#8: TRANSITION WHEN YOU'RE IN A GOOD POSITION

In this episode of Financial Adjusted, I’m diving into a topic that many aspiring entrepreneurs grapple with: making the transition from a side hustle to full-time entrepreneurship. Whether you're working part-time or full-time while running your side gig, this episode is packed with practical advice to help you make a smart and financially sound transition.

Discussion topics in this episode:

·         Budgeting

·         Testing your product or service in the marketplace

·         Health & Life Insurance

·         Debt Management

·         Revenue Projections

·         Additional Business Needs

If you're ready to take your side hustle full-time, this episode is for you. Join me as we navigate the financial aspects of making this exciting transition. Remember, the fact that you're listening to this podcast shows that you have what it takes!

For more resources and support, reach out at support@financiallyadjusted.com.

Tune in now and let's make your entrepreneurial dreams a reality!

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GUSTO (affiliate link): https://gusto.com/r/leslie4559

QuickBooks Online is my go-to accounting software. Get the best discount possible (30% off for 12 months) when you buy with my affiliate link below, through Complete Business Group. Message me at support@financiallyadjusted.com with any questions regarding signing up. https://completebusinessgroup.com/leading-ledger-bookkeeping-llc/

My favorite budgeting app w/ an amazing free version: https://www.ramseysolutions.com/ramseyplus/everydollar

My preferred business credit card with cash rewards (affiliate link):
If you have healthy behaviors around spending with a credit card, this is a great one to use and earn cash back. It also links up well with QuickBooks Online. If you have unhealthy spending habits with credit cards, please avoid using one! You need to be able to pay it off monthly and not carry a balance. I use this one for my business and it makes paying bills simple.
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Disclaimer: This content is for educational and informational purposes only. Please consult with an accounting professional for direct advice based on your specific business situation.

Transcript

Hello My amazing entrepreneurial friend. I’m Leslie Roth and you're listening to Financial Adjusted. This is a podcast I created to empower you to go for your entrepreneurial dreams and to provide you with financial education that helps you do it in a smart way. Many people start out as entrepreneurs via a side hustle where they are still in their part time or full time regular job. This is an incredible way to test the waterS so speak while you still have your regular income source.

If you're someone in this position, I'd bet money that the main question on your mind is when does it make sense financially for me to transition full time into my side hustle. Today I'm going to discuss some ways you can assess this for your own situation. Some of you might have a spouse and have a dual income household. Some of you might be single and doing it on your own. Some of you might have a six figure income that you're leaving behind. Some of you a little bit less than that but no matter what your scenario is, being financially smart about it will be the key factor in your sustainability with your business in the long term. Budgeting is where you should start when you're evaluating your situation. You need a personal and a business budget. I'm an unapologetic broken record about budgeting. Everyone needs a budget It's an absolute requirement when it comes to being proactive with your money and truly knowing how and when you can reach your goals. If you're going on a road trip, you're not just going to drive aimlessly with the hope you find your destination. You're going to map it out and likely study the route so you're aware of what the navigation looks like to get there. Budgeting is just like this It's your financial road map to your goals. This is why it's how everyone to start here. When you understand what your needs are personally, then you can have a much better understanding of what you need to make in your business to justify leaving your regular job for full time entrepreneurship. 

Now when you slowly transition into your business while you're in a regular job, this is going to allow you to gauge realistically how well your product or service offering performs in the marketplace so that you can realistically project what you could make when you transition full time. If you are someone who has a flexible position in the way of hours that you work, you might consider lessening your hours as you generate income from your business. I know not everybody's in this situation. But if you're able to it's worth exploring. I did this personally when I transitioned from being an ultrasound technologist to running my bookkeeping business full time. And it was definitely something that helped me out being able to cut back a little bit and I was able to do that because I had the flexibility. If you can't then you can still completely make this work by transitioning. If you can't you can still…do this transition, you just might be working a little bit more in the process. If you haven't already, check out episode number two which is all about budgeting I get into what it looks like to budget personally and for a business. Which can be really helpful if you're in this zone. This goes into more detail than I'll get into today. But I just wanna plant that seed about how crucial budgeting is, especially when you are that transitionary stage.

Knowing exactly what you need to cover monthly bills, plus have a cushion of savings will be the information that you need in order to determine if you're in a good position with the new business to have it be your solo gig. You don't necessarily need to replace your income a hundred percent but if can cover monthly bills plus have a cushion, then you're in good shape. If you're someone who has a spouse or a partner that you do life with, I recommend that you both be a part of the budgeting and decision making process when comes to this transition. While you're evaluating your budget and monthly bills, look also at the personal ones that would change if you were to be a full-time entrepreneur. For instance, health insurance. If you don't have a spouse who provides this for you from their job, It's something you need to start looking into or to leaving your full time job if you do have these benefits. Start reaching out to insurance brokers who deal with self-employed health insurance. Unfortunately, there's a good chance you might not be able to get health insurance that's as good or as inexpensive as what you have with your full time position, but there are plans out there that could work for you that won't break the bank. Just a side note and a word of caution when it comes to this topic If you end up applying for insurance on the government health care marketplace. They offer discounts and help and it's contingent on your income at time you apply. Now, if your income increases dramatic over the span of time that you have your business, which I know it will when you become full time entrepreneur, there are likely going to be tax repercussions. If your income goes up and you don't qualify for the credits any longer that you got from the marketplace, you might end up owing money back. How do I know this? Well, it happened to my hubby and I personally so I just wanna warn you on this one. If you simply go in every couple of months I think and update your income with changes, you'll pay more at the time, but you would avoid more tax issues. 

