Principle 4: De-Risk Yourself
How can I best manage my risk through this transition?
Why is this principle important?
It has never been cheaper to get something started. However, it is still as hard as it has ever been to build a viable business. It’s really important to make a personal financial plan to track your progress and keep things under control. Similarly, don’t believe that entrepreneurs are good risk takers – they’re good risk managers. As you embark on your entrepreneurial journey you’ll want to treat this process as a transition, not a one-off event, and make sensible choices for yourself given your personal circumstances and risk appetite.
What should you focus on at this stage?
- Make a personal and startup survival budget for the coming months.
- Find easy ways of earning money whilst freeing up your time to build.
- Explore ways of managing your downside and building an insurance policy.
- Assess the career benefits of starting a business (regardless of outcome).
Make a money plan
Create a personal survival budget
- Include all your monthly costs
- Include all your monthly income
- How much money is there in the bank that you’re prepared to spend on this?
- How many months do you have to work on your startup?
Keep your job
- This is your best source of income currently
- Use the 5-to-9 evening slot or weekends to build
Earn money on the side
- There are lots of creative ways of earning money using your skills and network
- Airbnb, private tutoring, consulting, freelancing etc
Prune where necessary
- Can you downsize? What bad habits do you have on the spending front?
- Our expenses tend to rise with our income (cut out those expensive dinners!)
- Re-focus your spending on experiences not stuff.
- What expenses can you prune – go for 15%?
Spend almost nothing
- Try and ‘bootstrap’ for as long as possible
- Use free or cheap tools to build prototypes (there are so many)
- Resist the urge for unnecessary expenses (business cards, offices)
- Resist the urge to pay salaries / developers / contractors
Monetize your startup asap
- Pre-selling a product or service equals positive cashflow (and validation)
- Even if it’s not the long-term revenue plan (Airbnb sold cereal before bedrooms)
- Gives you breathing space and a clear head
- Massively decreases anxiety if you can pay for your life
Manage your risk
Shelve all-or-nothing thinking
- You don’t have to risk it all to start building things online
- It is cheaper than ever to start a business – don’t spend any money
- Failure is an option – you’ll learn masses and no one cares anyway
Stagger the transition
- Ask your work to go down to 3 / 4-days a week
- You’ll be surprised what employers will say yes to
Figure out freelancing
- Knowing how to freelance is a massive help
- What are your marketable skills?
- Earn money quickly to top up your escape fund
Leverage your current situation
- At work: contacts, skills, resources, training, etc
- But behave professionally and with integrity
- NB: Remember to check your contract.
Make a checklist
- What things need to be true for you to quit?
Join The Tribe Forum for Q&A on the Personal Risk principle.
- When is the right time to transition away from my job?
- What if my startup fails?
- How do I properly prepare a “safety net” to be able to go back to?
- How can I make money to stay afloat in the short-term?
- How should I budget my personal finances to build a startup?
Have a question that hasn’t been answered yet?
Jump into the forum and ask away (just click “New Topic” in the top-right of the screen. Write your question as the Topic title, with your context / explanation as the Description).
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