This is part two of a five part series on how an IT professional can become an entrepreneur, based on my experience of doing just that. The first post talked about courage. The third post will appear tomorrow.
You're going to need money before you can quit your job to start becoming an entrepreneur. As romantic as it might sound to quit immediately and begin following your dream, you don't want to end up having to consult all the time in order to survive. It will distract you from making progress, and even worse, you may be tempted to slip into consulting for a living, thus killing your dream entirely.
You need to attack this problem from two sides. You need to get more money, and need to be spending less.
Getting More
You'll need all the cash you can spare. If you're like I was, a young, single programmer, you'll probably be rolling in it (if you're any good). Now is a great time to start saving your money with purpose, instead of spending it on WoW subscriptions, pizza and computer gear you don't need.
Having said that, I used some of my money to buy a powerful desktop computer while I was still earning a salary, knowing that I could use it for my startup. If you're a techie, or have a techie friend, you can build a powerful rig for $NZ2500 just by sourcing parts and putting it together yourself. I have three screens, an SSD, a quad core phenom and 8GB of RAM, which put together make a great development machine that will last me until my startup succeeds (in which case I can buy a new one), or fails (in which case I go and get a job and buy a new one anyway) [1].
Spending Less
The flipside of obtaining more money and the gear you'll need is to work out a sustainable, long term plan for spending less. It's time to stop buying the coffee, start getting your Mum to cut your hair and finding a place with really cheap rent. In my case, I've co-founded with Martyn Smith, who is giving me cheap accommodation. Our business relationship is deeper than that, but it's an example of a way in which you can get resourceful in order to save money.
You might think it's hard to be resourceful. I disagree. You're a coder. Coders are supposed to be smart. Use your brain, think outside of the box. Try having $0 days, making a concerted effort to wean yourself off caffeine (and no crying that you need it - that's pathetic), ask your family if they'll put you up for a while, buy a motorbike so you can spend less on petrol, or just sell your car.
For a while, I started tracking all of my spending. I kept receipts and labouriously entered them into KMyMoney, a personal finance program. I did it manually as it added a nontrivial time cost to every purchase I made, which made me think twice about buying things. For every transaction that I didn't get a receipt, I recorded it in the Notes app on my iPhone.
I only did it for a while, but tracking my money did two things:
- I stopped buying random junk, because it would cost me time, and I knew I would have to stop buying it anyway, in order to let me live longer while starting up
- I got an idea of how fast I was spending money, which allowed me to forecast how long I could live on the money I had
Knowing how much you spend and how long you can last are two very important pieces of information. If you know them, you'll be able to pick a leaving date for your job that's realistic, and also give you the motivation you may need to stay at your job until that date, even if you hate your workplace.
How Much Money?
You want enough to be able to live as long as possible - 12 to 18 months or even longer. If you know you can consult for some money, you might need a little less. You need enough to be able to quit your job without immediately being worried about running out of funds.
Do not use your credit card, and do not get a loan. They'll weigh on you emotionally, and significantly increase the chances that you'll go bankrupt. Getting in trouble with the bank is not a hassle you need.
The good news is, in a high-tech startup, if you're an IT geek then you won't need to spend much on the product itself. In fact, in the first few months, you may find yourself spending more time talking to customers than building a product.
For Get Your Game On, we've only spent a small amount on graphic design. The code, hosting, internet and everything else, we've piggy-backed off existing infrastructure. The site costs $0 to run. When we launch, the site will still be costing $0 to run, meaning the revenue will allow us to last even longer.
Realism
If there's one important point you should take from this post, it's that you should be realistic. You need to drive your costs down to the bare minimum that you can live with for a year or more, then make sure you have that much money in the bank. Until you've done that, it's not time to quit your job.
It's not bad news if you don't have the money yet. You can work on your startup part-time out of work hours, by meeting with customers, going to entrepreneurial events, building your courage and finding out more about entrepreneurship in general.
One Final Note...
Don't think you can talk investors into funding you while you get your startup running. Your family and friends might, but investors don't exist just to pay founders salaries.
| [1] | Why did I spend all that precious money (which basically amounts to 1-2 months living expenses) on a computer? Because I firmly believe in having the best tools for the job, where possible. Chefs don't cook with crappy knives, and coders shouldn't code without at least two screens and an SSD these days. |
Helpful Sites
- Andy Chilton's Retire at 40 blog is full of great hints on cutting down your spending
- Mark Suster's advice for startups will give you a lot to think about. Don't spend much time sweating about stock options, lawyers, vesting and other such jargon right now - absorb it all into your system as part of your startup education, to refer to later when each part makes more sense.
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Hi and welcome! In 2009 I quit my job to become an entrepreneur, founding 