Another insurance consideration is going to be life insurance. If your full time position provides this for you and you will have no life insurance once you leave, it's definitely time to consider getting a policy of your own. You might wanna do this regardless. If you're the sole provider for your family, this is especially important.I'm affiliated with a financial advisor who sells life insurance in a high integrity way, meaning she will sell you a good life insurance product that meets your needs and won't break the bank. There are some pretty terrible insurance policies out there and the only one who benefits from them is the person and the company selling them. This is not the case with her. Term life insurance is usually going to be the most high quality and least expensive life insurance you can get. If you're interested, simply reach out to me at support@financiallyadjusted.com. Full disclosure: I do get a small commission when I refer to her; however, I would be recommending her regardless and she's who I use personally. I never recommend any person, product, or company that I haven't actually used myself.

The most important thing to remember about shopping out insurance is to find a broker. This is an insurance agent who can shop out various insurance providers and find the best most cost effective one for you. If you're transitioning into being full time in your business, it's in your best interest to shop all this out as possible prior to leaving so you have a clear picture of what the difference would be cost wise compared to your current situation. That way you can factor it into the equation and the decision-making criteria. I consider the insurance shopping part of the budgeting process and while you're at it, I recommend also shopping out home and auto insurance if you haven't done recently. You could end up saving a ton of money. It's just a good idea to do this every couple of months. 

Next let's talk about debt. Everybody's favorite, right? If you're someone who's in debt, do yourself a favor and become debt free if possible for making the full time leap into your business. This is gonna take the pressure off and put you on a solid financial ground from the start. If you started your business while you're in a regular job you can use the additional income that you're getting during that time to knock that debt out first and then build up a savings cushion for your transition.

If you're out of debt, props to you! You are a rock star! If you are out of debt but thinking of going into debt for your business, please don't! Operate with peace of mind by being debt free and not having those debt payments eating away your profits will be way better to start your business out than going into debt and being concerned about making enough money to over the debt plus bills. Plus, it's just always be better to be debt free. The goal is for you to keep that money in your business that you're generating and have it work for you and not just give it to somebody else. 

Another part of determining when you can safely transition into full time entrepreneurship is considering how much your revenue could increase if you're full time. Based on the increase in time that you can dedicate to your business, how many more clients could you take on or how much more product could you produce? Since you wouldn't be gaining these new clients overnight you just need to make sure you have enough of a cushion to get you through the time period between leaving your regular job and when you're operating at full capacity with your business. For me personally, I was able to grow even quicker than I anticipated when I could focus all my time and energy on my business and ended up not really having to touch my cushion which was a huge blessing. I've actually heard this from so many different business owners.  Most people underestimate the energy factor. Your attention isn't divided anymore between your business and your regular job and you can give your full focus to your business. There's really something to this. I recommend having a big enough chunk of savings that would get you through about three months of growing your business but if you think it would take you a little longer than three months to gain the amount of clients you need to function well financially, perhaps you could have more of a cushion saved up before you make the move. And by functioning well, I just mean by that that you're covering your bills and then you have margin beyond that that's significant. Significant for you to take what you need to live on and then also be able to build up savings in your business. 

In your business budget you also need to consider if taking on your business full time will come with any staffing needs, software and supply needs, or anything else you might need in order scale operations. Maybe business insurance needs would also be a factor, depending on what type of industry your business is. The idea is to consider all the variables and changes in your life with the transition and what they could amount to financially.

Entrepreneurship can give you more freedom in so many different ways but making that transition when you're in a good position financially can be the difference maker when it comes to sustainability. The last thing I want you to do is make the leap and then be forced back into a J-O-B.

Financial topics aside, there is a leap of faith and significant courage that's required when you're venturing into entrepreneurship. Some people are totally ready financially, but they don't make the move because they fear leaving the safety of their job or fear failure in their business. Are you hanging on to the illusion that your W2 job is safe and that's what's holding you back? If you already have proven to yourself that your business is solid in the marketplace and you're financially ready to take the leap, you will not look back. Trust me! Check out episode number five of this podcast. I break down the difference between working for yourself and for someone else and get into what that looks like tax wise. This is also something else that worries people and holds them back when they're thinking about making the transition into full time entrepreneurship. It's much simpler than you think, and you definitely are capable of learning how it all works.

If you're in this stage of your life and you are currently devising a plan to leave your 9 to 5,  I have the perfect book recommendation for you: ‘Two Weeks Notice’ by Amy Porterfield is an incredibly inspiring book if your passion is to be an entrepreneur and ditch that 9 to 5. Amy has inspired me so much in my own entrepreneurial journey. So do yourself a favor and get this book. It’ll definitely light a fire under your butt.

At the end of the day there is planning required and a mindset shift that needs to happen when you're transitioning from a W2 employee to working for yourself but it's a hundred percent worth it. Working for yourself always gets my vote and if it's your heart's desire then go for it. It can be a little intimidating at first but the fact you're listening to this podcast and it's on your heart tells me that you have what it takes.