Are you thinking about turning your side hustle into your full-time gig? The idea of chucking it all to pursue your dreams can be downright intoxicating. However, if you’re planning to give up a stable income to turn your passions into a business, you need to have a plan. You should probably take a few precautionary measures to avoid going broke.
Pay Off High-Interest Debt
Pay off any credit card or other high-interest debt before giving up your stable income source. Interest can add up quickly, and when your income takes a plunge, it will become even more challenging to pay off your balances. Mounting credit card debt can add unnecessary stress and distract your focus from building your business.
Minimize Living Expenses
When you leave a stable job to become an entrepreneur, you may not know when your next paycheck will come. Sometimes it takes months, or years, for your business to turn a profit. In the meantime, you don’t want high living expenses looming over your head every month. You also shouldn’t rely on credit cards to cover these expenses. Credit cards should be saved for emergencies and paid off as quickly as possible.
The first step in minimizing your living expenses is to downsize your apartment or house as much as possible. This could mean transitioning from a two-bedroom to a studio apartment or moving into your parent’s basement. You should also take a critical look at your finances and eliminate pricey subscriptions, gym memberships.
Have Six Months of Savings in The Bank
This one might seem impossible for most young professionals, but it’s still an excellent financial goal. A nest egg equivalent to six months of living expenses can allow you to focus your attention on the business without worrying about the basics like rent and food. If six months of living expenses is still out of reach, do the best you can. The point is to save as much money as you can before pulling the plug on your current job.
Plan to Do Everything Yourself
As you get the business off the ground, it can be tempting to hire employees and contractors. However, hiring employees before you can truly afford them would be a mistake. Founders and CEOs of startups often need to wear many hats in nascent businesses. Lean into this reality and soak in the learning experiences.
Research and Test
If you plan to make money, you’ll need to be intimately familiar with the market you’re entering. Investing resources into a product without identifying a target sales demographic could spell disaster. Reach out to industry experts and potential customers to gauge interest in your product or service and continuously refine it to meet industry needs. When you stay tuned in to the market, you can avoid spending time and money on products that do not work or are not in high demand.
Overall, becoming a successful entrepreneur is not a linear process and will require continuous learning and adaptation. In the beginning, keeping your personal and business finances in the black will one of your biggest challenges.