As much as you'd like to dive right into starting a business, the truth is not every aspiring entrepreneur has one or two years of living expenses saved up. While you're laying the groundwork and making sure your new business idea will work, a steady paycheck comes in handy to deal with all the financial realities like mortgage, rent, student loans, and other bills.
In fact, keeping your day job while launching a new company can cut your risk of failure by a full third. That's according to research appearing in the Academy of Management Journal.
Yet pursuing a business venture while still employed can be difficult to navigate. Here are five things to keep in mind to stay out of trouble while starting a business on the side:
1. Get familiar with your employee contract and handbook: Revisit any paperwork you may have signed upon being hired to determine your employer's policy on side projects. If you're still uncertain, you may want to check with the HR department. In many cases, you'll be allowed to work on your own business as long as it doesn't compete and you don't use any company resources or time.
2. Be honest about the overlap between your job and startup: How similar is your business idea to what you're doing now? If there's any overlap, it's wise to seek legal counsel to determine the best course of action. You don't want your employer to claim ownership of your company, product, or other intellectual property down the road.
3. Give yourself downtime: Launching a business is hard, but juggling two jobs is even harder. No matter how much work there is to do, you've got to take time off. Ideally, you should have one full day off a week as a true break in order to recharge and replenish. You don't want to burn out before your new business gets a chance to take off.
4. Respect your current job: When you're straddling a day job and startup, it's easy to think about your job as the past, and your business as the future. However, your employer is paying you to do a job, so make sure that work on your business isn't impacting your performance. Your employer might become your customer, strategic partner, vendor, or even investor, so don't burn any bridges. Your professional reputation is on the line.
5. Take your new business seriously: Maybe you're just testing the waters with your business, but it's smart to lay the legal foundations as early as possible. Think about incorporating or forming an LLC, check with your local county or city office on what permits are required, and start keeping track of your business expenses for tax time. If you're not familiar with small business taxes, set up an appointment with a CPA: you just might find that your side business can lower your overall tax bill for the first year or two.
By paying attention to these five things now, you'll help your new business venture scale successfully over the months and years ahead. And before you know it, entrepreneurship will take over as your full-time job.