Knowing the right time to quit your day job after starting your business can be a big decision. Moving from your standard paycheck to relying solely on yourself for an income can be a daunting time. Unfortunately, there is no set formula to know you are making the right decision!
When I started my business, I kept my day job for too long. It wasn’t until three and a half years after starting the business I finally let go and walked away from the perceived security I was clinging to. After resigning, I realized I was almost spending as much on outsourcing simple tasks than I was earning from my day job. I was actually holding my business back by hanging on for no reason other than my fortnightly pay. Since resigning I have been able to actually work on my business to move it forward rather than just working in it as a result of being so time poor.
After starting my business, I reduced my hours at my job from four to two days per week. This actually worked well for about eighteen months as it gave me more time to work on my business while allowing me to feel secure by having a second income source. I didn’t want/need the job anymore, however, I just wasn’t confident enough to make this change. This made me resent my job, which negatively affected my business while I drowned in too much work and not enough time.
Fortunately there are some simple things you can consider to avoid quitting your day job too soon and doing what I did by hanging on for too long. This balance can be hard to achieve and there is no exact science but as they say hindsight is 20/20 – and I can see clearly now.
Can you afford to draw a wage?
Being disciplined in drawing your wage and seeing a stable stream of revenue is an important factor to successfully quit your day job. If your business cannot afford to pay you the income you need to cover your lifestyle before you resign – it is a sign you may need to stick it out a bit longer.
Consistent and steady growth
Stable and consistent growth indicates that your business is not volatile. Quick growth is great but you have to ask yourself why and if the growth will subside or be sustainable.
If you start making statements like “if I just didn’t have to work today I could get the job done for my client without having to work until 9pm” often means you are becoming burnt out. When you start a business you expect that working after you finish a days work is a fact of life. But if you start becoming bogged down by this situation, you may be hanging on to your job for too long.
What will happen if I lose a client?
Think about what will happen if you lose a client. Can you continue your business? Make sure your business is structured so if you lose one client you can still make a profit. Losing one client can happen but it is rare to lose them all at the same time. Make sure if you lose a client you lose a percentage of something not 100% of all your income. If you only have a small number of clients think of a number that you need to remain confident that your business can be sustained.
Assess your time
Tracking your time is so important when you own a business. This will allow you to be disciplined and manage your time more effectively. If your billable hours start consistently increasing to replace your day job, you can be confident that your business can be sustained.
Know what will change
When you quit your job you need to know what you will do with your extra time. Will you use it to take on more work or grow your business? If your business has reached its peak while you are working you need to assess why you want a change – maybe you just need to changes jobs while working on your business? By knowing what will change, you can start preparing for the business growth after you resign.
Walking into work and resigning on a whim can be a big mistake unless you take measured steps so you can be sure your income and business are secure. By understanding your plan and knowing when you should resign, you will have the confidence you need to work your business and adjust to the change.
Alyce started her current business at 21, she now works full time on her consulting business while venturing into other business models. Alyce has recently started a blog newstability.com that aims to help 20somethings and young entrepreneurs start businesses they are passionate about around a lifestyle of their choice.
Image credit: CC by Guy Donges