Today’s Biz Ladies comes from the wonderful ladies at Smart Cookies, the financial expert team. In this post, Katie Dunsworth, a co-founder of Smart Cookies and owner of Spark PR, shares her personal story (and tips) of making the leap from employee to self-employed. She offers some valuable suggestions for taking your business idea to the next level and making that transition out of the 9 to 5 a seamless and successful endeavor. Thanks, Smart Cookies and Katie, for this incredibly helpful post! — Stephanie
Read the full post after the jump . . .
Monotony. Boredom. Grating coworkers. Menial pay. Do any of these terms describe your sentiments about a day at the office? Each year, an estimated 1 in 12 people kiss their 9-to-5 day job goodbye and venture into small business ownership.
I count myself a lucky member of that club. In just two years, I went from being an underpaid and overworked employee to an award-winning entrepreneur with a six-figure income. I own my own PR firm and am one of the co-founders of The Smart Cookies, a money mentoring business I started with my four partners in 2007.
Our story began like many others: We had a great idea. We had a brilliant plan for what we could uniquely offer consumers. We were even lucky enough to have Oprah cover our money group concept, which led to a book deal and television show. But having an idea for a business is one thing; actually leaving the comfort of a steady paying job is something completely different.
Each of my partners and I read books, asked other entrepreneurs for advice and spent many sleepless nights contemplating the right time to quit our day jobs and take the plunge. From our more than three-year journey, we’ve learned some essential lessons to consider before starting your own business.
1. Do as much as possible to build your business on someone else’s dime.
- Register your business name.
- Buy a URL.
- Decide whether to incorporate or register as a soul proprietor.
- Create a brand and website for your business.
- Develop a business plan.
- Create a financial plan including projected operating expenses, taxes and earnings.
- Find a mentor.
- Hire a bookkeeper or accountant.
- Open a business bank account.
- If possible, take on clients, jobs and contracts.
These are just a few of the basics you can get in place before working full-time in your business. In fact, having regular income from an employer makes it a bit more realistic to pay for expenses like incorporation, web development and branding.
2. Create realistic financial goals and projections then have mentors review them and offer feedback.
Finding exceptional mentorship was probably one of the most impactful things we did in The Smart Cookies business. We sought out highly respected business owners with experience in everything from online business development to finance and asked them to sit on our Board of Advisors. When we started our business, they thoroughly reviewed our business plan and financial projections. Their feedback saved us thousands of dollars and completely altered our operating structure. I recall one example specifically: We were all excited to quit our jobs and start working full-time in our new business. We explained this to our mentors, who promptly convinced us that the longer we could stay in our regular jobs, the better this would be for the long-term security of our business. This was such an obvious and easy decision in hindsight, but at the time, we were so caught up in the excitement that we were getting a bit ahead of ourselves without noticing the obvious consequences.
Another critical element is relationships. Our mentors were very connected in our community. If they didn’t have specific advice, they were able to refer us to someone who did. By connecting us with world-class contacts, we were able to maximize the capital in our business and keep close tabs on our costs.
3. Save more and spend less in your personal life.
As a future business owner, personal and professional finances will be closely linked. In your first few years of business, you are realistically going to make less than your previous salaried job. Aim to reduce your living expenses as much as possible to compensate. This might mean moving, downgrading your vehicle or cutting your food and entertainment budget.
Some simple money-saving strategies we followed when we first launched our company included:
- Ditching a car for a zip car
- Moving in with a roommate or moving into a smaller, more centralized studio (cheaper and closer to transit)
- Consigning clothes and household items for extra income
- Switching from lattes to regular coffee — or better yet, making your own coffee
- Cutting your restaurant and cocktails budget down by 50%
4. Allocate time and money to business development and marketing
I’ve met too many entrepreneurs who left everything the second they got one paying gig. Bad idea. I firmly believe that unless you have a plan and some proven experience creating regular ongoing revenue, you aren’t ready to leave your job. Getting your first paying job is a fantastic accomplishment. But it’s also incredibly deceptive. Now that you’ve got the contract, you have to spend more of your time providing the service you’re selling and less time on business development. If and when the contract expires, you need to ensure that you have new customers in the pipeline. Don’t fall into the trap of forgetting to plan for the next sales cycle.
You can avoid this by doing the following:
- Treat marketing and business development as part of your job.
- Carve out at least five hours a week for things like cold calling, taking meetings with prospective clients and researching marketing opportunities.
5. Get to know and respect the taxman.
Knowing and respecting the taxman will save you a lot of time and heartache down the road. No one likes to pay taxes, so accept that fact and move on. As Bill Bruns, Harvard Business School professor, said, “I want to pay more taxes. Meaning you should look at an exorbitant tax bill as a measure of your success.”
Enter into your business with a clear understanding of the following:
- What does the tax implication look like in your line of business (this differs if you are a sole proprietor or an incorporated business)?
- Based on your income projections, how much do you need to set aside for taxes every month/year?
- What do you need to register for to make tax paying as easy as possible?
- That an accountant with experience can support you in managing and filing your corporate taxes
A great resource for all you need to know about taxes for your small business can be found here.