My father became the CEO of a Fortune 500 company when he was 34 years old. With that shining example, being the boss of a big company became my own goal.
After moving up the corporate ladder, and a long period of soul searching, I decided to choose the toughest, most demanding – and most caring – boss one could ever wish for: oneself. I decided to open my own financial planning enterprise as a CFP® professional.
Everyone has a different story to explain what led them to become their own boss. Some were tired of working office hours, driving long distances to commute, or doing the actual job. Others, like me, wanted a chance to magnify the positive impact of their professions in the ways they saw fit.
Whatever your reason, I salute you. If you are considering joining us and becoming your own boss, consider the following three big costs you will likely incur, and some ideas for how to overcome them:
The cost of not having a steady salary with paid benefits
As CFP® professionals, we always advise our clients to save for rainy days. When you are prepared for the low points, you increase your probability of success.
The absence of a steady salary and paid benefits forces a discipline of saving before spending. Unlike a steady job, during which you save for retirement, as an entrepreneur one must first save for cash flow and then save for retirement. Having about six months of core living expenses will allow you to focus on growth vs. survival, and help you avoid debt when those rainy days arrive. The key to saving is keeping your living expenses lean. The number one reason businesses fail is cash flow. With these two facts in mind, plan smart and maintain discipline.
The cost of not having a paid office or team
As an entrepreneur, time becomes your most precious commodity. It’s something you might have taken for granted as a salary earner. The saying “you reap what you sow” makes more sense now. Your outflows of time and money must be focused on your return on investment (ROI). Here are some ideas to help you keep your outflows in line with your inflows:
•Choose office space that allows you to concentrate with few interruptions.
• Consider a shared office space at the beginning to lower costs.
• Take monthly inventory of where you allocate your time weekly. Consider hiring a freelance professional to do the tasks that take the most time and generate the least amount of income.
The second reason businesses fail is that entrepreneurs want to do it all. Outsource.
The cost of not having a boss
Accountability should become your best friend, but being accountable to yourself is harder than it seems. As your own boss, you cannot get fired or restructured from your business, so how do you keep yourself on the right track? And how do make sure your skills keep up with the market’s needs?
• Ask your clients for feedback.
• Focus your resources (time and money) to review your strategic plan monthly. It may cost you money to hire a business coach who will hold you accountable, but if you choose a professional who has experience in the product or service you are developing, the investment could be worthwhile.
• Join a peer group or networking group and take a leadership role.
• Invest in services and products that will help you grow your skills.
There are many more costs associated with being your own boss. Planning for all of them, including losing your steady cash flow, office and team, will greatly increase your odds of success. A CFP® professional can help you think through the implications of becoming your own boss, and help ensure your values are in line with your financial realities.