By Briana Morgaine
For many, the hardest part of starting a business isn’t coming up with the idea or choosing the right name.
Deciding when the time is right to start a business is often the biggest challenge. How do you know when to take the plunge? Should you go all in, all at once—or take it more slowly?
This can be an extremely difficult question to answer, and doing so involves a careful assessment of your own strengths and weaknesses, your position in life, and (of course) your financial situation.
It comes down to a decision between “jump right in,” and “slow and steady.” Some feel it’s better to quit your job and start your business right away, while others will advocate for a more measured approach, involving building up your new business on the side before transitioning into the role of full-time entrepreneurship.
So, you want to…quit your job and start your new business right away: You have a plan, a passion, and you’re ready to do whatever it takes to make it happen. That’s all great—but, the reality is that quitting your day job cold turkey to start a new business is the riskiest path available.
There are huge advantages to quitting your day job and starting your new business right away. You’ll have the luxury of time and energy, and you’ll be able to throw yourself wholeheartedly into your new venture. You’ll also be doing what you love, and that alone is an important consideration. Plus, unless you have a substantial financial cushion to fall back on, you’ll likely have a bit of urgency to spur you toward success.
So, if you think this is the right choice for you, let’s look at some of the questions you should be asking yourself:
Do I have any savings? What about investments? Can I get a loan? So, the obvious question—what’s your financial situation? It’s not just about making sure you have enough money to start your business. You’ll need money to keep the lights on—not just in your new business, but at home, too.
Before you proceed, get as realistic a sense as possible of these three things:
- How much start-up capital you need to open your doors (whether real or virtual) and begin selling your product or offering your services
- How long until you’re able to break even and make money
- How much money you currently need to, you know, keep living
Once you have a sense of the first two points, compare them against the last point on that list. How long will it take you to break even? Is it 12 months after you open? Maybe 24, or more? It’ll be necessary here to do some type of financial forecast, or perhaps a business plan (we recommend a Lean Plan).
Use that number (along with your calculation of your necessary living expenses) to determine how much additional cash you need saved up to sustain yourself while you’re not bringing in income. Then, add to it. Unforeseen expenses always creep up, and you don’t want to find yourself in a position where you can’t cover an unexpected bill or emergency expense. Also, starting a business is going to take longer than you think, so padding this number is important.
Next, spend some time familiarizing yourself with your funding options. Depending on the type of business you’re starting, the types of funding available to you will vary greatly.
Do I have the motivation to make things happen quickly?
Quitting your job to start a business certainly has the potential to light a fire underneath you. The important thing to note here is whether you are the type of person who is motivated by that spark, or if the prospect of make-or-break will be completely overwhelming to you.
Ask yourself questions like:
- Do I thrive under pressure?
- Am I good at self-imposed deadlines and schedules?
- Do I have the kind of personality who likes to “hustle”?
- Am I willing to do whatever it takes to make this happen?
Do I have people relying on my ability to bring in a certain income? Maybe you’re a single person with plenty of savings, and you’re really only beholden to yourself. If so—what are you waiting for? It’s all on you, and now might be the perfect time to quit your day job and pursue your dreams.
But wait, back up—that isn’t you? That’s understandable; realistically, it’s a uncommon position to be in. Most of us have significant others, children, or family members who are impacted by our financial decisions. Don’t despair; that doesn’t mean that you can’t still pursue this path. It just means you need to proceed with more caution, as you have more stakeholders invested in your decision.
Here are some questions to ask yourself:
- What is my financial obligation to those in my life?
- What will the impact be if my new business does not make what I expect it to make in the timeline I’ve drawn up?
- Do we have a safety net (family who can provide assistance, investments, and so on)?
- Can I go back to my old job (or career) if need be? Do I have a fallback plan, especially if people are relying on me?
Do I need to get out of my current job or career ASAP? What is the happiness cost-benefit? Do you hate your job? If your current job is the proverbial soul-sucking, downright dreadful experience that many would-be entrepreneurs wish to break away from, you may determine that it’s worthwhile to just quit, light that fire, and make something better happen. However, maybe your current job is really okay, all things considered. Actually, you don’t hate it at all; you just have a really great idea and know you’d like to start your own business. If that’s the case, the cost-benefit ratio might be lower. Sure, you might be happier, but the urgency of needing to start your business quickly (as opposed to starting it on the side) might be less so than that of someone who really feels deeply unhappy and unfulfilled in their current career.
