When you’ve got that “entrepreneurial spirit” and want to start your own business, a common question that many “up-start entrepreneurs” need to address is whether or not they should quit their day job and, if so, when. Not easy questions to answer as they depend on many factors, but here is some guidance as to how to proceed.
I suggest that an easy way to approach answering these types of questions is to conduct your thinking in three distinct phases as follows:
· Phase 1 – The Thinking About It Phase
· Phase 2 – The Planning Phase
· Phase 3 – The Doing It Phase
The Thinking About It Phase begins with the first question you ask yourself which is “Why do you want to do this and why now?” Here are the types of issues, questions and concerns you need to address:
1. You need to think through the reasons for wanting to start your own business such as more money, more flexibility, more freedom, don’t like your current job and/or boss, not going anywhere, looking for a better work environment, hate corporate America or whatever. Some people who think they want to be entrepreneurs are just unhappy with their current roles. Quitting a job with guaranteed income and benefits to pursue a new opportunity full of risks and unknowns (such as starting a new business) may not necessarily be the right answer. You need to take the time to truly consider what you want from a business.
2. Do you have any business training such as in the areas of marketing, business operations, finance and accounting, management, human relations and employment, etc.? Just because you have a college degree in business doesn’t necessarily mean you know how to run a business!
3. Are you thinking about opening a business in an industry that you are familiar with? If not, then you need to assess your ability to start up a business in an area that you know nothing about. It’s best to do some preliminary research and “test the waters” by investigating the market potential for your business concept while you’re still working. You should at least understand who your likely customers would be and what type of competition you would face.
4. You need to assess the risks involved giving consideration to your current financial responsibilities such as mortgage, car payments, credit card obligations and other debts, kids in college, medical bills, etc. Having a working spouse/partner may be necessary to subsidize current financial obligations while moving forward with your new business where you may not see a significant revenue stream for months. (Note: I always advise my clients to have their wives keep their school teacher jobs just in case things don’t work out.)
5. How do you plan to run your business—partners, family members, investors, yourself with or without part-time help, form some type of corporation, etc.?
6. To help ease the transition, you should share your entrepreneurial plans with family members to see if they support the tradeoffs involved in starting a business. If your family members and other members of your “support network” are reluctant to back your idea, then you may want to rethink quitting your current job. You don’t want to be the “Lone Ranger without Tonto”!
Once you have “thought through” the Thinking About It Phase and are now convinced that you want to move forward, then the next step would be to undertake the necessary planning and make sure that you have a workable plan to move forward with your entrepreneurial idea, thus going through the Planning Phase. In this regard, here are some of the types of issues, questions and concerns that you while need to address in this phase of your thinking process:
1. Once you have gotten confirmation from your spouse/partner and family that they support you in this entrepreneurial venture, then pick a date and develop a plan around this date. You will need a plan that details at the very least how you’re going to become self-employed and how much money you will need to get you going. Think of this as your pre-cursor to your business plan which you will need in any case.
2. In terms of business planning, it is in this phase of your thinking that you should attend some of the various workshops and seminars presented by the Small Business Administration, Small Business Development Centers and SCORE. For example, SCORE frequently offers several workshops that you should find to be invaluable such as “How to Start, Run & Manage a Successful Business”, “The ABC’s of Starting Your Own Business” and “Developing a Winning Business Plan” to name a few. SCORE counselors can also assist you with the preparation of your business plan.
3. With regard to the financing, you will have to ask yourself how much you will need in savings to feel comfortable before quitting your day job. It is generally recommended that you should create a savings account of at least six months of income. Because lack of capital is one of the main hurdles to entrepreneurship, rather than figuring out cash flow as you go along, it’s best to come up with realistic projections as part of your business plan before deciding whether you can afford to leave your job. It is important to recognize that your start-up business may not be profitable for some period of time, thus it’s important to be realistic about how you’ll support yourself financially. Consequently, it may be necessary to keep cash flowing in from a day job when your new company may not be making much money. If you take a realistic look beforehand at what you’ll need to do to get your start-up going, you should have a better idea of when (or if) it’ll be safe to quit your day job.
People who decide to walk away from their jobs should take plenty of time to be sure that they’re making the right decision and undertake extensive planning to support this type of decision. If you are at this point, then you’re ready for the Doing It Phase. Here are the types of issues, questions and concerns you need to address:
1. Make sure you have completed your business plan and have obtained concurrence from the experts such as SCORE counselors and other types of business planning advisors. You may even enlist some mentors to help you make this transition to successful entrepreneurship.
2. You may want to consider keeping your day job for a while and starting your business on the side. This would allow for trial and error without too much risk. The advantage to this approach is that it gives you the opportunity to evaluate what’s working and what isn’t so that you can focus on the good and fix the bad. This would give you the opportunity to “fine tune” your business plan before taking that final step.
3. Before quitting your job, it would be a good idea, besides giving adequate notice to your employer, to share your business idea with your boss. You want to avoid “burning bridges” and leave in good standing. Leaving the door open to possibly return can be helpful if you eventually decide that owing a business isn’t right for you. Besides, depending on the nature of your new business venture, your employer may even want to retain your services as a consultant.
As Richard Branson says in his article “On Knowing When to Quit Your Day Job” (see http://www.entrepreneur.com/article/229965) “While you plan and network and find financing, remember that the window of opportunity is closing—at some point, you will simply have to go for it. Then all that’s left to do is give up your day job and become your own boss.” Remember, starting your own business is not right for everyone, but, if you do so, good luck and enjoy the benefits of entrepreneurship.