Well, there is a big difference between wanting to quit your day job to follow your business-ownership dreams versus actually being able to do it. In fact, the difference is financial ruin.
I tell my clients to prepare for the worst and expect even worse. This, in my opinion, is the best way to be truly prepared for all the unexpected situations business ownership will deliver. We don’t live in a perfect world and your business isn’t going to run this way either.
It is vital for you to have a year’s salary put away. Make sure this salary covers paying your bills, mortgage, paying for food, family needs, entertainment, + 6 months of an emergency fund. Additionally, you need to have 1 year of business operating expenses put aside. Don’t forget to include your startup costs and another 6 months of a business emergency fund.
Typically, this means you need to have around $200,000 cash on hand to really operate a business (and survive) for the first year to year in a half of being in business for yourself. Don’t forget the golden rule- most businesses don’ts tart making a profit until two to three years in, which leaves a gap of 6 months to a year where there is no cash flow… what will you do then?
You see, it isn’t wise to quit your day job until you are prepared to lose a lot of your saved cash (or other people’s money). Ask yourself right now if you’re willing to take this risk. If you’re answer is “no” then it isn’t time for you to be brave and quit your day job.
Until tomorrow,
Coco the CEO
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