Episode Details

So you've decided you're ready to take the big plunge and start your own business. Congratulations. Having transitioned from being an employee to running my own business, I can tell you, you will be in for some challenges, but also many rewards, not least of which is flexibility in how you manage your time. I know of self employed people who like early morning, quiet, thinking time, and so choose to work for 2-3 hours from 6am, then take a break, do some exercise, have something to eat, and sit back down to continue working late morning. Others work better at night, hitting full stride at 10pm and working through until the early hours. Of course many businesses require you to be on deck during normal business hours to respond to customers, but even here you have flexibility, especially when you employ staff, to decide when you will be "at the coal face".

So you've made your decision, but how to be financially ready to start your own business? You need a roof over your head and food on the table. Perhaps you have a family to support. Most often the thing holding people back from taking the plunge into self employment is the financial worry. But that is where good financial planning comes into play. I don't know about you, but sometimes I have pieces of work that need doing, and I just really don't want to do them, primarily because I don't know where to start and so it's daunting. So I keep pushing them aside thinking maybe I'll feel in the mood to tackle that one tomorrow. Eventually I bite the bullet and my usual strategy is to make it the first thing I do in the day. So often, once I get cracking, I find it actually wasn't nearly as big a deal as I had thought, and the piece of work I had been dreading is knocked over in half an hour. Now whilst a financial plan to get you ready to start your own business will certainly take more than half an hour, I think it is common for people to put off planning for the move because the thought of doing the planning is just too daunting. They just don't know where to start. Well let's solve that for you! None of us are getting any younger, so the sooner you transition into the thing you are passionate about, the more of your life can be devoted to that dream instead of clocking in doing something that is not totally fulfilling. There are two elements required for you to be financially ready to start your own business – a Survival Strategy, and a Capital Strategy. By Survival Strategy I mean how will you (and your family if relevant) survive financially whilst you get this business off the ground? How will you maintain a roof over your head and food on the table? The Capital Strategy concerns your new business – how will you fund the start up costs, marketing, perhaps fit-out costs and the like? Step 1 – the Survival Strategy The starting point in developing your survival strategy is for you to be clear on how much you spend. That means doing a household budget. Now I know that for most people doing a household budget is about as appealing as taking an ice bath in the middle of winter, but if you want to transition successfully from being an employee to running your own business, it just needs to be done. I would set-up a spread-sheet (I have created one you could use, which can be found in our Resources page here), but if you're not comfortable with that, hand written on a piece of paper will work too. Set up something like this: Start with your housing costs – mortgage repayments or rent. These are likely to be your largest expense. Of course if you're lucky enough to own your house without a mortgage, well done you, you can skip past this bit. Record expenses as either weekly, fortnightly, or monthly, and then tally that to a yearly figure (the samp