I previously mentioned three things I learned from my failed business. Here are three more things I learned that are equally, if not more, important.
Don’t Quit Your Day Job
For a lot of us, entrepreneurship is the road to financial freedom. We want to quit our day jobs and have some flexibility in our lives. However, keeping your day job will help you save up to cover expenses while you’re getting your business off the ground.
If you plan to quit, keep in mind that you may not be profitable at first. You may want a year or two years’ worth of household expenses saved, plus money set aside as an owner’s investment for the company. There is a significant learning curve with a new business, and you never know what the costs might be. Forbes states there is a 75% chance you will make it through the first year, and there is a 50% chance you will make it five years. Part of the reason for failure is the lack of funding.
Be Realistic
Here are two things that some people don’t realize about being self-employed: it takes a lot of money and even more time than a regular nine-to-five. When you go to your job, you have one role that you’re filling. You complete your purpose within your set hours, collect your pay, and you go home.
When you own your own business, you have to work all the positions, with no set hours, until you can hire employees. To pay your bills, your company needs to earn enough revenue to cover supplies, utilities, rent, legal fees, taxes, etc., plus your salary and a profit. Employees earn wages, too, so make sure you include their pay into your budget. You want to have money saved in case customers don’t pay on time and plenty of inventory in case vendors don’t deliver on time. All of these things take money.
If you need to take out a business loan, you are more likely to get it if your established business has money saved and is profitable. Unfortunately, banks will consider your company to be high-risk if you have bad credit, low business age, or no collateral. This lack of access to lent capital means most new businesses will need to be cash-funded. Hence, I recommend you do not quit your day job until you have plenty of money saved up.
Be Patient
It can take time to save the money you need. Your business may take years to cover more than business expenses. Each milestone shows growth and promise. Most overnight success stories have years of planning and testing that came before. Some of the most famous entrepreneurs were broke for years or failed multiple times before making it big. Examples are Elon Musk and Jack Ma. They both have remarked about their failures and what it taught them over the years.
To see other lessons I’ve learned when I failed at business, you can read part one.
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