Ah, the Wild West of entrepreneurship. It’s glamorous. It’s exciting. It’s been written about in books and portrayed on the big screen. There are stories of billionaires getting started by working out of a garage, stories that tempt one to think, “Why can’t that be me?”
It could, theoretically. But for those considering pursuing their dream and dropping everything in the process — including any gainful employment they currently have — it’s helpful to first understand what you’re getting yourself into.
If you’re hoping I’m going to tell you you’re making the right decision by throwing caution to the wind and jumping into entrepreneurship without a safety net, sorry to disappoint you. Buckle up, because I have a lot of experience here, and it’s going to be a bumpy ride of truths. But don’t worry: There’s light at the end of the tunnel.
5 considerations before you quit your job to start a business
Saying goodbye to that job you hate as you pursue your dream seems glamorous and exciting, but here are five big things to consider before you take this step.
1. Have you done your homework?
To have any chance at success, you must have done your homework about your industry and your customers. And you must have done the right kind of homework, too.
One of the biggest mistakes I made as an entrepreneur was doing the homework but approaching it in totally the wrong way. The proper way to go about researching your business idea is to try to prove that the idea is terrible, and, when you fail to do so, you can be confident that you’re onto something.
What I did was the opposite. I was convinced upon having the idea that it was fantastic, and I set out to prove it. As a result, when I surveyed potential customers, I asked them leading questions meant to draw out the answers I wanted without realizing I was doing so. I would ask things like, “Wouldn’t it be nice if you had a product that did x?”
The nice, obliging people I asked of course said, “Yes.” They may even have believed it. But when it came time to ask them to open their wallets, their tune suddenly changed, leaving me to realize that my initial product idea was going to need a lot more work.
What you should do: Devote a lot of time to research — hours upon hours upon hours. Your local library has access to industry research, so dive through that material. Consult with players in the sector. Survey customers. Identify a niche that fits solidly within a high-growth industry but is different from what anyone else is doing. Create an honest assessment of what kind of resources you’ll need in terms of funding, personnel, assets, and anything else in order to get your business off the ground.
2. Do you have a conservative, gradual plan for growth?
Are you penciling in turning a profit by the fifth week? If so, shelve this project and come back to it when your head’s on straight. A lot of entrepreneurs — me included — are guilty of making pie-in-the-sky projections for growth that are based more on hope than reality.
Getting a business off the ground is like launching a rocket ship. It takes incredible energy to break the pull of Earth’s gravity but gradually gets easier with more momentum.
During at least the first year or two of your business, you will grind and push and beat your head against the wall trying to get some positive movement. It will be frustrating and, at times, seem pointless. If you’re projecting rapid growth, you’re setting yourself up for failure. Wouldn’t you rather be pleasantly surprised? Grounded expectations are necessary to avoid early burnout.
What you should do: Resist optimism at all costs. Be pessimistic in your assumptions and leave the optimism for firing up yourself and your investors (if you’re lucky enough to have any). As the saying goes, every project takes twice as long and costs twice as much as expected.
3. Do you have the skills you need?
Let’s say you have a great idea for a widget, and you’ve worked in the general industry for a while and know a little bit about the ins and outs. However, you’re not an engineer and know nothing about creating a physical product.
Of course, you can hire an engineer to create it for you, but you probably still need to communicate the general dimensions of the product and create some specs so the engineer builds what you had in mind. For that, you should take classes to understand some basics before you embark on a potentially frustrating journey of going back and forth with an engineer who doesn’t seem to get what you’re going for.
You may need to learn many other skills to be an effective entrepreneur. Perhaps you must understand Accounting 101 or learn how to be a better project manager.
What you should do: Take a moment to sit down and identify what skills will be needed to maximize your chances of success. Identify classes and training that will provide you with these skills and budget both money and time in your business plan to make this happen.
4. Have you built a nest egg?
If you’re keeping your day job and using only your free time to work on the business, this advice doesn’t apply to you — although it’s always good to have a nest egg. But if you’re looking to quit your job and jump into this startup full time, or at least scale back your existing job to part-time, you must have a nest egg.
As previously mentioned, building a startup is a long-term grind and not a get-rich-quick scheme. You must save sufficient financial resources to cover your costs, assuming the business provides you with no revenue for months or potentially more than a year.
What you should do: Have at least six months of savings on hand if you’re quitting your job or possibly a little less if you retain some income from part-time work or side gigs. Personally, I would go with a year of savings because those six months go by quickly. Since it’s very difficult for most people to save up that much, I’d just keep my day job and work during my free time.
