How to Keep a Steady Paycheck while Starting a Business

Quick?you want to start a new business?what?s your biggest fear?

If you said ?failure? you?re close, but you?re confusing cause and effect. It?s the inability to make money?also known as the loss of a steady paycheck? that would be the cause of the failure that?s at the root of your deepest fears. Failure will merely be the result?or the effect?of the inability to make money.

But there?s a way to reduce this fear, by breaking the income process down into smaller steps. The point of breaking it down is so that we can approach the income hurdle that all small businesses face into a series of manageable blocks. What we want to do is to convert the self-employed income hurdle from an obstacle to a transition process.

You want to try to engineer the transition in four steps:

Step 1?Start with a Full-time job/Part-time business arrangement

It?s much easier to start and run a business when you aren?t relying on it to pay your bills. Having a full-time paycheck (and benefits never hurt) can take the risk and income insecurity out of starting a business. Most business ventures take months or even a couple of years to make a profit, so getting started while you?re on someone else?s payroll will take the uncertainty out of it as well as buy you time for making mistakes (you?ll need this!).

Once you?re seeing a steady cash flow?even if it?s small?it?s time to explore other options.

Step 2?Business income grows?reduce job to less than full time

When the business starts making money on a steady basis it?s time to start clearing your schedule a bit. If you?re working in a full time, permanent job, you?ll probably find that it will be very difficult to grow your business with very part time hours. Most businesses require more time in order to grow, but if you?re not in a position to quit your job and go full-time in your business, you?ll have to get creative.

Try some of these to help you carve out more time for your business:

• Approach your employer about working from home. It isn?t a perfect solution, but it will eliminate the time you spend commuting, and may enable you to be available to handle at least light functions with your business during regular working hours.
• Approach your employer about cutting your hours back. Given the weak state of the economy, some employers might welcome the opportunity to cut payroll expenses. A reduction in hours from 40 to 30, or even 35, could benefit both parties.
• If your employer won?t budge on the hours, try to find a position with a competitor who might entertain either arrangement. Economic reality if forcing many employers to do things they wouldn?t have considered a few years ago.
• Move into contract work. Many contract situations will provide greater flexibility than a full time, permanent job, primarily because you?re a fringe worker and not a regular. Because of the absence of both permanence and benefits, the pay is often better as well.

I chose the contract route at this stage of the game and I had several. I had one that was on an ?as needed basis?, and it paid well enough that I didn?t need to do it on a steady basis. Another was temporary?it lasted three months, but again the pay level floated me for an equal amount of time after it was over. Then I also have a seasonal contract gig that I still keep. It?s also part-time so it blends well with my business schedule.

There are all kinds of contract arrangements out there, so try to find one that works best with your particular situation. You?ll need to be flexible and fully prepared to step outside your comfort zone with some, but it will be well worth it.

Step 3?Business income reaches the level of a ?living wage?–almost

This is probably the first level at which you feel truly ?self-employed?, but it can also be the most stressful. Your business is starting to make money, but you?re hardly home free. At this point, you?re probably making just enough money to survive, but not much extra and, just as important, you haven?t yet withstood the test of time. There will be a temptation to quit your regular job and go full tilt at the business, but you feel some hesitation?that?s probably good.

This is the make or break point, but you might still want to have at least a bit of a parachute, just in case. Or at least, just some extra money!

A part-time job would probably be ideal. Not only can you make the needed extra income, but because it?s only part time, you can phase it out as you need to simply by cutting back you hours.

Still another way to navigate this late stage is by doing contract work for your new competitors?as in people engaged in the same business you are. Nearly all businesses have functions that the owner doesn?t have time to handle, but they may also be so specific that hiring someone off the street isn?t workable. As a member of the same industry, you have the skills that others in the same field need.

So you?re not working for direct competitors, you can offer to do contract work for businesses who are in the same business, but in different niches. Sometimes you can do this by contracting for competitors who are in different geographic locations. Think of a newly self-employed attorney who may do legal research work for a larger firm to help with cash flow early on. Find something you can do in your own business along the same lines.

Step 4?You?re ?there?!

You?re finally earning enough money from self-employment to support yourself or your family, and you?re feeling confident in your ability to keep it going. Since you no longer need a job?full-time, part-time, contract or otherwise?you can now devote 100% of your working hours to your business. This is the time to grow it, streamline it, make it better and make it more profitable.

This is also the time to kick back and enjoy life right? Not when you?re self-employed!

Not only do you need to constantly grow your business and stay abreast of new developments, but you also need to shore up your finances. Having your own business isn?t like a steady paycheck?you typically don?t have a stable income. Self-employment has an unstoppable feature of roller coaster income.

That means you?ll need to save money for the down times! A person on a salary never has to worry about his or her income level, but one of the challenges of the self-employed is to create something close to a steady cash flow. The best way is saving money during the good times to be ready for the lean ones. If you?ve never been a saver up until this point, you?ll need to become one.

One of the best ways to do this is to save money while you?re doing double duty?building your business and working outside jobs or contract arrangements. And once you cross over into full time self-employment, you?ll need to continue with the saving habits you developed while you were holding multiple occupations.

Is it worth it?

In a word?YES! It reads like a long process, but the purpose is to remove the uncertainty of a steady income while you?re building your business. It?s a tough economy out there, and you?ll have your hands full just building your business. Keeping a steady paycheck while you?re building it will not only remove the survival dilemma, but it will also give you the financial strength you?ll need to get through the upstart period successfully. And dealing from strength is ALWAYS the way to go!

Are you starting a business, or have you done it recently? What did you do to keep money coming along the way?

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( Photo from Flickr by Alan O?Rourke )