Deciding When to Leave Your Day Job to Run a Small Business
Starting a small business takes a lot of time, planning, and capital to get off the ground. But perhaps the hardest part of launching a new venture is knowing when it’s time to move from your steady paycheck into the unknown. For a number of would-be entrepreneurs the thought of not knowing how they’re going to pay their bills is enough to keep them from starting the business of their dreams.
Recently Inc. explored a number of questions that you should ask yourself before taking the leap into entrepreneurship. The first question is how well is your side business doing? Many small business owners decide to start their venture while keeping their current position. During this time you can prove your concept while minimizing the financial risk. This is also a great time to start saving in case your new business should require more of your attention before it starts generating profits.
In a perfect world your side business would grow at a predictable rate so that you could smoothly transition to it from your current day job. Unfortunately this is rarely the case. That’s why it’s important to consider you growth plans for your company before diving in. One classic mistake is going full-time with your business only to have it crumble when you run out of ideas to increase your side income to a full-time income. Obviously you never know what the world of business will throw at you, but having thought out projects, financial estimates, and expansion plans to keep your company thriving should all be in place before you transition to full-time entrepreneur.
While your business finances are certainly important for starting a company, your personal finances are equally relevant. If you’re debt free and have a sizeable amount of savings, the decision to leave your current position to start a small business is a much easier one to make. Not only will your savings make it easier to live during the pre-revenue days of your venture but can also come in handy when it’s time to invest in growing your business.
That goes hand in hand with another one of Inc.’s questions: do you have access to additional capital? Imagine opening an online retailer and receiving a huge order only to have to decline due to lack of inventory and not having cash on hand to purchase the additional products to fulfill the order. This horror story is one that entrepreneurs face time and time again but is one that you can avoid by evaluating all of your options for investments, lines of credit, or small business loans ahead of time.
One of the pitfalls of starting a side business is that you might stunt the growth of your company due to your full-time gig. That’s when it’s time to ask “is your day job interfering with your business operations?” If so it’s likely time for you to make the tough decision of whether you want to remain comfortable or move on and become an entrepreneur. Evan Mendelsohn, co-founder of Tipsy Elves — a successful apparel company that was featured on Shark Tank — recommends taking note the first time your day job interferes with your business. As he told Inc., “If it happens once, carefully decide whether it was a one-time thing or an ongoing problem. If you’re constantly compromising your new business for your day job, a transition might be in order.”
Starting your own business and becoming a full-time entrepreneur can be an exciting, rewarding, and fulfilling. However, pulling the trigger and leaving your steady salary behind is a major decision that should not be taken lightly. By asking yourself some of these questions and growing the plan for you business, you’ll help ensure that once you do take that leap of faith you will have the best chance of success.