Starting a new business while working a traditional job is a very shrewd move – it helps eliminate much of the financial stress that accompanies entrepreneurship. But working a day job while pursuing your passion is also incredibly difficult – it can wear you thin while pulling you in two different directions.
At some point, you’ll have to make a decision to quit your day job and fully devote your efforts to your new business. But knowing when to walk away from a steady paycheck is not always clear. Before turning in your notice, ask yourself the following questions to help determine whether you’re really ready to make the leap.
1. How Is Your Side Business Doing?
If clients are pouring into your new business, you might be ready to act now. But if you’re barely scratching two pennies together from your new venture, leaving your current job won’t necessarily guarantee more income. Remember – your steady pay check is paying your bills and keeping your head above water. To give that up means you need to start paying your bills from another source. If you’re not generating much income from your new business, you’ll need to rely on savings or loans – are you really ready for that risk?
2. What Are Your Expected Growth Plans?
If your projections and research indicate that your new company could take off in the next few years, you might be able to pull the trigger before the money starts rolling in. Be sure you have a solid business plan in place with finances, projections and expansion plans noted.
3. How Are Your Personal Finances?
Personal finances play a major role in entrepreneurship, especially if you plan to run a one- or two-person show. If you have little to no credit card debt, an emergency fund in place, and long-term savings stocked away, you might be ready to go it alone. Many entrepreneurs must bootstrap their companies or forgo a personal salary until the company is self-supporting. Solid personal finances make this possible.
4. Is Your Day Job Interfering With Your Business Operations?
If you can’t tend to your side business because your current career is getting in the way, it might be time to make the switch. For instance, if customer service is suffering, or you can’t take on new clients because your day job requires too much time, you’re actually foregoing possible income with your new business to maintain the job you’re trying to leave. 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.
5. Do You Have Access to Additional Capital?
If you think your business needs more money in order to grow, now’s the time to start investigating options. This is particularly true if you don’t have any personal funds available for business expansion. There are lots of ways to raise capital – angel investors, venture capitalists, crowd funding, and small business loans – so research which option is best for you. Lining up capital before you leave your job enables you to list your current income if you apply for a loan, and it also ensures there’s no lag in cash flow once you’re on your own.
6. How Is Your Personal Life?
If you just became a caretaker for an elderly parent, or you’re wife just gave birth, now might not be the best time to add more stress to your life. Your family should always come first, so think about their needs before deciding to quit your job.
7. Are You Disciplined and Organized?
Once you quit your day job, you’ll be running your own show. You won’t have a boss, a work schedule, or as many externally-assigned deadlines to meet. While the freedom of entrepreneurship is wonderful, if you don’t have the personal organization and discipline to maintain productivity, you might not be quite ready to quit. Take steps to improve your self-discipline and organization before you walk away from your day job – enroll in a class, or attend an online seminar to learn techniques for staying on track.
Making the leap from a traditional career to small business ownership is a major decision, and shouldn’t be taken without careful consideration. I made the transition several years ago, and while it worked out for me, it took a lot of planning, research, and prudence. Be sure you do the same.
Have you recently quit your day job? How did you decide to make the transition?