Five ways to stay afloat while starting your business

Home Office Computing, Dec, 1990 by Paul Edwards, Sarah Edwards

The number of men and women who are making the shift from corporate paycheck to profit in their own business is growing rapidly. In fact, home business is the fastest-growing sector of the small-business market, according to research firm BIS CAP International. But how does someone who's employed make the shift from a steady salary to profits he or she can live on?

Here are five plans you can use to keep the money coming in while you start and grow a business.

1. The Moonlighting Plan. Beginning your business as a sideline is the most popular method of getting started. Your steady paycheck finances the start-up. When income from the business begins to approximate the minimum income you need to cover basic living costs, you can leave your job and run your business full-time.

Moonlighting is a relatively painless, low-risk approach to going out on your own. If you find you don't like the work or discover that the market is flat, you haven't lost much. But make sure you work at least eight hours a week on your business to create enough momentum to get it going.

2. The Part-Time Plan. Another way to venture out on your own is to line up a part-time job that will provide you with the base income you need to live while you start your business. Sometimes people negotiate to continue their salaried job on a part-time basis rather than quitting outright. Alternatively, you might do temporary work or take a part-time job in an industry that could lead to valuable contacts or referrals.

To help your business grow more quickly, arrange to do your part-time work in other than prime business hours. This will leave you free to market, set appointments, and take business phone calls.

3. The Spin-Off Plan. This approach, which enables you to start out working full-time in your business, involves making your employer your first major client or going into business with one or two major clients already signed up. Rather than losing you altogether, some employers may be willing to contract with you for some portion of the work you've been doing. Or sometimes you can ethically and legally take a client or customer with you from your job. This was how Paul launched his business. As CEO for an environmental-research firm, he was administering a contract that no one else at the firm could handle; so when he left, the company agreed to give him the contract. It provided the cushion he needed to get his new business going.

Be sure to allow at least one or two days a week to market your business so that you will be able to add additional clients as quickly as possible. In business, you never want to have all your eggs in one basket.

4. The Cash Plan. Arrange to draw upon a financial resource that supports you while you work full-time to launch your business. This cash resource should cover your living expenses for at least six months. Often such funds become available unexpectedly and serve as an occasion to seize the opportunity to start a business. They can come from many sources. For example, a divorce settlement, severance pay, an inheritance, or return on a previous investment each could serve as a cash cushion. Sarah used the retirement funds she had accumulated while working for the federal government as the cushion to open her business.

Although we don't think that borrowing money is the best way to create a cash cushion, it is an alternative. Many businesses are started by loans from parents or other relatives. Others have started their businesses by taking out a second mortgage on their home. Some banks are now offering loans or home-equity credit lines to help people start businesses.

5. The Piggyback Plan. Couples sometimes find they can piggyback on each other's dreams as a way to get a business going. By cutting back on living expenses, one person can leave his or her job to start up the business while the family lives off the other's salary.

This plan is a great way for one parent to stay home with the kids and still work full- or part-time. As the business grows, the family income can return to or even exceed the original level. As soon as the business is consistently bringing in enough to cover the family's living expenses, the other spouse can leave his or her job to either start another venture or join what then becomes the family business.

WHERE THERE'S A WILL, THERE'S A WAY

In many ways, starting a business is like getting a college degree. Some people are fortunate enough to have a financial cushion that allows them to study on a full-time basis. Others have to work on the side to pay their way. Sometimes this means taking night classes or stretching the course work out over many years as a part-time student. But one way or the other, those who persevere do graduate. So it is with starting a business. Where there's a will, there's a way.