If you’re thinking about ditching the 9 to 5 and starting a business, you’ve probably thought about how you’re going to make the transition from a financial, professional and personal standpoint. How will you sustain yourself if you leave your full time job? How much money do you need in the bank to feel confident making “the jump”? Will you scale back your hours, take on a part-time gig, or quit altogether?
This is what I refer to as your Exit Strategy, and it’s all about effective planning for moving from one career and life phase to another. Essentially you’re exiting your current scenario and moving into the next, in what hopefully is somewhat of a seamless transition. What makes that transition smooth is having a solid strategy in place that addresses your financial, professional, personal and emotional needs. Just as there’s a proper method for uprooting a rotted tree, there’s a method for uprooting your life, switching out the pieces that are no longer relevant so that there’s room to plant new seeds and inspire growth.
An exit strategy will look different for everyone, depending upon your needs, priorities, current career situation and future career and entrepreneurial plans. While a truly effective and fool-proof exit strategy involves more than a simple check list, start by thinking about and incorporating these 5 important aspects.
Do a Performance Review on Yourself
What crucial skills do you need to be successful in your venture, and do you have them? It’s one thing to be the most innovative interior designer on this side of the Hudson, but it’s a totally different thing to be a good business person. Do you know how to balance a budget, and read a profit & loss statement? Are you well-versed in e-commerce and operating as an online merchant? Do you know why, when and how you should go about forming an LLC or incorporating your business? Chances are you are well-versed in your core craft, otherwise you wouldn’t be pursuing it as a career. But there are a number of other skills in business operations, finance, accounting and legal that you need to develop as well in order to successfully, and responsibly, run your business. And for those skills you don’t have – where can you go to develop them? Think- online courses like Lynda.com, local colleges, trade organizations, or even barters.
Develop Your 12-Month Business Start-Up Plan
There is a good probability that your business will evolve and change several times throughout your first 12 months, as you learn more about marketing, your target audience, your value proposition, and what works and does not work about your strategy. Start by creating a 12-month start-up plan, and you can integrate this into your business plan, of what you want your business to look like financially, strategically, growth-wise at the 3 month, 6 month, and 12 month marks. Continue to adjust this as your business grows and evolves – nothing is set in stone. But you need to have a foundation and blueprint to start working from, so you’re not sitting at your desk on day 1 of flying solo, wondering where the heck to start.
Get to Know Your Finances on a First-Name Basis
Now that you have your 12-month business start-up plan roughly mapped out, carefully determine:
- How much money do you need each month to cover your personal expenses?
- How much money do you estimate you will need each month to cover the operational expenses of your business?
- How much money will you need for one-time start-up expenses, such as incorporation fees, or new equipment?
Now figure out what that looks like for a period of 12 months. Assess your options and develop your gameplan for where that money come will from (part-time job, savings, business loan, VC/Angel funding, etc.). And while it may seem pessimistic, you want to answer this with the assumption that your business will not earn money in the first 12 months. It’s not pessimistic, or thinking small, it’s simply smart planning. You cannot jump into a new business expecting to turn a profit your first month. If you do generate revenue from the start (I did…), then good for you! But keep in mind the average start-up period for a business is anywhere from 12-36 months. So it’s essential that you cover yourself financially for at least the first year, so that you can focus on growing your business and your brand, and trying out different marketing strategies, instead of worrying where the revenue will come from by month’s end.
Once you have an idea of how and when you will be able to raise the funds to sustain yourself and your business for the first year, you can work backwards to figure out a timeline for your exit – be it quitting your full time job, reducing your hours, attaining funding or some other strategy.
Pool Your Resources into Your Sustainability Dream Team
Who do you have in your life who is backing you up 100% on your new venture? Does your best friend or your significant other remind you on a daily basis how great your ideas are, and to keep going in the face of nay-sayers and adversity? Maybe you have a mentor, coach or therapist who keeps you sane, focused and determined to succeed. And you wouldn’t be able to do it all without the financial genius of your awesomely reliable accountant, Franz. Think of the people who cheerlead your efforts, who add value to and support what you are trying to do, and what their function is within that community of supporters.
Do a Little SMART Goal Setting
As I mentioned, your business will change and evolve significantly in its first year, and probably its first several years. But start by coming up with your short-term and long-term goals for growth, whether it’s a financial goal, a brand-building goal, or any other quantitative measurement that helps you track what is and is not working. Maybe you want to grow your email list to 500 subscribers by the 6 month point. And you’d like to bring in your first customer by month 3. By the end of the year you’d like to have a 40 repeat customers that you’ve build a solid relationship and loyalty with. Use the SMART goal setting tool to guide you. If you don’t have a reliable system for tracking what is and is not working, it will be difficult for you to assess if you’re on track, and re-strategize when you’re not.
Having a truly solid Exit Strategy in place is one of the first and most important steps in making a successful transition from Employee to Entrepreneur. By assessing realistically (don’t do yourself a favor and work on minimums – OVERestimate) what you will need financially, emotionally, personally and strategically, you are setting the initial foundation for a successful shift and a sustainable business!