Whether the thought of attending one more meeting that should have been an email brings you to the brink of despair or you simply want the freedom of calling the shots in your work life, the catalysts for becoming self-employed are many. The good news is that you may be able to get there by the end of this calendar year.
“That’s absolutely enough time to start a business,” says small business expert Melinda F. Emerson, known as the Small Biz Lady, author of Become Your Own Boss in 12 Months: A Month-by-Month Guide to a Business that Works. The key to long-term success is to set yourself up for success right from the start, she adds. These seven steps can help you get there.
Step 1: Develop An Exit Strategy—From Where You Are Now
Think about your current situation. Have you learned everything or accumulated the experience that will possibly help you with your business? Have you met the contacts you’ll need or taken advantage of the training available to you that might help you? These are all critical considerations and leaving too soon could be to your detriment, says Diane Mulcahy, author of The Gig Economy: The Complete Guide to Getting Better Work, Taking More Time Off, and Financing the Life You Want, and lecturer at Babson College in Boston. She has her students participate in an exercise, thinking about what actions they would take if they knew they were getting laid off.
“Imagine that your company gave you a lot of notice and said, ‘In six months, we’re going to lay you off.’ What, professionally, would you do? What conferences would you attend? What colleagues would you reach out to? What projects experience would you try to get?” she says. These types of a questions, along with how you might change your personal situation and finances, are very similar to those you should ask if you’re considering self-employment. Get yourself in the best shape possible to be successful before you leave your job. That may include getting more training, socking away more money in savings, and reducing your personal overhead.
Step 2: Look At Your Financial Picture
Your personal financial picture plays a big part in your plan to start a business, Emerson says.
“The money for your business is going to come from your right or left pocket, she says. In other words, you need enough savings and income to launch your business and sustain you. If you plan to borrow money, your personal credit and financial resources will likely be part of the lending decision, she says. Small Business Administration-backed microloans may be an option for some businesses, but most of the time “banks do not lend money to startups,” she says. Venture capital data analysis firm CB Insights found that running out of cash was the reason roughly 30% of companies fail.
Step 3: Get Clear On Business Basics
Do you even know how to run a business? If you don’t know the difference between profit and cash flow or whether you should organize your business as an S-corporation or a limited liability company, it’s time to learn the basics, Emerson says. Your local Small Business Development Center or college extension program may have seminars or classes on starting a business. Read books, get advice from a good attorney and certified public accountant, and find a trusted advisor or two to help guide you in your startup phase–even if you’re going to be flying solo for a while.
Step 4: Get Some Hands-On Experience
In addition, if you’ve never run the type of business that you’re planning on launching, it’s best to spend some time working in the field. You may do this part-time or, depending on your situation, make a career change as part of your startup plan.
“Sometimes, people think because they bake great cakes that they know how to run a bakery. Not so. You really have to get clear about what it takes to turn this thing that you want to do into an actual business that is going to sustain you and your family financially,” Emerson adds. “The reason why restaurants go out of business a lot of times has absolutely nothing to do with the food. It has to do with disposable goods, like how much money you’re spending on napkins and ketchup and straws, and just the stuff that’s the unsexy part of a restaurant is what’s draining money in a restaurant every day.”
Step 5: Build Your Network
As part of your “exit plan” into your new business, work on building and strengthening your network, Mulcahy says. Connect with influencers in your company and industry. Attend trade or business events, if possible. Join online or in-person alumni associations. You never know where business will come from, so having a strong, engaged network can be important to make the right connections for everything from business development to finding the right suppliers.
Step 6: Test It Out
Mulcahy advises launching your business as a side hustle to start, as long as that doesn’t violate any of your company’s policies or your employment agreement. “Start doing whatever it is that you’re interested in doing, selling your services or creating a product or getting a business going. It’s lower risk, lower cost to do that while you’re in a full-time job, as long as it doesn’t conflict,” she says. This gives you the opportunity to test your market and the demand for your products and services, as well as marketing and pricing strategies. You may even be able to do it on your lunch hour.
The importance of knowing your market, the demand for what you offer, and how to promote your business can’t be overstated, Emerson says. And the CB Insights data backs up her assertion—42% of businesses failed because there was no market demand.
Step 7: Dive In
Deciding when to dive in—whether you take the plunge full-time right away or build your business after months of working on it in addition to your full-time work—can be daunting. But, Emerson says, if you’ve done your homework, know your market, and especially, if you’ve built up enough demand to sustain you financially, then it’s time.
“Sometimes, it takes a minute for people to catch onto you or for you to figure out what the right price is, the right target customer. You’re not going to get everything right as soon as you open your doors and put your shingle out there and say you’re open for business, so you need some time to have sort of like a weather vane,” she says. If you start now, you may very well be able to give yourself the gift of being your own boss by December.