From Severance Check to Self-Employment: First Steps

The severance check hits your account. You take a deep breath. Maybe you saw it coming. Maybe you didn’t. Either way, you’re standing at a crossroads: do you jump back into another job search – or do you finally bet on yourself?

If you’re leaning toward self-employment, that check isn’t just a payout. It’s a rare opportunity: a financial runway to build something of your own. But that runway disappears fast without a plan. Let’s talk about how to make that transition intelligently, strategically, and legally.

First, Treat the Severance Like Seed Money – Not a Windfall

It’s tempting to see a severance as a cushion or vacation fund. And sure, a little decompression might be in order. But if you’re aiming to start your own business, you need to shift your mindset.

• This is your startup capital – it’s not just for paying bills.
• Every dollar should be assigned a job – whether that’s covering living costs or investing in business basics.
• Aim to stretch the runway as far as you reasonably can while building income.

Think like an entrepreneur from day one: cash flow is king.

Start With the Simplest Business Model Possible

You don’t need to launch a polished brand, hire a team, or build a complicated funnel on Day One. Start with the clearest, quickest way you can make money using the skills you already have.

• Are you a designer? Start offering freelance packages.
• A corporate trainer? Offer small group coaching or one-on-one sessions.
• Former ops manager? Businesses pay well for someone who can organize chaos.

The point is to validate your service, get paid, and build from there. Keep it lean. Keep it simple.

Set Up Structure So You Don’t Regret It Later

Many new self-employed folks put off the admin. It feels unnecessary or overwhelming. But waiting until things “take off” often means cleaning up a mess later – or worse, running into legal or tax problems.

Take these foundational steps early:

• Form an LLC: It protects your personal assets and signals professionalism.
• Open a business bank account: Keeps finances clean and tax-ready.
• Get an EIN from the IRS: Essential for banking, taxes, and client contracts.
• Create a basic service agreement: Every client should sign something – even if it’s simple.

It’s easier (and cheaper) to start right than to untangle things later.

Budget for Survival and Growth – at the Same Time

Here’s where things get real. You’ve got a finite amount of severance money. So you need to cover your living expenses and start generating income before that cushion runs out.

Split your budget into three rough categories:

1. Personal essentials: Rent, food, insurance, transportation.
2. Business investments: Website, legal formation, software, marketing.
3. Emergency reserves: A little buffer, in case cash flow is slower than expected.

Don’t forget to factor in taxes. That severance check likely didn’t withhold enough. Assume 25–30% of income will go to taxes unless you verify otherwise.

Build a Revenue Plan, Not Just a Business Idea

A business is only a business when it makes money. That means building a revenue plan – not just branding and dreams.

• What will you sell? Be specific: services, products, packages.
• Who will buy it? Identify 2–3 ideal customer profiles.
• How will they find you? Think referrals, content, outreach – not just hoping.
• What will you charge? Be honest. Undercharging is common – and risky.

This doesn’t have to be a full business plan. But you do need a path to revenue. That severance won’t last forever.

Think Like a CEO Even If You’re the Only Employee

You may be answering emails in your sweatpants – but your mindset should be sharp. Treat every day like you’re running a real company – because you are.

• Set office hours – even if they’re just for you.
• Track your time and income from the start.
• Create processes for onboarding, invoicing, and delivering work.
• Talk about your business like it’s a business.

The more seriously you take yourself, the easier it is for others to do the same.

Don’t Wait Until You Feel “Ready” to Formalize

Many new entrepreneurs wait until they hit a certain income level to form an LLC or open a business account. That delay costs more than you think.

• Tax messes: Mixing funds and missing deductions adds up fast.
• Client friction: Some clients hesitate to pay individuals instead of businesses.
• Legal risk: Without a business entity, your personal assets are exposed.

You don’t need everything perfect. But basic structure – legal and financial – is a must. It protects you, saves time, and positions you for growth.

This Is the Beginning of Your Business Journey

Getting laid off isn’t the end – it might be the launch. But only if you treat it that way. That severance check? It’s not security. It’s a springboard.

Use it to buy time. Use it to build something real. And use it to protect what you’re building with the right structure. The first few steps you take can define the path ahead. Walk it with purpose.