One reason few people start their own company is that they are afraid of being broke. Or, as Pamela Slim puts it, they are afraid of living in “a van down by the river” (because that is all they can afford).
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My ideal path would not be one of starvation between day job and the work you love. In fact, I like money and the things it does for me so I prefer to never move in a backward direction.
How I Would Plan to Quit Your Day Job
If your endeavor is going to take significant capital or full time effort, consider how you could start with less. If you need to develop software that will take 6 months of full time activity or require a $30,000 investment, start instead by consulting on the side. Work with customers who will let you start small after hours or on the weekend. If instead your new plan is a storefront or selling product that has you working all day, then consider how you might start marketing your product on the internet.
No matter what the business model, you can find a way to start small. But more importantly, you can find a way to start today.
When Do You Quit Your Day Job?
- Option 1 – When your new business income is getting close to your day job pay. If you are making $60,000 at your day job and have grown your new business to $40,000, you might notice that you can now quit. You might take a small hit in income for a few months, but the extra time at work might allow you to make it up and surpass it quickly.
- Option 2 – Wait until they are about equal. When your new business is making $60,000, you will become confident that you can do it.
- Option 3 – Wait until it is so obvious it is just silly. I have seen this many times. One friend of mine was making five times his annual day job salary on his part time work before he quit.
Each of these options has two assumptions:
1. You do not want to starve and are willing to work extra hours for your financially conservative approach.
2. You are not living on both your day job and your new business income!
Find Your Calling
If you are looking to break away and do something on your own, you might want to explore the RIGHT thing for you. Download a FREE copy of HOW TO FIND YOUR CALLING to get started!
[reminder]What else do you feel you need before you quit your day job? [/reminder]
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Dale,
I have an issue with the advice in this statement “If you need to develop software that will take 6 months of full time activity or require a $30,000 investment, start instead by consulting on the side.” I agree with the ‘get started today’ part but I disagree with the approach. The original intention was to create a product. If you start with consulting, you are going down a service path. You may end up with a successful business but I doubt it will end up like you first intended. In my experience it is very hard to make the switch from a service based company to a product based company. So my advice would be to figure out a way to incrementally release your product without the high up-front investment. This is the driving principle behind the lean startup movement and I believe a better option for this situation.
Good points John. I CERTAINLY agree with the incremental release (although I find many startups do not carve down the first increment small enough – the technologist just cannot let it go). But if you can do that and release – I still would not quit the Cash Cow job. (exceptions in place for those with a strong financial plan of course).
I would argue that the consulting model could really work well to understand the real customer needs, but you are right that you need a pretty solid plan to take action else you become a 100% consultant. I have certainly see it work both ways. Are you speaking from personal experience here?
My real issue is getting people off the fence. So often we think we have to risk it all to start, when, as you said, you are best to just ‘get started today’ instead doing something.
But back to my point – how would you suggest we take the software project that we think is going to need months and investment. How would you do that instead?
Dale,
My experience comes from working in companies that have struggled to make the switch from service to product. I’m not saying it can’t be done, it just takes exceptional discipline.
I think if you encountered a problem that there is really no way to start small then you should probably pursue external funding. The other reason I can think of to go after VC is to quickly capture market share.
That said, with software I’m struggling to think of an example where you can’t start small. If given some basic parameters, I believe that I could come up with some creative way to lower the barrier to entry. Maybe you start with someone else’s platform like Facebook or Amazon. Maybe you start with some existing technology like SharePoint or Drupal that you can do a lot with out of the box without having to write custom code. The answer might require some creativity, but I think the days of big investment up front are behind us for the most part.
Good points and thanks for elaborating. Yes – getting investment without any revenue is really tough. I see a lot of companies here also – waiting till they get $ to start. While I have been in one where the money just flowed in, I would never expect it to flow that way again.
I think that assumption two would be the hardest trap not to fall in. Keeping extra money out of your household is a pretty tough challenge.
Agreed – takes REAL discipline! Having multiple accounts helps keep money from mixing.
