When you’ve been contemplating starting your own business for a while, sometimes something happens that provides you with the nudge you needed. A cash windfall is one thing that could move you in a certain direction. For example, using a lawsuit settlement to start a business is one of the positive things you can do with the money that will hopefully allow you to grow it over time.
Most of the time, however, it’s much more ambiguous as far as timing and when to leave your day job to pursue your entrepreneurial dreams. Maybe you’ve been building a business on the side while continuing to work for your employer, but when is your business going to sustain you full-time?
It’s difficult to time it out and know when it’s the right time to make the leap and either start a business or start working your side business full-time. It’s scary and intimidating, and there’s a high degree of uncertainty. Some of the biggest fears people have include not only what happens if you fail but even what happens if you succeed. Other fears you may have include not being able to financially make it work or experiencing burnout.
No one can tell you what’s right for you, but the following are some things to think about as far as when it might be time to take the leap.
Build a Cushion Before You Do Anything
If you’re debating the leap to entrepreneurship, before you make any decisions or take any action, you should have savings to fall back on. You don’t need to have a huge amount, but you should have enough to cover your basic expenses for at least six months.
When you have that money in the bank, not only does it provide you with financial protection, but it can give you more peace of mind as you leave your current job. If you’re not there yet with your savings, then you might want to evaluate your situation and consider waiting.
If you haven’t started anything yet, and you’re just in the planning or conceptual stages, then you might want to start small. You don’t have to leap into everything all at once. Start with a niche market, and go from there. If you try to do everything at once and start out too big, you’re more likely to fail or experience burnout.
Have a Business Plan
No matter where your business currently is, from not existing at all to being a small side hustle, if you haven’t already done so, you need to have a business plan.
A business plan isn’t just something to show investors. What a business plan does is create a foundation for you, and it helps you see where you are and where you want to be. It’s one of the most important things you’ll do.
In your business plan, you’ll include your vision, objectives, and mission statement. In the creation of a business plan, you’re also going to do important market research and learn more about your industry.
You’ll include a marketing plan and a financial plan. This is something you’ll be able to refer back to if you ever need to or you feel off-track. It seems small, but a business plan can be a big driver of your success.
Even if you have an emergency fund set aside, that doesn’t inherently mean that you’re financially ready to start your business or leave your job.
You have a few major options when it comes to funding a new business. You might have an investor, you could get a grant, you could get financing, or you could use your own savings. There are upsides and risks to each option, but you’ll need access to capital from some source.
Set Up a Legal Structure
Before you quit your job, set up a legal structure for your business. This will allow you to separate your personal and business finances. You are most likely to operate as a limited liability company. Other business structures include sole proprietorship, corporations, and partnerships.
Understand the Numbers
In some ways, this has been touched on, but your main priority as you decide when to fully leap into your business is making sure the numbers work. Again, you are going to lose your steady income for a period of time, and you may simultaneously be putting money into your business.
You need to be honest with yourself about this reality and how much money you currently have, as well as how much you need to live.
If you’ve gone over the numbers, you have a business plan, and you think you’re ready, there are a few things to remember.
First, when you turn your side business or passion project into your career, you have to commit. You have to stop thinking about the what-ifs and move forward. You also need to go with your intuition. This is one of your best guides to making the right decisions.
So what if you do a little soul-searching and don’t feel that now is the time to leave your job? There are still things you can do in the meantime that are going to be valuable for your future business.
Spend the time at your job not just saving money but working on validating your idea. Learn more about your competitors, what’s available on the market currently, and where you could fit in and do things differently.
You won’t have the extreme pressure that can come with funding your business in the early days because you’ll still have income, so you can do more intensive research and ultimately build a stronger business.
You can find that perfect sweet spot for you within the market and find out what works and doesn’t work. It can be an incredibly valuable time for you if you put it to good use.
You can also let your employer invest in you in terms of professional development, and that is an investment into your future business.