To get a sense of the happiness cost-benefit, ask yourself these questions:
- What is it about my current job that I dislike?
- Will starting my own business make me appreciably happier? How?
- Am I sure that starting my own business will eliminate the negative aspects of my current job or career?
- Will my increased happiness level as a result of doing what I love be enough to outweigh how hard I will have to work?
Or, maybe you’d rather…save up, have a side hustle, and quit when the timing is perfect: Well, no one can knock you for being reckless. Choosing to keep your day job and start your business on the side is a solidly sensible approach. You’ll be able to build up your savings, you won’t be without income, and you’ll be able to chip away at the process of starting your business in stages. It’s less risky, and makes for a much smoother transition when the time is right.
The slow and steady approach (while sometimes realistically the best option) isn’t without flaws.
Here are some questions to ask yourself before choosing this path: Can I function well under an extremely heavy workload? The major downside of having your new business function first as a “side hustle” is that you’ll have limited time and energy to devote to it.
Let’s say, for the sake of argument, that you work a traditional nine to five. Working on your side business will, at best, take place during the evenings and weekends—and realistically will likely stretch into the wee hours of the night.
Do you have the temperament to withstand these long hours? Here are some questions to ask yourself:
- Is my job relaxed enough to allow for this, or will I be completely stressed and overworked?
- Will I be able to get enough work done outside of the time I spend at my day job?
- Do I have many obligations outside of work (children and family in general, volunteer work, hobbies you won’t want to neglect, and so on)?
- If so, can any of those responsibilities be put on hold?
Do I have the social and emotional availability to allow me to do this? To expand upon the last few bullet points of the previous section, take some time to think about what your current obligations are, and how working both a day job and starting a new business will impact them. The impact here will be different than that of simply quitting your day job, but it’s still worth considering.
Let’s say, for example, that you and your significant other both work full-time and have two young children. Both of those children need to be dropped off and picked up from school, taken to various activities in the evening, helped with their homework, and so on. If your evenings and weekends are now taken up with starting your business on the side, can your significant other, family, or friends help you pick up the slack? Is this a sacrifice you’re even interested in making?
Get a sense of your state by asking questions like:
- To whom is my free time currently devoted?
- Will it be alright if I temporarily devote less time to these people?
- Do I have nearby family and friends who can help lend their time to me and my family?
- Will this strain any relationships irreparably?
- Have I discussed this choice with all impacted parties?
Is my new venture time-sensitive? There is no doubt about it: Keeping your day job and starting a new business at the same time will prolong the amount of time it takes to get your new business off the ground. It’s not hard to imagine why: You simply won’t have as much time to devote to it. For some businesses, this won’t be a problem. Maybe your business isn’t an emerging industry or doesn’t experience seasonality. Or, maybe you’re at a settled enough position in your life that you can make this transition any time, and it’s more about finding the right moment.
If you’re worried about the time sensitivity of your new business, ask yourself these questions?
- Am I entering a market where being first is important? Why or why not?
- Do I need to start my new business quickly? Why—is it because of the industry, my financial position, or some other reason?
- Are there trends that I am hoping to capitalize on?
- Would I still want to open this business if it took me one, two, three, or more years to make the transition? Is there a window of time to start this business that may close?
Will I ever be able to execute? Be brutally honest with yourself here: Will the stability of your day job inhibit you from ever really taking the plunge and starting your own business? Ultimately, it’s a study in personality types. Some folks thrive off of pressure; others drown in it. Some work well with a steady march toward a goal; others fail to get things done without the right amount of urgency.
Where do you fall on this spectrum? Here are some questions you can ask yourself:
- Do I need the feeling of “crunch time” to motivate me to get things done, or am I good at setting my own deadlines and avoiding procrastination?
- Do I operate well with long term goals?
- Does “slow and steady wins the race” sound like a mindset I can adopt for this process?
- Am I guilty of abandoning projects that take too long, or where there are no serious stakes?
Still unsure? Luckily, there’s no right or wrong answer. How you choose to proceed depends on so many unique factors. Your position in life, the state of your finances, your industry, your personality type, your relationships and family needs, and so many other facets of your life will all come into play when it comes to making this decision.
The good news is, there isn’t a right or wrong—only a right or wrong for you.
It’s also possible to combine the two; maybe this looks like keeping your day job for a short period of time while you build up a financial cushion, write your business plan, do your initial market research, and generate some initial buzz on social media sites. You can still save the heavy lifting for once you’ve quit your day job, but maybe it doesn’t need to be such an abrupt transition.