The advantages of holding down your "day job" while starting your own business are many. But the most important one is having a reliable source of income - something that can help you gain access to critical working capital when you are ready to fully launch your business.
1. Benefits of Having a Steady Source of Income
Owning your own business is a great opportunity for wealth - and for creating new debts and obligations. Unless you have been successfully in business for two to five years creditors are likely to consider a new business for its debt potential not its income potential.
If you are planning to buy a home, car, or take out a loan in the future, hold off on quitting your job. Self-employed people have a harder time getting access to personal credit because their source of income may not be seen as reliable until you have at least two years of tax returns filed proving your income.
If you own a sole proprietorship you can write off deductions for your business to reduce your personal taxes. But this also reduces your recorded income and will appear to creditors that you earn lot less money than you actually do.
2. Employee Benefits
Most employers offer some kind of employee benefits including health insurance, paid holidays, vacation and sick leave, and retirement plans. Few start-ups can afford to offer these same benefits.
Unless you have at least several full-time employees you will not be able to get a group health insurance plan for you and your employees. If you have to purchase private insurance, most states allow insurers to deny you coverage or limit your coverage by excluding pre-existing medical conditions.
Until your business is well established, remember that taking time off for holidays or a vacation could mean no income during those days. For example, if you open a restaurant, retail store, or other service that requires you to remain physically open to make money, unless you have employees to keep things going, your business will be shut down anytime you are not there. Before you leave your job, ask how much your employer contributes to retirement plans, education funds, or towards the cost of your health insurance benefits. Count the cash value of these benefits as income you will need to replace when you start your own business.
3. Education and Training Opportunities
If your employer has a college education program, take advantage of it now. When you start a business your credentials and training can help you find better business partners, and make you more attractive to investors.
If you plan to start a nonprofit organization the IRS will want biographical information that includes experience and training. And, if you incorporate your business you will need to list the contributions and experience of each board member - including yourself. The more training and education you can get free through your employer, the better.
4. Networking Opportunities
It is not advisable to tell your boss about your new business venture until you are sure you are ready to leave your job, but you can begin networking by establishing yourself as a solid employee. Your boss might serve as a business reference in the future; your co-workers might be able to send potential clients and customers your way.
If you have the opportunity to attend business functions for your employer do so. Cultivating business relationships now by establishing yourself as a competent professional can help you build your own business in the future.