Good ideas! Working on the side seems like it could prepare you in several ways. It could provide the initial working capital needed to launch the business and then eventually produce sufficient funds to replace your current salary for the startup period. It could also prepare you for the amount of time and effort that you will need to devote to your new business once you have finally given up your day job. It could give your family a chance to experience the impact that running your new business will have on them.
You could start working on the side doing work that is related to the business you plan to start. You might learn some valuable lessons in the process. When you have the necessary startup money you could begin to gradually transition from your side job to your new business. Over time you would have the opportunity to get a taste of what life would be like running your new business, both in the time required and the type of activities involved. The experience might motivate you and your family and thereby accelerate your move or you might find out that this new business was not such a good idea after all. Wouldn’t it be better to figure that out before you quit your day job!
Just to note that today Sherwin Greenblatt (one of the two founders of Bose) told about how they started and funded the R&D by consulting. This kept them fed and provided them some skills in the 3 years it took to move the company forward. Today Bose has annual revenue of $2Billion. Emageon, the former Birmingham startup that went IPO, did the same thing. The company which provided them the daily revenue was also successful. That is ComFrame.
So issues and struggles aside – it does work.
I agree with Blane starting a business on the side is the best way to start a business. My problem is finding out what I would like to do in addition to my current job. I know doing something related is a good idea, I just don’t want to do more of the same. If I’d need a really high of an hourly rate to keep myself interested. I like the idea of doing something completely different, that way I’d learn something new.
Any guidance on how to keep your employer from figuring out you are trying to start your own business, thus jeopardizing your current status at work. What I want to do requires taking time away from the office. It is not something that can be done at night, but could be done on the weekends.
I like the point about moving products initially over the internet. Even in this internet age I still think “storefront” first. An initial customer facing web page could be relatively inexpensive to get started.
This is an interesting question! Note that many times when we THINK we are putting our current job in jeopardy, we are in fact helping it. So my gut response is to always be up front. You never know how our superiors at work might have a similar ambition to make a move – even if they are the CEO!
But perhaps that is a gentler way. I might be inclined to bring up in a casual conversation something like “do you think someone like me could go do this on their own and make a living?” or “someone mentioned to me they were going to quit their job and do XYZ.”
Just by dropping something in casual conversation you might see how it lands and the response you get. While I am not against starting without their knowing – I think the best thing would be to have your current boss be your ally in your new endeavor. Often, very often in fact, these kinds of splits are win-win.
But, if you truly want to be undercover, you could hide you. You could do the work under a pen name or with someone else in the front.
Short of you sharing the particulars, these are some ideas.
I agree with Buck, it takes a lot of discipline for a family to keep the current budget when new revenue starts pouring in.
The problem I have been having is that the side business is taking up too much of my time after the day job. I don’t feel like now is my time to grow it much bigger. Perhaps I should look into hiring a few people to help with the time consuming tasks of the business to ease the double work load.
When to quit your day job
I really like this article. I like the point you made that a person may not have all resources available up front, but get started. Some of the ideas I am about to share will be similar to Blane’s comment.
I am a strong believer in the Network Marketing business model. This is a business model where it is easy to get started in business for yourself at a very low cost (typically $200 to get started) relative to your traditional business startup cost. Typically the model is set to market a product and build a team of people who will buy this product on a monthly basis and help them build a team of people that does the same.
This plan may take some time to develop, but the payoff can be very rewarding and with enough of sacrifice up front, you can have enough income for start-up of your business. A lot of people may disagree with this model, but it is just an option like the example you gave of your neighbor who needed $100k to start a business. She did not start her business right away; instead she found her startup capital by writing a diet book and selling it to start her business.
If you are on the right team, this type of business model can teach you so much about business. You will have the opportunities to meet people, build your network, and expose yourself people who are making a ton of money and get in their circle. This model will also help you to prepare for what it takes to run a major business and equip you with the toughness to keep going when the business is slow. Also, the risk for this type of business is low. $200 vs. $100,000 is a no brainer. As Donald Trump once said, if he goes broke again he will find a Network Marketing company out there and market the hell out of that product. I believe that was said in that book he wrote with Robert Kiyosaki.
