Feeling Entrepreneurial? Look Before you Leap

Many people dream about starting a business, but it’s a big step that requires serious planning and preparation. Additionally, venturing out on your own can have major implications on your financial situation. Those who decide to walk away from the security of a steady job to the world of entrepreneurship find that they are moving to something that is very different, yet new and exciting.

Be prepared before you leave your day job

Everybody’s experience is different, but there are a few aspects of self-employment that you should make sure you are comfortable with before making a major life change:

• Cash flow may be tight in the first months (or even years) of owning your own business. It can take time to attract customers, and expenses are often higher in the initial stages of a business. You will want to be frugal with your money and carefully consider all expenditures, especially when starting out.

• When your business has a good week or month, remember that every month may not be as lucrative. You’ll need to keep some cash in reserve for those days when the business hits a rough patch.

• The hours can be long and you might feel like you are on call 24 hours a day. It’s important to be totally committed to what you are doing if you hope to be successful.

• Be ready to take care of a lot of tasks. Unlike a corporate position where you are responsible for specific duties, entrepreneurs have to be ready to do everything, from keeping books to cleaning floors to making sales calls.

• If you have a family, make sure they are prepared for the change. Starting a business can require significant time and energy and may have an impact on your home life. A spouse and children need to understand this since you’ll need their support.

Steps to get ready

If you’re set on starting your own business, don’t make the move overnight. Planning is critical to make the transition as smooth as possible. Here are a few steps to consider:

• Write a plan – having a business plan that spells out what you are trying to do, the markets you are trying to reach and key milestones is important.

• Determine the legal structure – will your business be a corporation, partnership or sole proprietorship? Explore your options. You’ll likely want to consult with an attorney or accountant.

• Consider starting it on the side – if it is possible, you may want to start the business as a side project before you leave your job. This can give you a better sense of whether your prospects for success are good once you go at it full time.

• Have a financial plan in place – you will almost certainly need a pool of money to help you get started or keep you financially afloat in the early years of your business. You should have a financial plan that can help specify what you need on hand and any financial gaps that must be filled before you make the move. The decision to start a business may be the most important of your financial life. A plan is critical to ensure that you are in a position to make it work.

Rob Davis lives in University Place with his wife Lorri and their youngest son, Parker. He is a Financial Advisor and CERTIFIED FINANCIAL PLANNER practitioner™ with Ameriprise Financial Services, Inc. in Tacoma, Washington. Rob specializes in fee-based financial planning and asset management strategies and has been in practice for 38 years. He is licensed/registered to do business with U.S. residents only in the states of Washington, Idaho, Arizona and California. You may contact Rob at ameripriseadvisors.com/robert.g.davis.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

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