The journey toward entrepreneurship can be an exciting time, but if you do not have the proper financial support, you might face regrets.
Luckily, if you follow the right preparation steps, you’ll have more responsibility for your future. These steps can help you become financially stable and ready to proceed.
Save as Much as You Can
It’s often difficult to control your cash flow when beginning your company. Not all your clients might want to pay you, and it’s often hard to find customers in the first place. And whether purchasing equipment or getting licenses, you’ll often face unanticipated costs. Having some money set aside in your bank account is a great asset to help you through the tough times. It will give you peace of mind about your finances, eliminating stress.
You might consider refinancing your student loans, which creates a new payment. That way, you can free up more money to either invest in your business or put into your savings account. Using a student loan refinance calculator, you can know what to expect payments to be once you make repayments.
Several factors impact how much you’ll need to set aside. That includes the amount you plan on spending each month and whether you have any options to fall back on, like a partner with money. But in general, it’s best to save about three or more months of living expenses. If you can, you might try to build up a year’s worth.
When determining if you are financially ready to open your company full-time, think about self-employment taxes. They’re much different from if you had a job with an employer since taxes are automatically deducted. A portion is paid for you. With a W-9 job, you just have to file a return at the end of each year, and you might get a small refund.
But with self-employment, you’ll need to file once every quarter, and you’ll have to pay somewhat higher taxes. Plus, you might need to pay extra taxes for the business. Do your research to understand the obligations and ensure that you have the funds to meet them. You might consider hiring an accountant to help you know the ins and outs of the process.
Considering Possible Customers
Think about whether you have enough potential work to help you transition full-time to running the new company. It is much easier to go full-time when you have enough customers ready to purchase your service or product. If you would need to do some marketing, you need to work that into the budget.
If you need to do any marketing, consider your rate of success and what your goals are. Do you hear back 25 percent of the time or only 5 percent? Think about the current clients and how much effort is necessary to scale up your operations. That way, you can make better timing decisions. For instance, perhaps you will decide to do more marketing before going full-time, so you have enough projects ready to start.