As widespread as that reason may be, there are other motivations to escape from work of the corporate variety, of course. Many people simply want to leave their current jobs, for reasons ranging from challenging conditions to long hours or long commutes. Others may see opening a small business as a solution to being laid off, especially given the large number of people unemployed due to the effects of the COVID-19 pandemic that began in early 2020.
Small business ownership certainlycan be a solution to any of these issues. Of current small business owners, 17 percent were simply dissatisfied with corporate life, 16 percent wanted to pursue their passion by opening a business, and seven percent were laid off or outsourced.
If any of these reasons describe your situation, you may be wondering how to get out of corporate America. (Or, if you’ve been laid off, wondering how you can earn a living without going back.) It’s worked for many people; 43 percent of small business owners rate themselves as very happy according to Small Business Trends: 2020, while an additional 31 percent rate themselves as somewhat happy.
But before you leap into the world of small business ownership, you need to know not just how to go about escaping corporate America, but the right steps to take while doing so. While owning a small business can be fulfilling, there’s also no denying that it’s potentially challenging. More than 50 percent of U.S. businesses fail before they hit their fifth-year anniversary.
If you’re currently employed, it’s likely prudent to keep your job while you launch your business, for several reasons. If the businesses are related, your current work serves as a potential source of referrals or consultations. At a minimum, the financial compensation protects you from common downsides in the initial phases of a business, such as challenges with cash flow or product issues.
These challenges are common enough that, if you are currently unemployed, it might be wise to look for a job to support you financially while you plan and launch a business. Don’t rely on a fledging business to support yourself right off the bat! You don’t want to run the risk of choosing between paying your mortgage or paying your suppliers.
5 Steps to Leave Corporate America and Start Your Small Business
Here’s an overview of how to escape corporate America in the most prudent way.
1. Plan Your Business
The first step in how to leave corporate America is planning your business. If you’ve been dreaming, this is the first step toward making the dream a reality.
What product or service will you offer? What market is the product or service be aimed toward? What problem is the product or service solving? What evidence exists that there is a market out there for your product? How large is the potential market, in your opinion? How will you reach that market? Who or what competes with you in your planned market? What is your planned competitive edge?
Do you have sufficient expertise to run the business? Be objective about how much experience will be needed. Will you have partners or employees? How many?
The answers to all these questions and more may change as you do more legwork toward achieving your dream, but these plans constitute a start.
2. Forecast Your Expenses
All businesses cost money to run, even if you’re beginning in your own home. It’s essential to know how much it will cost you to have a small business. The greatest business idea in the world will flounder if your profits aren’t enough to cover expenses, so you need to know what they will likely be.
You may want to develop your own spreadsheet or work with a business advisor. Consider the cost of goods sold, the cost of acquiring or leasing assets, the cost of your physical plant (office or manufacturing plan), employee costs and more.
3. Forecast Your Revenue and Profits
Next, forecast your profits. Estimate your revenue first. How much will be earned from your product? Estimate per month and per quarter. If your business has any cyclicality, be sure to adjust for any shortfall or peak periods.
Then, subtract your forecast expenses. Will the remaining cash flow be sufficient to keep your business afloat and eventually allow it to flourish?
4. Be Aware of Potential Challenges
After you have this material, think through any potential challenges to your business. If there any element that might derail your plans or make it tough to operate? These reasons can range from competition to the macroeconomic climate, depending upon your business.
The three largest challenges small businesses face are lack of capital/cash flow, employee recruiting and retention, and marketing/advertising, according to Small Business Trends. If any of these affect you, they can negatively impact your ability to launch and remain in business.
Many small businesses need financing to launch a business or remain in business – and financing can be difficult to obtain. Even if you are successful in receiving financing, be sure to factor any debt service payments into your expenses.
Start Your Corporate Exit Now
The single most common financing source is cash, used by 39 percent of respondents to Small Business Trends: 2021. But many small business owners don’t have sufficient cash on hand. The second most popular method, Rollovers for Business Start-ups (used by 20 percent of respondents), utilizes retirement savings such as 401(k)s or Individual Retirement Accounts (IRAs). Many people have considerable funds in their retirement accounts and reinvesting them with ROBS them eliminates debt as a potential issue for the future and avoids costly early withdraw penalties.
Other common sources of financing include U.S. Small Business Administration (SBA) loans (nine percent), lines of credit (nine percent), family/friends (10 percent), and unsecured loans (five percent).
5. Seek Advice and Feedback
The last prelaunch step is to seek advice on your business plans, your financial projections and any potential challenges. Never go it entirely alone.
You can seek advice from experienced business owners in your area, business mentors, consultants and even family and friends. Seek feedback from a wide variety of people who are likely to have specific knowledge of running a small business and the business climate in your area.
Access the Funding Your Small Business Needs
Guidant Financial is here to help you start or buy a small business or franchise with accessible funding solutions. Contact us online or call us at 888-472-4455 to talk with one of our small business funding experts and learn more about what options fit your business.