When you live in big cities like Los Angeles and New York, most of your income goes to rent. But you’re also living in these cities because you have dreams — often entrepreneurial dreams. So how do you fund them and make the self-employment switch?
Here are five things myself and colleagues living in London have done that worked:
Create an “Exit Strategy”
It’s likely you have some kind of bridge job. Create a strategy to take you from where you are now (working at soul-crushing job) to where you want to be (spending your days creating, doing meaningful work, and having a balanced life). Exit Strategies are useful because they map out the steps to take you to your dream.
The most crucial part of the strategy is these next money saving tips to help you fund the dream.
1. Live frugally on your income while you’re still employed
Determine how much money you need to live on annually and plan to have one year’s living expense saved before you say goodbye to your bridge job. Use these saving tips to quickly sock money away:
- Since rent is most likely one of your largest expenses, seriously consider having roommates or moving back home. If your parents are reluctant, propose an arrangement that speaks to their concerns and shows them you’re serious about your business idea. You might, for example, propose that you pay a small or no rent for a year if you’re actively pursuing the business and saving your money, but if you’re partying and wasting money, you’ll pay market rate or have to move out. Also, consider offering them a small stake in the business.
- Cut back on expensive extras like dining out, travel (sigh!) and pricey clothes. Replace cuts with alternatives that make you still feel like you’re having a life. For example, replace dining out with dinner parties (preferably potluck).
- Ask everyone you pay money to or do business with if they offer discounts or are willing to barter and use your network first when you need a service.
- Sell clothes, jewelry, and furniture you no longer love.
2. Pay off your debts
During your first few years in business, it helps not to have to worry about personal debt, as many businesses will incur their own debts and re-payments soon enough.
3. Starting out, get everything you can get for free
When starting a business many people think of ordering stationary and hiring help, but starting out, it’s important to budget funds for where it will have the most reach and effect — stationary and business cards (even the modern-day equivalent, a website), may not be crucial in your pre-launch or even your start-up phase. Focus your time and resources on crucial things first. Google has many resources for start-ups and there are many, many FREE services, apps, and solutions out there that works fine for what you need starting out. There are many ways to get a free website–even start a community using a private Facebook group. Some website resources you’ll need like email marketing and design services have free basic plans. Go with free for now and upgrade later.
4. Start small now
The internet has made it possible for more people to become successful entrepreneurs. Now there are creative ways we can use the interest to be successful using social media, freelancers on crowd-sourcing websites, and other money-saving strategies.
5. Get alternative funding
These assume you don’t have collateral to qualify for a traditional bank loan or is the type of business a venture capital company would invest in.
If you’re in the states and really really believe in your dream, consider borrowing from your 401 (k). There’s a penalty for doing so, but it’s an option. Here are other alternative sources of funding to consider:
- Peer-to-Peer Loans on a platform such as Lending Club or Prosper.
- Crowdfunding platforms such as KickStarter, SeedUps, Peerbackers, and RocketHub
- If you meet the requirements, the Small Business Association’s 7(a) loan program may be a great option.
- Parents, friends, siblings and angel investors. Again, offer them a percentage of the company and get the proper legal documents.