Can I afford to start my own business?

I'd love to start my own business, but I can't afford to

I've heard this so many times from colleagues and mentees.

Fear of losing money, or getting into debt is one of the biggest fears around starting your own business.

In response, I would ask:

Do you know how much you're spending and how long would you need to feel comfortable having your bills covered until your business starts to make money?

Taking this first step to properly look at your finances will help you understand IF it's possible and if so, when.

To avoid getting yourself into debt, it is helpful to have a savings pot that will cover your bills while you get your business up and running.

How long would you like your buffer to be?

Understanding that it will take time for your new venture to make enough money to cover your bills etc, to avoid getting into debt you'll want to allow yourself enough money to cover your bills in the meantime.

How long this "buffer period" is, depends on your financial circumstances and how you feel about financial risk.

I quit my day job twice. The first time, I thought 6 months would be enough. Within that time I'd know if I had a business that could make money to cover my bills. 6 months was a bit short.

The second time, 10 years later I had a slightly different approach. I wanted to give myself 12 months to give it a real shot. I set myself a rule, I'd not click on job ads, and when job offers came my way, I felt empowered to say no.

How much of a savings buffer do I need?

You'll need to know: your buffer months, your monthly spend (bills/expenses), and estimated set-up costs.

For example: If your spend is around £24k per year — your estimated monthly spend is around £2k/month. If you want your buffer to be 6 months, you'd need at least 6 x £2k = £12k savings plus approximately £3k for set-up costs. Total: at least £15k of savings.

What date could I hand in my resignation?

That will depend on how far away you are from reaching your savings goal. Set a date in the diary for your "leaving drinks for day job". Having this date clear in your mind, should help you to reach your savings goal faster.

What do I do next?

Work out how much you're spending, how long you feel your buffer should be — and work out how long it will be until you reach your savings goal. You're not committing to quitting your job at this point — just moving towards working out your options.

If you're interested in taking the next step, check out my Financial Foundations course, to help you understand what your options could be.