I used to be in a ton of debt.
Not as much as people with student loans, but for a single gal without a college degree, who made less than $32k a year, it was a fair amount, and more than I could see myself digging out of. I’m sure that salary seems like a lot to some people, but when more than half of that is taken up with credit card minimums and car loan payments, and then you still have rent due, its a very overwhelming place to be, especially for someone in their early 20s.
I got into a lot of debt when I first tried going to community college and ended up cutting classes to go hang out at Dennys with my friends. (I was a terrible 20 year old, don’t be like me!) Then, when I first started my photography business, I decided it was a good idea to open up a ton of credit cards in order to buy the latest and greatest equipment (and if you know anything about photography, you know its not a cheap business to get into!) I was just convinced that I would make my investment back in no time, and that I’d be able to quit my job within a year and be my own boss. After all, that’s what everyone wants, right?
What to Consider before Leaving Your Day Job
THANK GOODNESS I made the decision to stay working full time, because I never actually climbed out of debt until after I closed the doors to my photography business. It’s crucial to evaluate the risk and potential gain involved in working for yourself from home. This is where the business plan comes in. Every company, small or large, needs one. It is necessary to ask yourself a few questions before you quit to go full steam ahead with a home business.
Here are some questions to ask:
Can you fund your venture? What will it cost to run your business? Home-based businesses have an advantage of low overhead in most cases, but that doesn’t mean free. Using your savings is not a good idea (in fact, its a terrible one!). Using your business plan, seek capital from a financial institution first before dipping into your hard-earned savings (unless you’ve been saving specifically for your business.) I follow Dave Ramsey’s debt-free principals, and don’t spend a dime I can’t afford anymore.
Can you support yourself and your family? When you are talking about pursuing a new business full time, the income that sustains your household needs to come from somewhere else. A fledgling business might not provide enough income alone to do the job. This is the reason there is a good case to be made for staying at your full time job while working your side hustle.
Are there unforeseen costs involved? You'd be surprised how many people get into business and are shocked by the amount of money they had to spend that they didn’t account for. Unforeseen costs can be a nightmare. Of course you can’t predict every scenario that might happen. Factor in extra capital for upgraded equipment, contracted services and such. Don’t let an unplanned snafu sink your business ship. When I was a photographer, I had my main camera break, and was completely unprepared to buy a new one. The most critical piece of your business breaking when you can’t really afford to replace it was a nightmare that I don’t wish on anyone!
Can you handle several roles at once? In the beginning, you will be chief cook and bottle washer. It will be your responsibility to take orders, advertise, network, answer customer service calls, fill orders and whatever else needs to be done that pertains to your particular business. There is nothing you won’t do when starting up, and you should be prepared for that. I sure wasn’t. I had no idea what went into running a business-taxes, legal fees, advertising and marketing….of course you do realize in general terms what needs to be done, but for some reason it doesn’t really sink in that you are actually the one who has to sit down and do it.
Is your knowledge up to the task? We all have our strengths and weaknesses. In business, it is the weaknesses that determine how strong your company will be. If you are starting an internet business, but don’t know much about online marketing strategies or SEO, the choice will be to hire someone who does or take the time to learn all about the techniques yourself. A weakness in this area might cripple your business promotions. Make sure that you know all aspects of your business and can perform them yourself if need be. For example, I am just terrible at math and accounting, and because I didn’t want to pay for someone to do it for me, I had to sit and learn how it all worked for myself. That’s paid off for me in the long run, but at the time it was completely overwhelming.
There is nothing wrong with working a business part time in the beginning (or maybe forever!) Once you gain clients and get a feel for how the operations work, then consider if your success is enough that a day job is not necessary.
Before you even start, I recommend sitting down and taking a serious look at your finances. Really plan out your budget each month and see just how much you would need to bring in from your business (don’t forget to only count profit, not just income!) before leaving your full time job to work on your business. There is no need for anyone’s life to be ruined financially by making a judgement mistake when a little planning would have prevented it.
Since the day I became debt free, I haven’t once looked back or gone into debt, for any reason business or personal. Its amazing how many possibilities are opened up when you aren’t spending your entire earnings on debt payments. It is my wish for you to have the same.