6 Month Business Update
As promised, here is an update on my wild adventure of running a business in Arizona. A little over 6 months ago my wife and I quit our corporate jobs to run our own business. This was a franchise business that I had worked in for many years both in operations and in a consulting role. Our theory was that running our own business would get us closer to financial independence than our corporate jobs. Lets look at effects of this choice.
What we gave up:
-Savings of $60,000 cash each year for future investment
-Retirement savings of 12% each year
-Full Healthcare coverage subsidized by our employers
-Most evenings (after 5:30 pm) & weekends off work
-Non Physical work
What we gained:
-Uncapped Income potential
-Uncapped time off
-Generally being compensated for late night & weekend work
-More geographic options
-Flexible time schedules
-Recipient of all company wins
-Working with your spouse
As you can see, we gave up a lot of financial security. That has been the scariest part of this transition. We knew we would be financially independent eventually with our corporate jobs. What motivated our change to business ownership was the opportunity to see what we could do with unlimited income potential and freedom of schedule. As business owners, we hope to be away from the day to day operations of our business in 5 years. We know that a few days out of the week we’ll still need to be available. Our goal is to work around 3 days a week or less with the occasional remote work. This would allow us to obtain our financial freedom quicker than our corporate jobs.
Again, that is our theory. That is what we want to happen in this roller coaster ride of business ownership. You can follow along and see if we made the right decision.
If you are thinking of quitting your corporate job and starting your own business, here are 6 things I’ve learned so far:
Buying out an existing business is helpful, giving you an income right away. (I bought out two micro businesses, so I had no income to start). I recognize that I should have looked at larger companies as well to give me an income almost from the get go.
If you can swing it, ask for owner financing when buying out a business. You’ll be surprised at how many are willing to take payments overtime. This leaves capital for you to invest in growing the business. They usually want a large down payment, but if you don’t have to get the banks involved, money is saved and the deal can close much quicker.
Constantly be hiring. I’m constantly having to cover shifts as I’m growing quicker than I can staff my accounts. Find a way to staff properly. This prevents burn out, and keeps you motivated to grow your business. If any of you have ideas, please let me know.
Go to every convention, training or networking event in your field. I’ve learned so much in the six months being in business. It was hard leaving such a young business to travel and attend workshops, but the people I have met and knowledge gained has been priceless.
Have enough saved in cash for the worst-case scenario. If you don’t earn a salary until 12 months into the business, then you need to be prepared for that. Run your numbers and make sure you have enough cash to not take a salary/draw from the business unless you must. I’ve made good money so far but realize that almost all of it has gone back into the business because we are growing so fast.
If you need to finance the purchase of property (residential or commercial) obtain the loan BEFORE you quit your corporate job. With over 800 credits scores and 20% down, my wife and I cannot find financing for our home here in Phoenix. Lenders want to see two years' worth of self-employment income before you can qualify. Referring back to item #1 on this list, if you purchase an existing business with a strong history of income for the owner, you can qualify that way as well. I did not do this.
We are still plugging along. We are basically where we thought we would be at this time in the business. It’s been a lot of hard work. Late nights and early mornings. There have been at least 4 times in the month of November alone that I wished I had kept my cushy corporate job. Those tend to be the days that I worked 17 hours straight and then must wake up at 4am the next morning to start all over again.
I am not confident that I made the right choice, but I feel if anyone has a chance of making it, my wife and I do. We are excited about our growth (we’ve doubled our gross revenue in just 5 months). We are excited to have the reins on our future. Here’s hoping we made the right decision!