“Do not wait to strike till the iron is hot; but make it hot by striking.”
–William B. Sprague
“You don’t want another Enron? Here’s your law: If a company, can’t explain, in ONE SENTENCE….what it does….it’s illegal.”
Previously, I’ve discussed how if you truly have the itch to trade in stocks, then you should only risk 5% of your available capital in trying to hit a home run through trading. If you have that irresistible urge to tinker and to try to find the next Google or Apple, I have an alternative suggestion to trying to hit that home run through trading.
Why not try to start your own business on the side?
Note, I am NOT advocating quitting your job and starting a business. While it is possible to succeed this way, it’s extremely risky. From day one, you’re going to be desperate to make sales, and people will be able to sniff that out from a mile away.
What I am advocating instead is to take small chunks of your risk capital and try to start a business on the side. Enjoy painting? Try to sell something on etsy.com. Are you handy? Sell your services as a handyman. Have specific expertise in a topic? Sell consulting hours.
Did you know that, according to The Economist, 47% of the millionaires in the world made their wealth through entrepreneurship?
Here are a few guidelines to follow when trying this out.
Get a comprehensive financial plan now!
- Make sure whatever you do does not violate the terms of your employment contract. The last thing you want to do is to be forced to turn your side gig into your full-time gig because you’ve run afoul of your employment contract.
- Follow the $1,000/6 month rule. This rule means that you can spend no more than $1,000 on your side gig and you have to stick with it for at least six months before declaring a failure. This will teach you how to market on a shoestring and save you from spending money on needless investments such as rounded, glossy business cards or an expensive custom-designed website.
- Do not write a business plan. I successfully built and sold a company without ever writing a business plan. Time that you spend writing the business plan is time that you should be spending getting people to pay you for whatever it is that you are offering.
- Aim to get someone to pay you, no matter what that payment is. Even bartering counts. The idea is that you’re getting someone to give you something which they value in exchange for whatever it is that you’re offering. In the olden days, before fiat currencies, that’s exactly how business worked. Get someone to get over the psychological hurdle of exchanging value for value, rather than value for free. That value can also be in the form of testimonials.
- Do something that you feel passion about. If it’s not passion, then it has to be at least a very strong interest. The more that your heart is into something, the more likely you are to be the storyteller that you need to be to convince people of the value that you offer. One of the limitations to growing my previous company was because nobody functioned as the chief storyteller.
- Don’t quit your day job until your side gig is replacing at least 60% of your revenues and you have more work than you can do in your spare time. Remember, you don’t want to make the jump until you have proved that what you’re doing is sustainable. If you make the jump, don’t go out and immediately buy Aeron chairs either.
- Once you’ve run through the 5%, you don’t get to add to it until you’ve added an appropriate amount of investable assets. Let’s say that you have $50,000 in investable assets. You have $2,500 in at risk capital that you can either try trading with or try to start your own business with. Let’s say that you try two business ideas and neither works. You now have $500. You don’t get to try again until your investable assets are up to $60,000, since you need another $500 and $500/5% = $10,000. You need to add $10,000 to your initial total before you get to try again.
What happens if you don’t have $20,000 in investable assets – the minimum amount needed to have $1,000 to take a crack at a side business – can you break the 5% rule? No. You’d better start saving. Find out what’s important in your life and cut out the unimportant, because if trying this is important, you’ll find a way to make it work.
Next time you get the itch to be the next rogue stock trader, try starting your own side gig instead. You may find the return, even if not monetary, is well worth the effort!
Have you ever tried to start a side gig? What happened? Tell us about it in the comments below!
Get your comprehensive financial plan now at myFinancialAnswers.com!