You’ve had a great idea for a business for a while, and you’ve spent time laying the groundwork.
Now you’re ready to make the leap and quit your day job, but what will you do for money before the business starts to turn a profit, and what are the pitfalls to look out for? Below are some tips for the entrepreneur ready to take that leap.
Take Out a Personal Loan
One of the main reasons you might consider a personal loan at this stage instead of a business loan is that it can actually be very difficult to get a business loan when you are just getting started.
This might seem counter-intuitive because when else are you most likely to need some startup capital?
However, if you look at it from the lender’s point of view, it makes a little more sense. As a business, you are an unknown entity, but as a person, it’s possible to run a credit check and determine whether you are a good risk. Y
ou can use this personal loan from Earnest as a cushion to help you pay bills on time and cover other expenses before your income becomes steady.
Find Out About Health Insurance
If you have your health insurance through work, you’ll need to figure out how you can keep some form of it after you leave. What is available to you will vary depending on what state you live in. Keeping your old insurance through COBRA is an option, but it is exorbitantly expensive for most people.
However, if you only anticipate going without a new health insurance plan for a short time, it is worth keeping in mind that COBRA can be paid retroactively for 60 days after your time on your employer-sponsored plan comes to an end.
This means if you become sick or injured in the two months after quitting your job, this option is available. This can give you time to sort out a cheaper alternative.
Check Out the Gig Economy
Dipping into the gig economy can tide you over if you run into financial dry spells while you’re getting your new business up and running.
Whether you enjoy driving and talking to strangers, writing and editing, tutoring or have other skills, there is probably a platform online that can connect you with people who need your expertise.
The advantage of the gig economy is that there are few barriers to getting started and little commitment, so you can take jobs as your financial situation requires without sacrificing the time and attention you need to give your new business venture.
Have a Business Plan
Although you might be covering expenses with savings, a personal loan and the occasional freelance ventures while you’re getting your business up and running, you need a concrete plan that includes an idea of when you expect to start showing profits.
This can help you determine whether you need to make adjustments at some point if your plan is not lining up with reality.
For example, you may find that you need to put more time into networking or money into advertising if you are not drumming up the business you expect within a certain amount of time.