Good facts. It also depends on if the person is comfortable and confident in their own product. A person can have a million dollar idea and product, but can be scared to let go of the “security” of their 9 to 5. Business is a risk, take a chance.
Kimberly Delaine
This is great read for someone (like me) who is very afraid to venture out. The options provided are great tools to follow, but how do you actually get to the point of making your ideas work for you? Part time work is a great way to start your business, but my fear come when it is a mandatory need to continue producing revenue after you quit your job. Many concerns are focused on failure and how to prevent it. I have found a helpful website that encourages any one with these same fears and concerns (http://money.cnn.com/2007/01/09/smbusiness/tips_avoid_failure/index.htm). This site list 6 ways to keep your business alive.
I defiantly want to become a successful business owner; and I understand that there many sacrifices to be made. However, I am looking forward to applying the rules of when to quit your day job, using the 6 ways to keep your business alive, and using additional research and trial and error to make my business grow and work for my benefit.
You would also like the book by Pamela Slim!
I think one of the main reasons for us not to quit our day jobs is the comfort zone that our minds are used to in our day jobs, which gives us a sense of security. We don’t won’t to feel insure, so we don’t want to step out of the comfort zone. We are always speculative of the unforeseen circumstances and problems they may pose.
We try to push ourselves to extremes when are kicked out of comfort zone. As, long as we are happy with the comfort zone we don’t push hard on ourselves. We have to be extremely motivated by the cause to come out of comfort zone and try something new and innovative.
I think one of the main reasons for us not to quit our day jobs is the comfort zone that our minds are used to in our day jobs, which gives us a sense of security. We don’t won’t to feel insure, so we don’t want to step out of the comfort zone. We are always speculative of the unforeseen circumstances and problems they may pose.
We try to push ourselves to extremes when are kicked out of comfort zone. As, long as we are happy with the comfort zone we don’t push hard on ourselves. We have to be extremely motivated by the cause to come out of comfort zone and try something new and innovative.
I think one of the main reasons for us not to quit our day jobs is the comfort zone that our minds are used to in our day jobs, which gives us a sense of security. We don’t won’t to feel insure, so we don’t want to step out of the comfort zone. We are always speculative of the unforeseen circumstances and problems they may pose.
We try to push ourselves to extremes when are kicked out of comfort zone. As, long as we are happy with the comfort zone we don’t push hard on ourselves. We have to be extremely motivated by the cause to come out of comfort zone and try something new and innovative
Dale,
I am in agreement with you that I am afraid of starting a business of my own because I am afraid of getting broke or insecurity. The reason being, I tried 2 times and both gave me bad experience in different ways. I tried one business in India in the line of Computer hardware sales and here in USA where I created a product for health care industry. The second one was not that tough as I was paid to develop the product. Well, there is lot to say about the second one of-course.
Currently I am working towards a business that can bring money which could be my capital for my long term business. I am having my day job and I am not disturbing that at all. In fact, my current employer could use some of the trained people as their resource for projects as well. As you were mentioning, I would only quit my job if I am making 3 times that I am making as salary now.
This topic is very interesting. When I look at many who have started their own business and continue to work their day job. That job acts like a leash that is holding them back. So many people have a great model and just need to step out. They keep waiting for this magical revenue number before they take a break for it. I do understand that we are to minimize our risk. Especially, when there are families involved. But, when opportunity knocks please answer the door. It is understood that my statements do not relate to all situations.
This is a great topic. I understand John Asbeck’s concern about the unintentional inertia created from a service based model that could prevent you from transitioning to building a product but that concern is manageable. I can say from experience that it is certainly possible to transition the customer to another service provider and maintain credibility if you are completely honest and help with the transition in any way you can. Once the customer is transitioned you are wide open for your product.
I think Dale’s intentions with this article are to encourage people to get started doing something not related to their day job and consulting is an excellent first step for those wanting to minimize risk. Consulting also helps focus the developer on customer service, an area that can get lost to those of us who love code. I also think there is no faster, cheaper way to go from 0 to credible. If you think about it, your customer is paying you to learn about their domain while telling you, no, urging you towards your next great product idea/opportunity.