If you’ve had a great career and want to start your own business the comfort zone of your salary can be a trap.
It can keep you in a job far longer than is good for you, or can hold you back from getting started on your business as quickly as you might like.
Wanting to replace your salary with income from your own business is a common benchmark, but is it the right question?
If you’re starting out and want to know what to focus on first, you can download our ebook:
Top 4 Priority Focus areas for a successful first year in business
The reality is that it may take far longer for you to replace your salary than you might want – but being your own boss brings other valuable things beyond just the income you receive.
4 THINGS TO CONSIDER:
1. Cost of living
Often when you’re earning a great salary you have cash coming in, but not a lot of time, so you’re likely to spend more on some things – either for convenience, or as a way to self-medicate for the stresses of your role.
If you’re like most successful women, potentially there are many things that you currently buy, or spend money on that you could reduce or remove, without feeling like you’re suddenly on the bread line.
If you wanted to reduce your spending by 10 – 20% to give yourself a little more breathing room as you start a new business, what could you stop doing or buying?
Don’t go hard core poverty minded though!
A great place to start is to print out 3 months of credit card or bank statements and highlight anything that is not ‘essential’.
Doing this doesn’t mean you’re going to stop buying coffee, or dining out ever again, but it will show you how much you spend on discretionary items and allow you to make informed choices about things you could potentially cut back on to help you create a nest egg to draw on, or to buy you more time as you build your business.
2. Real returns
Having the benchmark of your corporate salary is a natural one to compare your business ‘success to’, but there are many other ‘non-monetary’ returns that you get from being your own boss.
There is true value in the many freedoms you can enjoy when you work for yourself.
What value do you put on being able to choose:
- your own hours,
- who you work with,
- what you actually do for work and
- the flexibility of your own schedule to suit your lifestyle and energy patterns?
A client of mine, Tanya, is a true night owl who comes alive with energy and ideas late at night.
Since she left her role in a media organisation to start her own brand partnerships consultancy, she’s been able to work to suit her preferred working hours and rhythm as well as travelling between Melbourne and Adelaide to be with family when she needed to.
That’s not been without it’s challenges, but the value of this freedom and flexibility deserves recognition beyond a monetary benchmark.
Another element I have realised is hugely valuable to me since starting my own business over 6 years ago, is my ability to prioritise my health and my sleep.
In my last employee role [and probably in all of them!] both my health and sleep were severely impacted by the stresses of the job and the culture I was working in.
Working for myself and being able to check in with what I need, mentally and physically – to let myself sleep with no alarm if I can, to work in the garden, or go for a walk outside, to play with my puppy, or meet a friend for a coffee during the day without having to ask anyone else is a remuneration perk that would have a very high dollar value!
In saying all of this, if you really do want to replace your corporate salary in your own business, there are also some other realities for you to consider.
3. Your Business model
To know if you can replace your corporate salary in your own business, and how long it will take you need to take a solid look at what your business model is going to be.
You need to crunch the numbers to include things like the costs before you’re ready to sell and your price point.
- how many ‘products/services’ do you need to sell at what price to break even?
- how many more do you need to sell to pay yourself a starting salary?
- how many more again to match your salary?
In considering your business you also want to make sure you think about scalability – are you able to sell enough to earn what you want to earn? And what will it take for you to be able to do that?
Are there additional costs that will kick in beyond a certain point?Many women start a business without doing some decent number crunching to know what they’re heading for and can inadvertently create a model that makes them busy, without the profitability they’re looking for – so make sure you put some time into looking at this.
To help you with this, download this free ebook:
Top 4 priority Focus areas for a successful first year in business
4. Build some Buffers
Another thing you want to consider is how you can take pressure off you needing to replace your salary quickly by building some buffers of time and cash.
There’s a lot of benefit in you taking some small steps to get started and ‘test the waters’ with your business idea before you pull the rip cord on your current income.
You’ll also learn a lot by doing this that will help you be even more informed and prepared for what’s ahead.
So how could you build in some ‘Time buffers’ by getting started with your business now?
Could you start by doing some research, or by getting your first client and testing your offers, without needing every conversation to convert straight away?
And what about building some extra comfort from some lovely plump cash cushions?
The bigger your cash reserves going into your own business the more time and flexibility you will have to build your business without unnecessary money stress.
How many months of living expenses do you have access to without earning any income from your new business, and how could you potentially have some money coming in whilst you build the foundations of your business?
Think of your cash cushion as an account that will pay you and cover your business costs until the business can do those things on its own.
It’s ok to want to replace your salary in your business as quickly as possible, but don’t obsess about it, or use it as an excuse to delay getting started and use these tips to give yourself a shot at the best of both worlds.
Here’s to being your own boss!