Changing careers is more common than ever. On average, a person switches careers between three and seven times in their life. For those who are self-employed, pivoting careers comes with its own host of challenges. As you’re juggling both living and business expenses while making a big push to propel your new business endeavor, financial stress can come from both directions.
If you’re currently self-employed and looking to start a new business, expand on an existing one, or change industries altogether, how can you do so successfully without a hitch? What financial ducks do you need to have in a row? Here are a handful of helpful tips and insights from self-employed folks who have successfully made a career change:
Save for a robust savings fund
To ensure you’ll have enough money to cover living expenses while pivoting, you’ll want to save at least one to three years of living expenses, says Heather Schooler , owner of the personal finances services company The Money Library. “This is critical if you are the primary or sole breadwinner in the family,” says Schooler, who successfully switched careers after 20 years working in corporate America. If you’re the sole breadwinner, you’ll want to save closer to three years of living expenses.
To do so, you’ll want to reassess your spending and budget for success prioritizing your savings goals, figuring out where your spending is going, and cutting back on your spending in whatever spending categories you can.
Another way to make sure your savings fund is ready for a career shift is to take on side hustles to earn extra cash that will help you save more quickly. Most people earn anywhere from $70 – $500 a month from side hustles, and every little bit can be squirreled away toward your savings fund.
Add a cushion to your business expenses
Whether you’re pivoting, adding new services, or expanding your existing small business, draft a business plan that includes the estimated expenses of your startup. Schooler suggests multiplying that estimate by three to ensure a safety cushion.
“It’s important that you feel confident you’ll have enough money to run your business,” says Schooler. If in doubt, it’s always better to err on the side of caution. So if you think you need $20,000 to pivot, have at least $60,000 in capital lined up to run your business. That capital can be self-funded, or come from a lender.
Factor in time to transition
When you make the leap to working for yourself or starting a business, you should give yourself at least a year to fully transition, recommends Melissa Berry, who went from working a career in Homeland Security to being a self-employed editor and content manager. This includes working two jobs: your main “day job” and your second “side hustle,” until your business turns a profit.
Besides giving yourself time to fully transition, it’s important to know when to fully transition. For Tyler Bainter, co-founder of Callbox Storage, he realized it was time to take the leap from his day job as a CPA to running his business full-time when it reached a point where it needed a full-time CEO.
Build a client list first
Whenever possible, work on building up a client list or earning sufficient revenue before transitioning, explains Matt Ham , president and owner of ComputerRepairDoctor.com. “Don’t quit your day job until you have enough clients to support yourself or you’ve reached a point where you really can’t manage both your day job and your new business,” says Ham.
Pivot within an industry you have experience in
While not impossible to do, it’s far easier – and you’ll up your odds of succeeding significantly – if you pivot in an industry you have some expertise in. When Bainter wanted to start his own business, he was working as a CPA in the real estate industry.
That expertise and his network of connections helped him figure out whether his business plan was a sound one, and get the financial support he needed. In fact, his old employer provided some of the funding to get his business off the ground. “The financial backing from my employer not only helped propel my company, but also showed they believed in my business idea,” says Bainter.
Celebrate the small wins
Celebrating the completion of small goals is one of the best things you can do to stay motivated, says Matthew Odgers of the San Diego-based business law and estate planning firm Odgers Law Group.
“There is so much that needs to be done in your first year and it is easy to get overwhelmed when you only look at the big picture,” says Odgers, who made the transition to running his own business several years ago.
To stay motivated, jot down a list of three to five goals on the first day of the month you want to accomplish during that month. At the end of each month, you can go through your list and either celebrate any small wins, or make tweaks to your goals. As a new business owner, there is always more that needs to be done, but by taking a break and celebrating what you have already accomplished you will have the endurance to make it through the long haul.
Pivoting to a new career while you’re self-employed is no easy feat, so you’ll want to make sure you’re well equipped to take on any challenges you may encounter. By having your ducks in a row, you’ll be able to successfully make the change.
Have you ever pivoted careers as a self-employed person? What were some of your hurdles, and how did you overcome them? Any surprises? Let us know in the comments below.
The post Tips from the Self-Employed Who Successfully Made Career Changes appeared first on ZING Blog by Quicken Loans .