Alicia McKay
What should you do before leaving your job to start your own consulting business? What boxes do you need to tick, and how much money do you need in the bank?
Lots of people ask me this. It's a tough one, because it depends on your personal appetite for risk.
Some of you will do best if you just do it. Don't think about it too hard. Rely on your skills, savvy, skills, hustle (and a bit of fear!) to get going. If that's you, stop reading now, and take the leap. I quit my job at 25, as the breadwinner of a family of four. I had a husband on apprentice wages, a mortgage, two kids to feed, and 2 grand in the bank. It was a hell of a start, but I made it work. If that kind of challenge excites you, then stop reading, join Consultants of Choice, and type your resignation letter now.
If you're still reading, I'm afraid I can't give you a foolproof formula or checklist. It's a bit like parenting - no matter how much learning or preparation you do, financial, logistical, or otherwise, you're never truly ready. Once you take the leap, and you're too far in to turn back, you'll wonder why nobody warned you it would be like this!
However, there are three important things for you to think about before you go and quit your job. If you take the time to get these three right, you'll find the transition a lot easier.
Here are the three pieces of advice I give to all SEP (self-employed professional) hopefuls:
1. Know your reasons
Before you take a huge leap of faith, you need something to draw on when things get difficult.
In Module One of Consultants of Choice, we go deep on interrogating our values, drivers and motivation for choosing self-employment. Your business should serve your life, not vice versa, so we start by designing an ideal life and work backwards from there.
Identifying your why is a critical first step because if you don't have conviction in your purpose, you're far more vulnerable to quitting at the first hurdle - of which there will be many.
Tricky questions to ask yourself:
- Why do you want to be self-employed?
- What frustrates or annoys you about working as an employee?
- What kind of life of you want? What do you want more and less of?
- Why would having your own business make that possible for you?
Knowing what you want for your life - and how self-employment will contributes to that - will give you a stronger sense of purpose and commitment to your chosen path.
2. Know your numbers
The second and arguably most important thing for you to be across is your finances. There are two really important numbers involved in self-employed readiness: your living expenses, and your safety net.
Your living expenses
Knowing your numbers when you're self-employed slightly differs from when you're in a regular job. When you're employed, you tend to think about income, negotiating salaries and how much you'll earn.
When you're self-employed, the more important number is your expenses.
It is so much more important to understand how much it costs to live your life, than how much you can earn. With self-employment, we stop thinking about salary bands, and pay rates, and market matching.
Instead, we get super clear: In the last year, what did it cost to run your family?
And secondly: Did it need to cost that much? Can you reduce your expenses?
The smaller that number is, the more doable your self-employment journey becomes. But you mustn't guess.
If you've skated by in the last few years without keeping a budget, it's time to change that. Not having a budget creates huge avoidable stress in your self-employment journey.
Get across what your real expenses are, on a weekly, monthly and annual basis. Do not guess. You will be wrong. Analyse your bank statements, or use a personal finance tool like PocketSmith, and take an entire year into account, to review your expenses.
Your F**k You Fund
The second number you should know is how much needs to be in your F*** You Fund.
If you're in a job you want to leave, put enough money aside so that if you finally explode one day, push your chair over and chuck your monitor out of the window, you can survive for a period of time you feel comfortable with.
There are plenty of handy rules - some advice suggests you should have three months of expenses on hand, others say six months.
Ultimately, this depends on your risk appetite. You might feel calm with just one month's expenses in the bank, or you might need six months.
Your comfort level will vary, but you must know what it is. Otherwise, you risk deferring this choice for longer than you need to. Every time you hit your number, you'll be tempted by completing another project, aceing another performance review, or getting another shot at promotion. The goalposts will keep shifting, and you'll stay put.
Once you know your numbers, you'll need to keep knowing them - at least in the first year or two. You should know your expenses, safety net and run rate at any given point in time.
- Expenses: Exactly what it costs to run your life
- Safety net: Exactly how much money you have in the bank
- Run rate: Exactly how long you will be OK, if you don't earn any money.
3. Keep your connections
The third principle is all about maintaining relationships.
This doesn't mean you have to leave on perfect terms with your last boss - and if part of your reason for leaving is a toxic or unhappy workplace, that will be doubly true. However, your connections run much deeper than your boss. Everyone you've worked with, all the stakeholders that you engaged with, and all of the other companies or government departments that you've had contact with, or partnered with, qualify as connections to maintain.
The day you leave your job, you should have a full deck of email addresses and plans to catch-up, because this will be the first and most reliable source of your early consulting work.
Your last employer is almost invariably your first client - partly because once you leave, they realise how valuable you were in the first place! Your institutional knowledge and subject matter expertise leave a hole, and if you play your cards right, you'll be able to fill that hole, on your own terms, at a much more favourable rate.
Lay your foundation
If you haven't been good at maintaining your connections so far, this is the time to lay that foundation.
- Build your network on LinkedIn
- Write a list of people that would take your call, and keep it updated
- Follow up with people you've met through work or at conferences
- Send an email or arrange a coffee with someone you haven't seen for a while.
Ready to explore?
There is no perfect time to leave your job. If you're ready, you're ready. However, you'll find the transition into self-employment much easier if you keep these three things in mind: your reasons, your numbers and your connections.
If you're ready to explore consulting, but you need some help, check out Consultants of Choice.
COC offers aspiring, new, and experienced self-employed professionals the support to run a lucrative professional consulting business. Access curriculum, coaching and community, and skyrocket your odds of success.