Emergency Fund- Starting a Business: What to Expect
Photo from Intuit
Starting a business without a safety net or funds to back it up may seem difficult (or impossible). But you can do it with the right tools, resources, mentality, and know-how. To build a safety net yourself when learning how to start a business, market research, accessible resources, separated finances, and mentors will help. Taking calculated risks with expertise and purpose will help you transition from a big idea to a successful business.
How to start a business with no money and no safety net
Starting a business can feel somewhat like a free fall, especially if you don’t have a safety net—like a regular paycheck — to catch you. However, with some careful planning and managing your own expectations, it’s more than doable. Use this quick guide to begin empowering yourself with the knowledge you need to become your own boss.
Research your business idea
One of the best ways to test a business idea before taking the plunge is to conduct market research. Gather data on potential customers, competitors, and the industry as a whole. Start by surveying people in your target market to see what they think of your business idea and how much they’d spend on it. Then, look at what the competition does and how you can do it better.
Want to learn how to start a business with low-cost ideas? Here are a few options you may consider:
- Selling services (pet sitting, social media management, freelance graphic design, etc.)
- Selling handmade crafts or baked goods
- Selling digital products (e-books, printable graphics, online courses, etc.)
- Affiliate marketing as a blogger
- Becoming a social media influencer
- Dropshipping from an online store
Even with a low-cost (or free) business idea, there’s still the potential that things may go wrong.
Although it’s tough to be pessimistic when you have a big idea, this is a good mindset to have, especially in the early stages. They don’t call starting a business a risk for nothing. Whether it’s calamity from Mother Nature, a financial collapse, a change in the industry, or something else entirely, your research will help you in the event of a disaster.
Know the ins and outs of the industry before diving in. And to make sure the business doesn’t fall apart before it even gets a chance, set up some emergency savings for business-use only.
Tap into key resources for help
No matter how great your business plan is, there are bound to be some speed bumps along the way. When you have the right resources on your side, it’s much easier to overcome those challenges. Here are some tips to consider when things go sideways, and you need some help.
Your full commitment
Be prepared to go all-in from the start. Heart, head, soul, time — these should all go into your plans when you determine how to start business from a single idea. When you get started, you and your family need to understand that you’ll be putting large chunks of time and effort into your business. Spend time with successful entrepreneurs who can offer guidance or advice can help, especially in the beginning stages of a business venture, to ensure this commitment is fruitful.
The four D’s
Commitment alone doesn’t guarantee a successful business. To really make it in the business world, you need desire, drive, determination, and discipline. Holding this mindset will keep you motivated, help you take critical action, and make it easier to follow through with early business plans.
Learn all you can
Getting business knowledge is essential. You should be able to wear many different hats or find a few trusted professionals to outsource tasks you aren’t up to. Do plenty of research upfront and keep learning as you develop your business. There are free or low-cost resources out there that can give you necessary training and experience.
Find startup money
Financing is among the biggest early challenges you might face. This typically involves tapping into personal savings or getting a small business loan. It may help to check out business incubators and accelerators to get support for your startup or early-stage business in the form of things like cost-effective office space, funding access, and free mentorship. This is often an effective way to get help figuring out how to bootstrap a business.
Consider your savings and your day job
Even if your idea is one-of-a-kind, ideas alone won’t pay the bills.
It’s a huge risk for someone to quit their day job and figure out how to start a business without any backup plan. Not only do you run the risk of financial trouble if the idea fails, but you will also lose a steady income. Yikes. Most new companies don’t make a profit for at least six months.
Instead, you should keep your job and use that income as a jumping-off point to take risks and make the new business successful. Investing your own earnings into the new business will help grow the venture steadily, leading to a solid base to build from. But remember — only invest what you can lose.
The same principle applies to your savings accounts. Investing savings into your new business venture may mean you never get that money back. Eventually, the business should grow into something that can support you financially if it finds the right footing, but if not, you should know you may lose that cash.
What if you need more time to ensure your business gets off the ground? Depending on your business plan, quitting your job and getting the pieces moving right away may seem necessary. If you decide to quit your day job to focus on the business full-time, confirm there are some personal savings available to support you.
Start building a safety net
It’s going to take some time until you’re able to pay down your bank loans and increase your cash stash. Even in the early days of the new venture, start building a safety net using these tips:
- Conduct market research to figure out how to start a business that’s a winner from the get-go.
- Set up an emergency fund to help reduce the impact that a disaster could have on your business.
- Use available resources to give yourself more knowledge and expertise as a business owner.
- Split business and personal finances to simplify taxes and better stick to your business budget.
- Don’t quit your day job if you can help it and prepare to lose any cash you put into the business to stay on the safe side.
- Build your cash flow with efficient invoicing to encourage faster payments.
With some careful planning and dedication, you can learn how to start a business that will lead to growth and profits. Create your own safety net by planning ahead and take calculated risks to establish a successful project