You might be considering making the leap from formal employment to focusing on building a business out of your passion. But there’s a catch: you’re not sure if this will be able to support your lifestyle. You’re wondering if your passion can pay your bills.
Your passion could be a skill or hobby. It could be something you’re truly excited about or something you enjoy doing. So the question remains – can you rely on this passion to pay your bills?
The short answer is yes you can!
how much are your bills?
The first step in this transition is figuring out how much your bills are. How much do your monthly living expenses amount to? These are things you spend on a day-to-day or weekly basis.
This number is what’s going to become your salary from your business. For example, let’s assume this number comes up to $500. You might not be able to earn the equivalent of that figure right from the start, but that’s the number you need to aim for.
Next, have an estimate of your business expenses. If you’re starting out, these may include your supplier costs, branding costs, and everything else that is essential to the foundation of your business.
Let’s take an example of $1,000 per month as the total amount of your personal and business expenses. This essentially means your business needs to earn this amount monthly for all expenses to be paid.
Anything above $1,000 is going to give you a profit. Aim for that, but you have to work towards earning the base amount to pay your bills.
earn enough to cover your expenses
Now that you know how much your bills are, how much do you need to charge for your products or services to earn enough money to cover those expenses?
The price you set for your product needs to go hand-in-hand with a quantity goal: how many of your products do you need to sell? Let’s say you decide to charge $100 for your product. To make $1,000 a month, you have to sell 10 units.
But if you charge $50 for a unit of your product, you would have to sell 20 of them to make the base amount.
falling short with sales
Be aware that you will not always be able to hit your sales targets. For example, if you start pricing at $10 per unit, you would have to sell 100 units every month. This might not be possible for you especially at the start. You might not have enough customers yet or have a pipeline. You would need to increase your price to a more achievable number. Maybe you increase it to $20 and then you would only have to sell 50 items to meet your monthly expenses.
But as you set your prices, you also have to consider whether the market can bear that price. How does it compare with your competition? Does it make sense in your industry?
buy yourself time to figure things out
Before you leave employment to pursue your passion, you should have an exit strategy. It is advisable to have at least six months of living expenses untouched in the bank. This is helpful in case an emergency comes up, or an unforeseen situation causes business to slow down or stop. A perfect example is the COVID-19 pandemic.
As you transition out of employment, your safety net acts as a buffer and buys you time to find your feet. Without this buffer, you risk making bad decisions based on anxiety or desperation.
making the leap
Choosing to turn your passion into your full-time business can be a tough decision to make. One not many people will understand. Remind yourself why you made the choice and this will motivate you to keep growing the business.
For it to grow, remember to constantly keep an eye on how much money the business is spending. At the start, you might have to spend a lot of your personal money. Eventually, this will become money your business owes you, so you need to keep records preferably in the form of receipts or an expense tracker.
I keep track of my expenses by having a weekly date with my money. This way I see what has come into and gone out of my account, what is outstanding and follow up on unpaid invoices.
over to you
Are you trying to decide whether to fully rely on your passion to pay your bills but don’t feel like you’re financially ready to make the transition? I am happy to help! Book a free consultation here and let’s figure this out together!