Hey would-be entrepreneurs. We've got a secret for ya. You don't have risk your house or go into debt to start a new business. Rather, you need to consider how you'll supplement your income as you build it. Rumor has it that only one in ten new businesses succeed, and that most businesses suck cash for years before they make any money. By planning for alternate sources of income, you can protect yourself from crippling financial damage. And that's a good thing.
Here's how to think about alternate income streams:
- Figure out what you need to make on a monthly basis. Factor in your business start-up costs, and maybe a latte or two. This is your number. Own it. Love it.
- Consider your need to secure a part-time job, or figure out how you can work as a freelancer. If you freelance, assume you'll only be able to bill clients for up to 20 hours of work per week. It's harder than you think to bill for more than 20 hours as a freelancer.
- If you're leaving a full-time job, set up a savings account six months before you announce your departure. Commit to adding to it regularly. Save as much as you can. While six months saved in cash is a pipe dream for many of us, it's a good north star to shoot for.
- Identify your most bankable skill. We don't mean what you love to do. We mean what can make you the most money, most easily. Period. Making money while you're launching a business need not be glamorous or fulfilling. It should be lucrative.
- Line up part-time work weeks or months in advance.
- Don't burn bridges! Your former employer might be open to hiring you on a part-time, hourly basis if you leave the job on good terms.