My recent research showed that the number one concern for women thinking of leaving their jobs to start their own business is money.
Will they make the same level of income as they have now, less, or even more? It’s not only the amount of money but also the uncertainty about how regular and reliable the income will be. These fears delay their departure.
If you are thinking of ‘crossing over’ ensure you have at least 8 months of savings to fall back on incase your business does not go according to plan. Having enough savings to cover 8 months of living expenses means that you can keep working to bring your business idea to life and not worry about how you will pay the mortgage this month.
Create a household budget and stick to it. Assess where you can cut your expenses as you are starting up your business. Create this budget while you are still working and live by it. In this way when you make the move from employment to your business, your lifestyle and spending patterns will not have to be another factor you need to adjust. You will have done the work already.
Feeling confident about business financials and how the numbers work before you leave your job will make a huge difference to how you create and run your business. Understanding the finances of the business is critical, and if you don’t know the difference between a profit and loss statement and cash flow – get help now!
Instead of shying away from the numbers, you will embrace them and understand how the business is performing. Knowledge of the numbers will give you insights about what you need to focus onto grow your business and your profits.
A recent Corporate crossover, Galia Orme of Choc Chic; “I do all my accounts. I have a really clear idea of what the outgoings are, what I need. I do weekly liabilities reports, what’s coming in, what’s going out. So I know. I’m determined to make sure I know the financial state of the business all the time. It gives me confidence and I feel on top of the business. It’s really important for me. It wasn’t a skill I had before, or something I thought I was capable of doing.”
Financial results are also an important measure of impact and the health of your business. By keeping a close eye on your revenue, expenses and profit, (hopefully!) you can be realistic about the performance of your business.
I had a huge lesson in this when I had been running my Executive Coaching business in London after about a year. I was sure I wasn’t making the money I used to when I worked and I was even looking for a job. Then one day (and I am ashamed to admit this) I actually took the time and added up all my invoices. Imagine my delight when they added up to more than my previous income! Suddenly, I realised I was successful, making decent money and most of all, that gave me the confidence to keep building my business and doing what I love.
In these cases, information is definitely power!
If you need to increase your understanding of business finances, there are many resources available. Try your bank as they often have free courses and information. And if they don’t have it, try one of their competitors who will most probably have lots of tools on their web site. Ask around from other business owners where they got information, find a proactive accountant, tax advisor and bookkeeper.
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