Owning a business and being your own boss is a dream of many. Here's advice from Mary Caraccioli, a personal finance expert and host of the TV show We Owe What?
Give yourself a year to develop the business. Don't quit your job during that year. There are so many things you need to do on the front end to give your business the best chance to survive. Keep earning your salary while you do them.
Get your financial house in order. "If you can't pay your bills on time or are living on credit cards month to month, don't even consider starting a business. Your business will fail," Caraccioli says. However, if you can create good financial habits for yourself, keep reading.
Pay off any balances on your credit cards. They'll be your finance options of last resource. Resist the temptation to use them to fund your business. "I've talked to many people who've believed so strongly in their business they spent on their credit cards to keep the business afloat. They ended up declaring bankruptcy."
Know what you need to survive bare bones every month. How much does it take to keep a roof over your head, food on the table, transportation, health insurance and the like? Then consider how these costs will change if you start a business. You may pay more for individual health insurance, but you may save money on commuting cost.
Go into savings mode. "You need to have six months of expenses saved up. Anybody should have this, but especially if you're starting a business."
Ask yourself how light you can live. Make a list of things you can do without, but be careful. You need to sustain expenses that feed your business, such as belonging to a business association or keeping your social network strong. Maybe you don't need a fancy phone. It could bruise your ego, but remind yourself that you're showing the discipline to keep your business going. Go over your personal finance and create the habits a year ahead so you're not going into culture shock the day you go into business.
Be realistic about what your business will cost. Will you hire an accountant? Create a website? Need a lawyer? Get estimates from these people.
Plan for a life without company-supported benefits. Before you leave your job, see if you can transfer your life insurance to a private policy. If you have a birthday coming up, do it sooner rather than later before premiums rise. Qualify for disability insurance based on your old salary so you'll have a big enough safety net. Call the insurance company rather than your HR to keep it private.
Ask yourself how hard you want to work. Are you willing to work seven days a week. No matter what kind of business you create you'll play two roles, as business owner and worker. That may add up to two full time jobs. Is that going to be okay? Are you willing to work an 80 hour week?
"People think if they run a business from home they'll be with their kids more. That's not the case. Sure you're there but you're working. That's why it's so important to love what you do."
If you take an SBA loan, take it seriously. "I know people who've used them to cover living expenses. If you can't pay the loan back, it's brutal. Very difficult to work out a settlement. Know how you'll make those payments every month if the business isn't bringing money in."
Caraccioli's show, We Owe What? airs on Saturday at 5:30 ET/PT on the Live Well Network.