one of the most rewarding things you can do in your life. It can also be one of the most difficult endeavors you can undertake.
Everyone likes to imagine the freedom of working your own hours, arriving to work in shorts, and collecting huge pay checks. Not everyone considers the more likely reality of working endless hours, having to dress to impress, and struggling to pay bills and expenses. After all, the statistic is something like eight out of ten businesses fail in the first year.
Scary talk aside, you still want to try. Well, before you go and tell your boss what you really think of his management abilities, here are a few things you need to consider.
How long can you survive without making any money?
If you haven’t already figured out where your first check is coming from, then stop! Unless you are independently wealthy or want to work for free, you need a real source of income. If you have existing clients or a guaranteed client and are not bound by a non-compete agreement, then you are in good shape. If however, you are starting from scratch, you need to assume you will not make a penny for a couple of months at the least. It will take time to setup your business, pitch to potential clients, and submit and invoice for that first check. If your business is service based, keep in mind not everyone is willing to pay anything up front. I suggest making sure you have enough to float your business for at least four months.
How much do you need to start your business?
Everyone wants to buy new office furniture, equipment, clothes, and all sorts of other unnecessary stuff to make them feel like they are in business, but the truth is you don’t need any of it. Remember, first and foremost you need to survive. Focus on the essentials. Legal fees for starting your business will be at least $200 and can be much higher depending on the complexity of your product or service.
Do you really need an office to start? Can you work out of your home or share space with anyone else? A lease will bind you for at least a year and even if you were to find something for $500/month. That is $6,000 you are obligated to pay in the first year, plus a security deposit.
Start with just the essentials.
How much money does your business need to run each month?
Before we talk about projections and business plans, I just want to say you should consider what you need to live each month. This should include your personal and business expenses. They will initially be paid from the same source. Remember, you wont be getting a paycheck every other Friday anymore.
Do a personal budget and figure out the bare minimum you need to survive. I am talking rent/mortgage, car payment/insurance, gas, food, utilities, and a wee amount of play money. No vacation trips to Miami beach for a while.
How much are you willing to work?
It isn’t going to be 9-5 anymore. You don’t have a team of co-workers to share the load. You don’t have subordinates to delegate to. It’s likely just going to be you. Anything and everything that needs to be done will need to be done or initiated by you. Customers are less tolerant of deadlines being pushed back then your old boss was. Think of it this way, when you are waiting for your car to be fixed and they say “another few hours,” how happy are you?
You may start your day at 10am, but most likely you will be ending it at 10pm. Be prepared to work all the time.
So, you still want it? You still ready to take the plunge?
Good! It is the experience of a lifetime and you won’t regret it.
Check back next Tuesday for Part Two which will focus on roughing out an initial spreadsheet to figure out how much money you can make and how high your expenses will be.
John Glorioso