Although the US labor market had a pretty solid 2022 and has remained fairly healthy in 2023, layoffs have still come into play. In fact, data from BizReport reveals that roughly 200,000 jobs were lost due to layoffs in 2022 and 2023. And for every 100 people who lost their jobs during that time, 13 started their own companies.
But should you start a small business after losing your job? You may be tempted to, but it’s really important to go prepared. So ask yourself these key questions before venturing out on your own in response to a layoff.
1. Do I have a decent chunk of money in savings?
It can take many months, if not years, for a new business to become profitable. And you’ll need a way to pay your bills while you build your business up. That’s why it’s best to start a new business at a time when you have plenty of money in your savings account.
In fact, you may even want to tell yourself that you won’t start a business until you have enough cash in the bank to cover a full year of essential living expenses. The last thing you want is to take on personal debt in the course of making a career pivot and venturing out on your own.
2. Am I really ready to be my own boss?
It’s nice not having to take orders from other people. But to run a business, you need to be focused, disciplined, and willing to put in the time. And you may not be in that place. If that’s the case, you’re probably better off applying to work for someone else who will be tasked with running the company.
Let’s say that in addition to having lost your job, you’re going through some life changes. Maybe you recently had a baby or are dealing with an aging parent’s health issues. These are perfectly good reasons to decide that it’s not the right time to open a business you have to oversee every aspect of.
3. Do I have an actual business plan?
You may be interested in the idea of running your own company. But have you thought about what will actually look like?
How will you sell and market your product or service? Where will your business be located? How much help will you need? And how will you pay to get your company up and running?
These are all questions you must have answers to before starting a business. If you’re not at the point of having thought them through, then you may, at very least, want to apply for some sort of temporary position while you iron out the details.
Starting a business can be a rewarding experience, and it’s natural to consider doing so in the wake of a layoff. But before you dive in, ask yourself whether you’re really in the right place logistically and financially. You may come to the realization that it’s not the right time to start a business, and that waiting is a better choice.
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