An aspiring business owner from St Petersburg, Florida, asks:
I began a part-time business venture 14 months ago whilst keeping my day job. Though the business needs more sales, it produced a gross profit of $37,500 last year which is a nice little money earner to supplement my $94,000 annual salary. However, I’ve hit a ceiling because I’m not operating it full-time. As a single mother of three with a mortgage, it’s scary thinking about leaving my safe job. Though ambitious and wanting to branch out, I am afraid.
Kenelm Tonkin, Chairman, Tonkin Corporation answers:
People handle the “entrepreneurial leap of faith” differently. Prospective entrepreneurs often jump. Others plan. Yet others perpetually analyse without acting. Some, like you, test the waters but baulk. Personal and financial commitments make this understandable.
Here are 5 risk-minimising tips in relation to this “entrepreneurial leap of faith”:
First, set a deadline. Resolve that if you don’t cover your costs by a deadline, including your pay, you will return to a job. Now you can launch with zeal knowing that your time and financial exposure are limited.
Second, fund your own safety net. Capping your financial exposure by imposing a deadline means you can calculate the salary you would forgo. Why not save this sum to fund your personal expenses rather than drip-feed your savings to fund direct expenses? You will discover that creating your own safety net first will actually accelerate your business growth.
Third, construct an external safety net. Introduce yourself to hiring managers in companies you like and ask them whether their company values entrepreneurial flair. Share your planned adventure, adding that you’d have tremendous experience to offer their company in the unlikely event the business doesn’t go to plan. I guarantee, they will remember you. Cultivate these contacts.
Fourth, understand job security is a fiction. At best, job security is qualified by the requirement that customers value a product. Even then, job safety is uncertain. One difference between employees and entrepreneurs is that entrepreneurs have a direct interest to make the product-to-customer process work. Another is that, if that process has hiccups, the entrepreneur is the last to lose her job. Employees go first. Who has the job security now?
Fifth, know your income replacement score. Yours is 39%. The $37,500 generated from your part-time business is 39% of your full-time, $94,000 salary. If you can already achieve this in those harrowed moments between a 9-to-5 job and raising children, imagine the possibilities full-time in business. The additional $56,500 needed to replace your salary seems probable.
If none of these realities moves you to act, I recommend you retain your business as the supplementary income source it is and live with thwarted ambitions.