6 smart moves for older entrepreneurs
Set aside two years of living expenses
Even the most successful businesses can take a year or two to turn a profit, which is why you shouldn't plan to draw a salary right away.
You don't want to have to count on business revenues to pay your mortgage and personal bills early on because the money likely won't be there.
Living expenses will be held in personal accounts, but as a proprietor, you should factor them into your business plan.
"You need to have 'drop dead' money, enough to get you by for a couple of years if everything goes wrong," says Mari Adam, a financial adviser in Boca Raton, Fla.
So if you're going to invest $20,000 in your business and you have $4,000 per month in personal bills, you need access to $116,000.
Adam also recommends that you have an exit strategy in the event of a failure. That could include a plan for how to liquidate business assets and how to return to the workforce.