Many people are learning web development with the goal of building an online business. The lure of "automatic income" from an online product is enticing, but building an online business is much different than building a traditional business.
In particular, it's easy for would-be Internet entrepreneurs to underestimate how long it will take to make a living with your new business. I was reminded of how dangerous this pitfall can be when I saw What It Feels Like to Launch a Startup With Two Weeks of Runway and the subsequent Hacker News conversation.
What is a personal runway?
A personal runway is the amount of money you'll need to support yourself and your family until your business can pay you enough to take over that burden or you can find investors to foot the bill.
One of the most prevalent reasons for new businesses failing is that the founder didn't have enough personal runway to keep it going until it became profitable. Building an online business takes time and you'll want to have enough of it to make sure you see it through, giving your business the best chance possible.
How much money should you save?
It's different for each person and each business, but my rule of thumb is to save enough money to support yourself for 18 months with zero income. So, if your annual living expenses total $40,000, you'll need about $60,000 in the bank for yourself. But this number is truly unique to each person. There are a number of variables that may mean you need more or less than 18 months of personal runway.
Factors that effect your personal runway
Your living expenses are a variable that can be changed as you progress. You'll have opportunities and incentives to reduce your expenses; from small things like cutting cable to big things like moving in with the in-laws.
Your business' viability might be more apparent as you build it, but having a personal runway will let you explore "pivot" options to aim for new markets if your original market won't support your product. Naturally, this is different for every business.
Your determination may vary based on how much you enjoy working on your own. It's not unheard of to see entrepreneurs decide they'd prefer to pull a steady salary than face the uncertainties of running your own business.
How long it will take to get a job if your business fails is a big factor than many people don't account for. If you're in a highly competitive career space, it might take you a long time to land a good job you enjoy. Consider this in your runway. If there's a possibility of it taking 3-6 months to find a job in your field, add that to your runway.
How to save money
I'm not going to discuss the techniques for saving money. It's been covered plenty, and what's more, common sense can drive most of the process on its own. Spend less money than you make. For a more in-depth discussion, check out the Total Money Makeover by Dave Ramsey.
Taking the leap
Once you've saved enough money to venture out on your own, keep a strict budget, cut expenses whenever possible, learn to live on less, and build for profit as soon as possible (or find an investor). Living on less than you need will create more stress and building a business is already stressful enough. Don't let your own personal runway add to it.
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