Making the leap to entrepreneur or consultant is always scary, but planning now will prepare you for the unexpected later.
How do you confidently make the leap from corporate employee to entrepreneur or consultant?
If you want to make it on your own, there are three important steps many successful entrepreneurs take before they head out.
While some folks get lucky or find a way to make it work without much planning, others end up returning to the corporate world they so desperately wanted to escape.
To ensure a smooth and successful transition to your new solopreneur life, take these three steps:
1. Reduce your costs
Live minimally. Gain freedom from your job by not needing the paycheck.
The more expensive your lifestyle, the riskier it is to jump to something new and uncertain that could have a potentially low income at start. The more you can reduce your overhead, the less risky it is to make that jump.
If you want to start something new or break out of a dead-end job, follow the path of the Ramen-eating hackers who live cheaply. If you live an elaborate lifestyle, you may burn through your paychecks. See how much you can cut.
Make it a game. Buy a $75 sewing machine and give up buying clothes for a year. Learn from the family in San Francisco that lives with no trash. Eat on the cheap. Give up restaurants and alcohol for a year, or even a few months. Track all your purchases and decide whether that night out with friends or new pair of shoes is more valuable to you than your freedom.
The nomadic entrepreneurs who live around the world and work from anywhere are often working in places where the cost of living is low. They’re not rich; they’ve often worked the airline systems to get thousands of frequent flyer miles and travel on the cheap. The life they’ve built is incredibly inexpensive, making the need for a giant business (and lots of possessions) unnecessary.
Sound like too much to give up? Consider how much you want to leave your job. What’s it worth to you? How much do you want to start this business? When you want it, you’ll make it happen.
2. Build a nest egg
Tuck away a little bit of money each paycheck to save for your future expenses. A great rule of thumb is to save enough to cover six months of expenses. But if you’re eager and motivated to make money once you take the leap, one or two months of savings might be enough to hold you over.
The lower your expenses, the longer you can stretch your savings. If every paycheck goes straight to paying your expenses, consider taking on a small side job to boost your income.
When I started my first job, I made less than the cost of my rent and loans. I picked up two side jobs: teaching swim lessons on the weekends and tutoring high school students in the evenings after work. That extra $200 a week was my savings and food budget, and I was able to save a little bit each month.
After a year, I had saved $4,000 and was ready to jump. It was just the cushion I needed for several months to concentrate on tweaking my side business endeavors. Soon I started making thousands of dollars on the side.
Allie Siarto of Lansing, Mich., built a side business as a photographer, which was entirely different from her day job managing Loudpixel (her first company). Another woman in New York spends her days at an advertising agency and works at J.Crew on the weekend shift to get a massive discount on her favorite clothes and add extra cash to her savings.
3. Hustle on the side
It’s called moonlighting, and it’s a great way to test whether something you want to do is feasible. The best time to try out your new project or company is when you have the structure of your current job to help support you.
Test the market viability by seeing if there’s any traction for your ideas, and tweak each iteration a bit to improve the offering. Perhaps you want to start a side culinary and health business. Set up evening showcases on the weekends for friends and family and let people know you’re doing a cooking class at a discount to raise awareness. Pitch your services to local vendors. Offer to teach at a high school. Spread the word about private lessons.
After a couple of months, reevaluate and see if you’ve made a profit. Tweak your project to build something people want that you also enjoy doing. If you need to, stay home and do things no one else is doing to make it work.
Leave your job when you need more space in your business or venture and when you have a few leads. You’ll be excited about what’s ahead because you’ll have already mitigated against risk.
When is it time to finally take the leap?
There are times when you need to make the leap without a nest egg, without changing your costs, without a plan. This happens, and people make it work. Sometimes the intensity of the jump forces laser-like clarity and an immediate reduction in expenses. But if your goal is to set out on your own by next summer, start building your business and reducing your overhead right now. (Click here to Tweet this thought.)
Most folks running their own businesses and building the life of their dreams are always in the process of doing that — running and building. These are active verbs, which take time, energy and innovation. It’s not about pulling all-nighters or creating an endless stream of energy; it’s about being smart about building something a little bit at a time.
People who are working on new projects or problems aren’t immune to risk. But they’ve mitigated potential risks by using strategic tools, building up their savings, creating clever cost-saving lifestyles and forming plans to tweak their systems to get what they want.
Sarah Kathleen Peck is a writer, designer/entrepreneur and teacher who runs workshops and online courses on creating powerful communications for yourself, your brand or your company. Based in Brooklyn and San Francisco, you’re likely to find her running, swimming and practicing handstands or on Facebook and Twitter.