Does the thought of starting your own company excite you, but you break out in a cold sweat at the prospect of giving up the steady paycheck from your current job? If yes, know that you’re not alone! Many entrepreneurs worry about the financial risks of launching a business.
Fortunately, it’s possible to continue working for someone else while working on the business of your dreams. We created an ebook to share how you can do that. “16 Steps to Starting a Business While Working Full Time” offers detailed steps to guide you.
In step 11, we cover how to manage your money.
And if you want to review the previous 10 steps, here they are: select a business; create a business plan; establish goals; choose your marketing methods; figure out your finances; know the rules; how to set up your office, business licenses, taxes, and insurance, invest in your image, and find your first customers.
“Budget” Is Not A Four-Letter Word
Some people cringe when they hear the word “budget.” But a budget is your friend, not an enemy. A financial plan and forecast will help you stay on top of your finances—both business and personal.
At a minimum, create a one-year business budget that breaks down income and expenses monthly. If that sounds intimidating, consider using bookkeeping and accounting software that makes the task easier.
Not sure where to begin? Ask your SCORE mentor for help in estimating:
- How much it will cost to produce your product or provide your services
- Your operating expenses
- Your startup equipment costs
- How you will price products or services
- How many units you might sell in the first year
- How much you’ll pay yourself
- Your expected tax liability
That will give you an idea of how much cash you need to meet business expenses. After you launch your business, review your budget every month to assess if your finances are on track. Do quarterly reviews as well, so you can detect bigger trends related to your income and expenses that may indicate you need to make adjustments to your budget.
Resist viewing budgeting as a chore; instead, look at it as a tool for business growth that will help ensure you always have the funds to cover your expenses.
A budget will enable you to more easily spot potential cash flow problems and find solutions faster. It will also help you establish sales goals that align with your growth objectives.
In addition, your budget will indicate if you need to raise your prices or lower expenses if your profit margins aren’t where they need to be to meet your income goals. Finally, planning for tax time can go much more smoothly with a budget.
Another significant benefit of business budgeting is the professionalism it projects. It shows future lenders and investors you take your business seriously and manage it well.
As you’re building your business, you may find you need to dial back your personal spending a notch or two. Creating a personal budget will help you get a better handle on your expenses
Factor all of the following (and any other expenses that apply to you) into your personal budget:
- Mortgage or rent payments
- Car payments and insurance
- Insurance (life, medical, dental, etc.)
- Child care
- Personal expenses
- Retirement plan contributions
Laying all of this out will help you identify how much you’re spending on what you “must have” to live comfortably and what is “nice but not necessary.”
Also, aim to budget a percentage of your paycheck each month to build up your personal savings. To make sure you don’t spend that money on other things, consider setting up an automatic funds transfer (ATF) with your bank to move a set amount from your checking account to your savings account each month. That money will give you funds to fall back on as you transition from working part-time in your business to being a full-time entrepreneur.
You Can Do It: One Step At A Time!
With the “16 Steps to Starting a Business While Working Full Time” guide, you’ll get a head start in understanding what it takes to get a business off the ground while still working full-time for someone else. From business plans to budgeting to marketing and more, it’s packed with information to help you take your first steps.
And to make sure those steps point in the right direction, contact SCORE to work with a business mentor. SCORE mentors have expertise in all aspects of starting a business and can give you the insight you’ll need to move forward with your business dream.
Copyright © 2023 SCORE Association, SCORE.org
Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.