A few weeks ago I had lunch with a woman who was just plain interest in coding. I answered a bunch of her questions and the conversation turned to running your own business. I’ve gotten a fair amount of email in the past from students asking about running their own business out of school. (You can see a few notes I’ve written about that on my FAQ page.) Now that I’m in my third year of business, I’ve learned two really solid rules to start a business, that I wish I’d known before I started.
Firstly, save a big nest egg. When I started my business, I was fresh out of technical school but had worked for five years as a designer before that. I have to say that I didn’t start my business with much of a nest egg and I regret it, you’ll find out why in a second. Most financial planners would say that you need six-months of expenses in a liquid form before starting a new business. I obviously don’t disagree with that, but I think that three-months could be good enough. (Again, this is just my opinion, so you should really do what you’re comfortable with.) That tricky thing here, might be the definition of expenses. This amount must include enough money to cover rent, groceries, bills (phone, electricity, heat, water, whatever), debt repayment (if you have debt) and a bit extra to make sure that you don’t go mad while you’re trying to get your business of the ground. It’s perfectly okay to boot-strap it and get on a tight budget when you’re starting a business (trust me, you won’t have much time to spend money anyway), but you MUST remember to budget for paying back your student loans and have at least a little bit to take yourself out for lunch once in a while, on a particularly rough day.
So, why is the nest egg so important? It gives you the freedom to choose your clients. When you first start your business, your tendancy will be to take any work that comes your way. There is nothing wrong with that, but having a nest egg means that you can listen to that occasional gut feeling you get from a potential new client who just doesn’t seem like the right fit for you. You’ll want to build up your name and your business at first but there will be the occasional client that you just shouldn’t take. Someone recently said to me that if someone gives you more than one red flag, you shouldn’t work with them. Great advice, if you ask me!