When you are just starting a business unless you have a round of venture capital funding or some angel investors, you will probably be bootstrapping your way along. This means you’ll probably keep your day job and work on your business at night and on the weekends.
Don’t worry, that is how a lot of us started out. Eventually you will get to a point when you are ready to drop to part time work if you can, and then you will find yourself at a tipping point. That point will be where it is actually costing you money to go to work. If you could do more work on your business, you would make more money. Your debt to income ratio is reasonable, and you can meet your monthly expenses with your business money, even if only barely.
This tipping point is different for everyone, but it does have some things in common. Here is how you will know when you are ready to quit your day job.
You Know the Risks
The tipping point is a risky one. You are assuming that if you quit your day job, you would either continue to grow in your business or at least sustain the level you are at now so that you can meet a minimum of income requirements.
Knowing these risks is key. You might have to backtrack and take a job for a little while. You might have to reduce your monthly expenses or borrow money to keep your household afloat. As long as you know these risks and are willing to take them head on if they come, you are ready to quit your day job.
You Have the Resources
Knowing the risks is one thing, being ready for them is another. But having resources is more than just being ready in case something goes wrong, It is about being prepared for growth, having time and money to invest in your business, and knowing who to go to when you have questions or concerns is another.
You will need a network, a group of people who will be there for you, and you may even need employees or freelancers who are there to support your goals. Beyond people, you will need to have money in savings, the equipment you need, software, hardware, and a place to work. One you have determined what resources you need and you have them at your disposal in one way or another, you are ready to quit your day job.
You Have a Business Plan
Ah, for the want of a business plan, many small businesses die or fade into obscurity. It isn’t enough to love coffee and to start one of those corner coffee stands. You need to have a budget, an inventory plan, goals, funding sources, cost estimates, profit predictions, and more. Blindly stepping into any business without a specific business plan, a marketing strategy, and an idea of what you need to charge and what you can pay your employees while still making a profit is ludicrous.
Yet it happens all the time. There are several elements of a good business plan, and many templates and courses for creating one online. Take a course, follow a template, get some help from your local small business administration or networking group, and share the plan with others who can critique it and help you improve on your idea. Once you know how to take your idea from concept to profit, you are ready to quit your day job.
You Have the Skills and Education Required
Typically, someone who wants to start a business has one of two sets of skills: either they are very good at the thing they want to start a business doing and so want to work for themselves rather than someone else, or they are a very good business person and see the opportunity for creating a profitable enterprise that will benefit them and the people they employ.
In either case, you will be lacking some skills in one area or another. Either you will need to brush up on business skills or you will need to learn more about the industry you will be working in. Both are quite possible. There are short-term business classes that will help you learn and apply the business skills you need. They can be found anywhere from your local community college to the Small Business Administration or local networking groups.
If you need industry skills, consider working in the job field for a while before you start a business or purchase one. That way you will understand the ins and outs of everyday operations and can relate to employees, managers, and their daily struggles. Once you have acquired the industry skills or business knowledge you need, you will be ready to leave your day job.
You’ve Proven Yourself
Finally, if you are bootstrapping your business, you need to prove to yourself and those who depend on you that you can run the business at a profitable level even if that is small at first. If you are not yet making a profit, and you don’t have some significant funding backing your venture, it is probably unwise to leave your day job.
Even if you are working part time to bring in a little bit of income to keep you afloat, hanging on to that sure-thing income is simply a smart decision. Once you have proven that your business idea will work, you are ready to leave your day job.
Leaving your day job entirely can be a scary process, but at some point, your business will have grown enough that it will become necessary. Use this guide to make sure you are ready.