Owning your own businesses one of the most stimulating elements oven entrepreneurs’ life, but when that business becomes your primary income, it is both exhilarating and terrifying. An important question to ask yourself as an entrepreneur is, “At what point does this side business become my primary income?”
Knowing when to move from your primary source of income in order to pursue your own business, is an important question to ask because the answer maybe the difference between owning a business that supplement your income and owning a business that is your income. At what point is it wise to make this move?
Recently, at a business expo where I was a keynote speaker, a young man came to me with this very question. His name was Bobby, and he owned a mobile car wash Lubbock Tx. At the time, he was a technician with a local security company, where he installed alarm systems in both businesses and residences. The money he was making was enough to support his family, but his side business was beginning to take up so much of his free time that he was unable to be at home after his kids got out of school. The question he asked was simple. He wanted to know if there was a formula to indicate whether or not he should move to being completely self employed. Sadly, there is no hard and fast rule, but there are some guidelines to help make this decision wisely.
As many of us know, being self employed holds risks that are not present as an employee. So moving from a steady paycheck to owning his own business, made Bobby rightfully nervous. We sat down and discussed a few of the particulars of his business, and arrived at the realization that the business that he would potentially bring in could be as much as two or three times his typical salary.
Without knowing it Bobby had taken a small Company he’d purchased from his friend and created business around it that prepared him to make the move to be completely self-employed. This was accomplished in three particular areas.
- He maintained the company name in spite of it having a slightly bad reputation. This may not seem like that important of an issue, but the fact that Lucky 7 Mobile Wash was already a name that corresponded with the business sector that Bobby was attempting to break into, helped him to have a presence in the market almost immediately. Additionally, the fact that his name was maintained allowed him to utilize the support of previous happy customers in his attempt to make this side business his primary income.
- Bobby entered the market that was available to him, and allowed the business to dictate how is company would be run. Far too many times business owners and entrepreneurs attempt to dictate what the market will allow. Rather than allowing the customers to help entrepreneurs flesh out the details of their company, they simply attempt to force their business on a market that is not ready. Bobby adjusted his marketing and product line in order to gain a foothold in the business that was available. Rather than simply being what every other mobile wash in Lubbock was, he let the customer help him understand what was most important to them. That foothold would be one of the most important elements of his transition from a side business to a primary income.
- Lastly, Bobby took a salary. He took a salary from his side business rather than letting the business grow all by itself. Realizing that he did not have very much in the way of overhead, he recognize that to take a salary in spite of the fact that it would be very small and not enough to maintain his cost of living, he was helping his company grow steadily by forcing it to maintain an employee. This was most useful because Bobby knew that at some point in time he would be taking a salary that would be his primary source of income. Because of this, Bobby was able to see the rate of growth that his Company could withstand. When he projected his growth rate he was able to see the point at which he could understandably quit his job and focus his efforts to his mobile car wash full-time. With the additional time spent at work and the additional marketing he was able to do face-to-face, the decision to move forward was far easier.
At the time of our last conversation, Bobby was excited about the possibilities what were ahead of him as a small business owner. When you have the opportunity to move from a side business owner to a small business owner, make sure that you’re ready to do so. If you make sure that you are ready when you take that first step you will be far less likely to have to backtrack, and your business will stay on course to grow year after year.