5. Do you have a network of support?
Starting a business is a lonely endeavor. There are no colleagues to pick you up, and you probably won’t have much time to hang out with friends. You must have a network of support around you, such as your spouse, a trusted friend, or a mentor. These people can lift you when you’re doubting yourself the most.
Going at it alone is risky, even if it’s your business, so consult with other entrepreneurs and heed their advice. Remember, you’re walking down a well-traveled road, so ask others who have navigated it so you can avoid some of their mistakes and learn from their experiences.
What you should do: Schedule regular conversations with your mentor — don’t wait until you’re burned out. If you don’t have a mentor, ask trusted associates to recommend someone who has experience and might be willing to help out a fledgling entrepreneur.
Advantages of quitting your job and starting your own business
OK, so you’ve read and understood the considerations. Now it’s time to get into the fun part: the advantages of quitting your job and starting a business on your own.
Greater personal investment
It’s immensely satisfying to have a sense of ownership in what you’ve created. You’re finally working for yourself rather than someone else. It’s also nice to have only yourself to answer to rather than some micromanaging boss.
You also have a heightened sense of accountability — there’s no passing the buck when you’re in charge and possibly the only employee at this early stage. You can enact your vision exactly as you see it, and you have control over the outcome.
Plenty of freedom
When you’re in charge, there are no rules except for those you set. As an independent contractor instead of an employee, you have full control over your schedule. Also, you can choose where to work from, whether it’s a rented office space or your dining room table. Most importantly, you have full control over the company’s vision. If things aren’t working, you can shift the plan as you see fit, making adjustments with full autonomy.
As the sole owner of your business, you get all of the profits. Once you break through the gravitational pull and your business has reached a certain level of revenue, the sky’s the limit in terms of how much you can earn.
There’s a greater relationship between effort and money made — unlike a salaried job, where working much harder may eventually get you a modest pay bump but not much else. There’s no limit on your expansion as a company except your imagination.
Disadvantages of quitting your job and starting your own business
The aforementioned benefits are great, but they can only be enjoyed once your business has reached liftoff and broken through the clouds. Here are the downsides you may experience before reaching that point.
When things go wrong, there’s nowhere to hide because you’re the problem. The buck stops with you, and failure is a tough thing to experience. You can’t blame your customers or an employee. You have to take responsibility and figure out what’s going wrong. That means tough decisions and self-reckoning.
Greater time investment
If you think you’ll be able to run your business as a 9-to-5 job, you may be in for a rude awakening.
Initially, you may work two or three times harder than when you were an employee, sometimes staying up late at night or working through the weekend, only to feel way behind when the work week begins again on Monday. It’s exhausting, and you risk burnout early on. If you’re holding down a day job at the same time, the feeling may be exponentially worse.
When you read those self-help books from entrepreneurs worth many millions of dollars, they make it sound like there’s no downside to failing. Just dust yourself off and try again! But there are real, harsh consequences for entrepreneurs who dive into creating a business without a fallback plan.
If you’ve quit your job and have no savings to fall back on, things could get real ugly real fast. You may face eviction. Creditors may seize your assets. Debt from unpaid taxes to the Internal Revenue Service may quickly pile up, leading to wage garnishment of any employment you do hold. Your parents’ couch is suddenly in your near future.
Bankruptcy becomes a last-ditch effort to get back on your feet, obliterating for many years your chances of getting a loan or buying a house.
If you’re young and single, you might be able to handle any adversity that comes with failing at a startup. But if you support a family and have a mortgage to pay, you absolutely must have a Plan B, whether that means staying in your current job or having a sizable nest egg — or, preferably, both.
Pursue your dream with gusto — just be smart about it
If you’ve read all of this and come to the conclusion that my recommendation is to not bother starting a business, you’ve misunderstood. Becoming an entrepreneur is fulfilling, exciting, and absolutely worth the ride. You just need to approach it wisely. Quite frankly, ditching your job prematurely is not a smart approach.
So keep your job for now. Carve out some time to work on your business plan. Flesh it out and do the homework necessary to ensure you have a realistic plan that will stand up to scrutiny.
Find a mentor who has experience creating successful businesses to review it and give you feedback. Then go to work gradually building your dream, whether that means an online business, freelancing, or a brick-and-mortar store.
Test things out and make adjustments based on the results. Then, when you have a source of income you can rely on, make plans to leave your job at a time that makes sense. Trust me, it’ll do wonders for your peace of mind.