Leave yourself a financial safety net.
While creditors require you to pay promptly, most of your own clients won’t rush to compensate you. Even if you write “payment due in 30 days” on your invoice, it’s a rare client that sticks to that time frame. Schedules of 60 or even 90 days are all too common. Complaining about tardy payment or imposing a late charge could drive business away. To minimize tensions while you wait for the work to come in — and then wait to get paid — set aside enough money to cover six months of expenses (a year is even better).
Do what you know.
Don’t waste savings on buying an existing business or a franchise. Instead, get ready for what Arlington Heights, Ill. new-business consultant has dubbed the “scratch startup.” Williams counsels “desperation entrepreneurs”—laid-off employees who aren’t likely to get back into the corporate world. He tells them to sell a skill or a product they already know.
Ken Proskie, 59, is a Williams client who was laid off in 2004 from his job as a health and safety manager for a large manufacturer. Working from an office in his Evanston, Ill. home, he began pitching his services to a network of 300 colleagues from professional associations. After three years, Proskie says, he matched his corporate salary and today has more than enough work. “Now I wish I had made the transition five or ten years sooner,’’ he says. It would have given him time to take on employees and expand.
Don’t bet your savings on a long-shot new venture either. New York financial planner Karen C. Altfest says she has one 70-year-old client who can’t retire yet because she sank all her money into a perfume business startup—in her 60s. Although she worked very hard in the enterprise for two years, going from store to store, it bombed; turned out not enough people liked her scents.
