How do you transition from employment to self-employed
entrepreneur without losing your shirt? That is a fundamental question. If the
business you want to start allows it—not all of them do—many people test the
waters first by starting the business with limited funds in their spare time.
Consider this option: ask yourself whether you could try it, does your employer
allow it, and would it work? Some personal service businesses can work like
this, but many cannot. Think about that first, for your business.
If you have a business that requires outside start-up
investment, then you have a harder climb uphill. First you have to convince
investors to buy into your business plan and invest with you, so you get the
money, and then you can start the business. In this case your starting salary
is funded by the investment, and has to be agreed upon by you and the
investors, and it is negotiable. The more risk you take, the happier your
investors, because they want to see you really committed. They don’t want you
to suffer, they need you to survive, and even prosper, or else the business
also fails, but they also don’t want to risk their money on the new business
and make you too comfortable at their expense. Your present earning power is an
important piece of information. On one hand, you will have trouble living on
less and they know it. On the other, it is hard to ask an investor to put money
into improving your lifestyle. Another point is equivalent salaries.
Sophisticated investors have a sense of what is appropriate for what job
description, in what industry, in what region; and if they don’t know, they
research it.
