Many entrepreneurs start their business venture while retaining their current job. As such, they face a formidable dilemma. The desire to focus all their time and attention on a new venture is powerful, yet it must be weighed against the associated risks — small stuff like giving up a predictable salary and benefits.
There’s no tests that can determine the right time to quit a “day” job, but here are a few questions to ask before you turn in a resignation letter.
Q: Is My New Business Poised to Thrive?
Sure, you might have plans for a successful business in mind, along with the skill required to lead it. But you have to consider whether market conditions are favorable and whether you have the resources on hand to steer the business to profitability.
Make sure you have enough money to spend on the business and pay your living expenses long enough to allow you to build the company. Don’t be stingy here: Allow enough of a cushion so that the new company doesn’t die on the vine if it takes longer to catch on than you envisioned.
Also, don’t be afraid to reach out to others for their input. Ask someone you trust, but who will be objective, to review your business plans.
“There’s a reason why entrepreneurs start businesses and why most people don’t. Entrepreneurs have different views of the world, different risk tolerances,” says Barry Levine a Los Angeles-based vice president in Northern Trust’s Financial Consulting practice. “Aspiring entrepreneurs have a greater tendency to see the glass as half full. Before launching your business, it can be very helpful to talk to someone who has expertise but not the same filters and biases.”
Q: Is Your Family Prepared?
You’re ready to live with some financial uncertainty, work the long hours required and skip vacations for a while. But are your spouse and kids?
“It is advantageous to sit down ahead of time with your spouse and envision what this will look like,” Levine says. With your spouse, be specific in terms of your day-to-day routine, your leisure time and expenditures, your cash reserve — everything that might be affected. Your entrepreneurial adventure will be better if everyone knows what to expect.
Talk through the emotional component, as well. Levine has worked with couples whose risk tolerances vary widely. It’s best to know at the onset if your spouse “is someone who is going to be absolutely terrified at the thought of not having a regular paycheck coming in,” Levine says.
Timing is everything. You may be emotionally ready to leave your job and focus on your new business. But if your spouse is nervous — or if your projections indicate you’ll have only a few months in which to turn a profit before you run out of money — you might consider a planning phase. For example, you could stay at your current job and funnel more money into savings while devoting night and weekend hours to lay the groundwork for your new venture.
Q: Is Now the Right Moment to Strike?
Once you’re confident that you have a solid business plan and there’s enough money socked away to allow you to execute your plan to perfection, it’s a matter of choosing the right moment to strike. Consider three potential indicators:
- The market: As you’re preparing your business plan and bolstering your savings, keep a close eye on activity in the sector you plan to enter. If you sense that competitors who have been on the sidelines are jumping into the action, it may be worth following suit even if your savings strategy is several months from completion. “So much of success is doing the right thing at the right time,” Levine says.
- Business maturity: If you’ve started the company as a nights-and-weekends venture while maintaining your other job, the growth of the business will tell you when it’s hungry for more attention. If you’re having trouble filling your orders, or if the only way to accept a big contract is to devote full-time energy to it, it may be time to move ahead.
- Your “fed-up” moment: Levine also provides leeway for the burnout victim. If you’re paralyzed by inertia and lack of motivation in your current role, it may be time to make the jump even if some of the other boxes aren’t checked.
“At some point, you have to acknowledge the emotional side as well as the financial side,” Levine says. “Sometimes, entrepreneurs just have a burning desire to call their own shots and do it their way.”
Of course, doing it your own way is a lot more fun when you succeed, which generally requires a mix of passion and preparation. When the two are aligned, you have the formula for entrepreneurial success.
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