But even if you are 100% sure you have a “can’t fail” idea for a business, actually carrying the whole thing out is scary.  As any retiree will tell you, saying goodbye to the vaunted “steady paycheck” is a big step, and probably especially so in this still uncertain economy. 

Does that mean you shouldn’t do it?  Heck, no.  As the events of the past decade have played out, “employment stability” appears to have evolved into a rather quaint notion, evoking feelings of nostalgia even for many with so-called full-time permanent jobs.  So it could well be that the bigger risk lurks in staying at your current job. 

Risks, risks everywhere.  So what do you do?  Start by reading this:

In the article A top 10 list for all the risk-takers among us, Boston.com’s Scott Kirsner offers up some excellent ideas for mitigating the risks of taking the leap from employed to self-employed.  Check it out before you stop by your boss’ office to say “buh-bye”…

Founder of Aspire!, Randi Bussin

Randi has changed careers twice, working in high tech, higher education, and is a serial entrepreneur.  She has an MBA from INSEAD and an MA from Tufts University.

She was recently voted one of 100 Personal Branding Experts to Follow on Twitter in 2010.

Those from the world of software development know that Beta test is the last phase before a product is officially released, and its purpose is to test drive the product under conditions that mimic as much as possible the way it will be used in real life by real customers.  The kinds of testing that come prior to Beta — unit test, Alpha test, etc. — are typically done internally by the company, and they are critical to getting the software to the point where it is even usable by real customers.

BUT it turns out that, no matter how bulletproof the software development team thinks they’ve made the product, there are always important issues uncovered once a Beta version of it gets into customer hands.  When these problems are found in Beta testing, they can be fixed BEFORE the official release when expectations and stakes are not as high as they would be in production use.  Yes, as all software users know, pretty much every piece of software gets out the door with at least some minor bugs remaining, but those that are thoroughly Beta tested are less likely to result in wildly customer-unfriendly behavior such as data loss, repeated crashing, and blue screens of death.

And this is an important lesson for career changers, retirees, and others whose plans include a change in employment compensation: try before you buy.  Or to put it another way, Beta test your post-transition financial plan as much as possible BEFORE you say goodbye to your regular paycheck.  For career changers and software development teams alike, it is easy to get caught up in the excitement of the new, the feeling of having already done so much and come so far, and the desire to just “get’er done”.

When it comes to career change, including retirement, this often shows up as an overly optimistic view of how much it is possible to reduce living expenses, in order to pull off the desired change.   I read a study a while back that suggested most of us can reduce expenses by 10% without a significant hit to lifestyle, but it’s a really good idea to verify that’s true, not to mention sufficient, for you while you still have all your options open.  Here’s how:

1. Download my free Cash Flow Worksheet with before, during, and after columns, as well as hints on categories where career changers are likely to see fluctuations.  First, determine your current income and expenses, which will help you with the next step: making estimates for the “during” and “after” columns.
2. If your post-transition budget doesn’t balance (i.e. more cash flows out than in, and the assets intended to fund this change can’t make up the difference), dig into more detail and identify additional areas where you think you can reduce spending, being as realistic as possible.
3. Now Beta test your plan.  In other words, try now, while you’re still gainfully employed, to spend at the post-transition level to see what “bugs” might be lurking.   While you won’t be able to test every change, e.g. lower commuting costs, you should be able to learn a lot just tracking the categories you can simulate, e.g. spend less eating out.
4. Fix bugs, and retest until the plan is ready for “production use”.

Even if the 1.0 version of your spending plan is perfectly achievable, it sometimes takes a while to make a downward shift in spending.  This Beta test strategy not only gives you that time, it has the added bonus of further padding your nest egg, er, goat pen, should a little extra cash come in handy.  And doesn’t it always??

Randi has changed careers twice, working in high tech, higher education, and is a serial entrepreneur.  She has an MBA from INSEAD and an MA from Tufts University.

She was recently voted one of 100 Personal Branding Experts to Follow on Twitter in 2010.

In the not-too-distant past, this was hardly even an issue because 1) employer-sponsored life insurance could usually be converted to a policy you could take with you, and 2) employment gaps were typically few, far between, and relatively short.  Unless you’ve been living under a rock, you know that the latter is no longer true.  

But for the first time, at the Dynamic Networking Group meeting, I heard from a group member about an employer-sponsored policy that was not portable.   Theoretically, this was always possible, that such policies were out there;  I’d just never run across one.  Now I don’t mean to attach too much significance to one instance of this, or suggest that it’s a trend.  However, in thinking about the damage that could be done to a family’s security by overlooking this, I’m adding it to my checklist of items permanent employees will want to start paying more attention to in our new, pink slip-happy world, and I recommend you do the same.

• Employed-but-worried: Are You Financially Prepared for a Layoff?
• Just laid off: Laid Off or Displaced? Get Help

Can’t make the webinar? The AARP Web site offers a myriad of other resources — checklists, an online community, contact information of organizations offering help, and more — for those laid off in their prime. A truly comprehensive resource!

So if you’re among the many Americans who remain “employed but worried,” there’s no time like the present to make sure you squeeze every last drop out of your employee benefits before news of a pink slip puts them out of reach.  For starters, take a look at:

• Flex Spending Accounts - Get familiar with your plan’s details and deadlines. If necessary, move up eligible expenses to ensure you spend your share before you lose the chance. 
• Group Health Insurance – Schedule known needed treatment ASAP, before you get laid off.  For example, if you’ve been putting off making that allergy, dentist, or eye doctor appointment, waiting until after a layoff could cost you.  First, if your new health coverage is not as comprehensive, a likely scenario, you’ll end up paying more out of pocket.  Second, if you can’t pay with Flex Spending plan dollars, you’ll get whacked again.  (NOTE: If you are eligible for a spouse’s health insurance or for COBRA continuation coverage assistance, you may have some wiggle room, but check to be sure!)  
• Life Insurance — If you need insurance and your only coverage is through your employer’s group plan, start doing some research ASAP to determine the best way to make up for the loss of this coverage.   Term life insurance is the best, most cost-effective option for many people, but if your health history prevents you from obtaining affordable — or any — private coverage, it may make sense to take your group policy with you, if you can.  Either way, compare rates and benefits so you don’t have to decide in a hurry.
• 401k Loans –  If you have an outstanding 401k loan that you’ll be required to repay in the event of a layoff, but you don’t have the cash to do so, you may be in for an unwelcome surprise next tax season.  That’s because, if the loan is not paid off, the IRS will treat it as a taxable distribution. If you’re under 59 1/2, you’ll also be subject to a 10% penalty.  (Here’s a good article from Kiplinger.)   One option:  If you have been continuing to contribute while you repay your loan, you might be better off directing the contribution toward paying off your loan – unless you are getting an employer match on your current 401k contributions (& perhaps even then.)   As always, the right answer varies depending on the situation.  Do the math to determine what’s best for you!
• Outplacement benefits – Be sure to take advantage of whatever services your ex-employer-to-be provides to help you secure a new job.