The “reluctant entrepreneur” is the term sometimes used to describe people who have been forced to become entrepreneurs not necessarily by choice but by circumstances beyond their control. More often than not, it is entrepreneurship born out of a layoff during down-times. With no other immediate job prospects available, one sets off on their own. We could be entering into a period where a lot of reluctant entrepreneurs are born.

But what about money? I joked last month that entrepreneurship was French for poverty. Since cash flow is the life-blood of business, big or small, anyone facing the prospects of becoming a reluctant entrepreneur (much less a willing one) has got to start thinking of money. How do you become a successful reluctant entrepreneur if the circumstance of this life choice was born out of an economic shock like a lay-off?

First, it is not the end of the world if you are becoming a reluctant entrepreneur with little to no personal financial resources. One of my most successful clients started his business in his basement with two used computers. You just have to be savvy. Second, we are re-entering the age of entrepreneurship (the concept of the employee is a relatively modern concept) and this re-emergence has resulted in a re-focus on the entrepreneurship issues.

I am not a HR expert so I am not going to attempt to blog on when you think the axe is coming and its time to be a reluctant entrepreneur but here are a few finance issues to think about:

• YOUR FIRST CLIENT SHOULD BE YOUR EX-BOSS

Many an entrepreneur has started their business by being retained by the company that down-sized them. Some are shrewd enough to know the axe is coming and to negotiate a deal with their employer- instead of paying me severance, hire me as a consultant.

What’s in it for your ex-boss? Cheaper labor and familiarity with work product. Consulting fees can be written off as an expense and your employer doesn’t have to work about your health care benefits anymore.

I see this occur quite often in the software and the media fields; labor markets with a great deal of employee fluidity. Now, if you hate your work and what to do something else, this is clearly not a good solution.

• THERE ARE A LOT OF FREE RESOURCES TO TEACH YOU TO BECOME AN ENTREPRENEUR

This may ruffle feathers but the worse place to learn to be an entrepreneur is at MBA school. The rough and tumble, unpredictable nature of entrepreneurship does not fit well into neat and tidy case studies and text books. The best place to learn entrepreneurship is through other entrepreneurs.

Having said that, there are many free resources to help you “learn” entrepreneurship. There are obviously blogs. I enjoy reading this blog on entrepreneurship. Many larger cities have economic development departments who devote some resources to providing resources to small business. In Canada, BizLaunch provides free training seminars for start-ups. These are only some examples that came to mind. There are a lot of other free resources to help you soak up knowledge so do your research.

• GOOD BUSINESSES GROW ORGANICALLY SO MONEY UP

Statistically speaking, word of mouth referrals is the best way to capture new business (although studies also state that it costs 4 times more to land a new client than to keep an existing one which tends to lead one to believe you are better off keeping what you have than chasing the next big client). This takes time so you best to “money up” because you are in it for the long haul and businesses consume a lot of money.

One couple I knew basically sold every non-essential item they owned to generate cash. Others take part-time or one-off jobs during down seasons. As I have mentioned before as well, the entire household has to make a commitment to entrepreneurship; many entrepreneurs need a spouse to carry the financial burdens of operating household for a while as well as providing emotional support. If this all sounds terrible remember that entrepreneurship is born out of passion so the sacrifices made are to pursue a dream and not a job.

• LEARN REVENUE RECOGNITION

Revenue recognition is just MBA speak for good debt. You spend money to the extent you know it will generate income. No fancy office furniture. Instead, spend it on marketing and advertising and things that will bring clients into the door.

• WHAT’S YOUR EXIT STRATEGY FINANCIALLY?

Are you going to retire by selling the business? Be a reluctant entrepreneur until you find a steady paying job? Become a serial entrepreneur? It is always good to have an exit strategy from a business and financial perspective since it will also dictate how you deal with your cash flow. For example, selling the business means having to pour financial resources into growing the business and making it attractive for sale. Always try to begin with the end in mind.

Many reluctant entrepreneurs end up loving the life of an entrepreneur so always keep an open mind.