Questions to Consider Before You Quit Your Day Job

[#1]

This article is only for advisory purposes. The information provided solely reflects the authors’ views and are not endorsed by Square. This article is limited in scope and is only intended as a high-level overview of the topics mentioned. Nothing in this article is or should be used as tax or legal advice. For guidance or advice specific to your business, you should consult with a qualified legal professional.

So, you want to make this the year you ditch the day job to finally run your business full time. But are you ready? Is your business ready? There are many questions you’ll need to consider. The questions below are just some of the factors you’ll need to think about before you make your dream job a reality. 

Square Small Business Evangelist Aylon Pesso (based in the U.S.), a former small business owner, consultant, and Square Seller, shares his tips for anyone considering taking their business full time. 

Photo credit: Clay Banks on Unsplash.com

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How strong is your customer base?

Are you relying on a small handful of customers? What if they were to disappear in the morning? How much growth is forecasted? Is growth guaranteed?

Aylon Pesso (@Pesso), says:

When thinking about your customer base, it’s important that it’s sustainable. Successful businesses tend to have a mix of returning customers and a constant flow of new customers. Some returning customers will stop coming for a variety of reasons, so making sure that you’re always bringing in new folks is essential. Start keeping track of who is buying your products, how often, and how much they’re spending. Then start working on marketing efforts to bring in new customers and take note of what happens. If it’s harder to get new customers than you thought, you might want to take a closer look at your business model.

Is your business plan up to date?

A business plan is an incredibly useful document and it will continue to be important as your business grows. For example, you may need to take out a loan. Financial Institutions and investors are likely to request a business plan to understand more about you and your plans for growth.

If you haven’t had a chance to create a business plan, there are many templates available online that can help you to get started.

If you’re not looking for loans or investments, you may not necessarily need a full, formatted professional business plan. But it can’t hurt! It is extremely important to have some type of written plan (and backup plan) for your business model for yourself so you can make sure that you’ve thought everything through, that your business has a solid foundation, and to remind yourself of your plan as you go. Take your time, think things through, do a lot of research, and start with answering the following questions:

✔️ How will you structure your business? Are you going to start a corporation? Are you running it alone or with partners? Will you have employees? How and how much will you pay everyone?

✔️ What are you planning on selling? How will you stand out? Why will people buy this from you specifically?

✔️ What do you need to run your business — a location, equipment, skills, suppliers, anything else? How will you get them? 

✔️ How much will it cost you? How much are you going to charge? How much profit do you need? What will it take to make that? How much are you realistically going to make each year for the next five years?

✔️ Who is going to buy it? Why? How much are they going to buy and how often? Can you sustain your business with this target customer base? 

✔️ How will you get these customers to buy? How will you promote and market your business? How will you afford all of this?

- Aylon Pesso

Can you afford to quit? 

It’s worth asking yourself if you can afford to give up your current salary. There are many ways to determine this, such as drafting a list of your personal expenses for a week or a month and comparing the total to the income your business currently generates. Will the profits from your business cover your personal and business expenditure? Consider other factors like taxes, family, retirement, and costs associated with running a business (e.g., leasing a brick-and-mortar location or working with a lawyer or accountant as your business grows).

It can be really scary to give up a steady paycheck for the potential inconsistency of a small business. But just because it’s scary doesn’t mean that it’s necessarily the wrong move for you. Take a deep dive into your personal and business finances to make sure that you can sustain yourself and others on the profit (not just sales or income) from your business. Figure out how you will make it through low profit months or years. Are you going to be able to set aside money to sustain things during business downturns? 

Also keep in mind that as businesses scale, challenges and expenses can grow exponentially. What may seem like an affordable and smooth transition while the business is part time may become unmanageable when shifting to full time. 

This is not a decision to make lightly, so make sure you have everything fully lined up and it’s as close to a sure thing as possible. It’s always a risk, and you should absolutely talk to professionals and other business owners before making a decision like this.

- Aylon Pesso

What’s your exit strategy?

Similar to a business plan in many ways, an exit strategy is a document that outlines the future of your involvement in business. Will you sell the business when it reaches a certain size? Do you plan to liquidate all assets in certain circumstances, like when you retire? Could you sell your business to another company? 

It might seem strange to think about how to leave your business before you’ve even fully jumped in, but it’s always important to think of an exit strategy. Both for if the business succeeds, but also if it fails. If it succeeds, you might not be able to do it forever. If it fails, you might not want to keep throwing money into it. Just like you may be planning now to leave one job for another, you may want to do the same later. Thinking this through now will save a lot of stress later.

Decide on what goals you have and why you’re deciding to run this business. Think of what success means to you and what failure means to you. Are you in it to make money or do you just love to run the business? Picture each of the next phases of your life, and plan out how and when you want to get to each one.

- Aylon Pesso

If you made this decision, what factors did you consider? Reply below to share more questions or tips for taking the leap to running your business full time.

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Helen is a Seller Community Manager at Square and is the editor of the Seller Community Blog. She writes about small business and the owners & entrepreneurs that are a part of the Seller Community.

Cover photo image credit: Photo by Jens Lelie on Unsplash. 

[QuokkaCoffee]

Two things stood out to me that have worked wonders for us:

Don't overthink the outsourcing of critical things like accounting, bookkeeping, or construction; you may think you're saving yourself a buck early on, and it's tempting as the founder to want to do everything yourself, but know that you can't. It's impossible. Be self-aware enough to acknowledge your weaknesses, play to your strengths, and outsource.

And can confirm, developing an exit strategy--whether it's as basic as picturing the type of person you might want to sell your business to in the future, or a detailed roadmap of its every stage--even before you greenlight the whole thing is so useful.

It's not an admission of weakness, or equivalent to inviting failure and jinxing things before you've even begun, because once you're on that train... boy, does it feel like hurtling forward with busted breaks while simultaneously laying tracks.

[DLRosenberg]

I don't often throw my MBA around (my concentration is in Entrepreneurship) BUT I think better than a Biz Plan would be a feasibility analysis run based upon numbers.

In theory if we're considering whether to go full-time and quit the "day job" this is how I would think this through:

Say for example you bring home $1,000 a week in your day job and you want to replace that in order to pay your bills.

You need to weigh that 1k against what your business is currently producing .. then you need to take into account what return on your investment working full time in YOUR business would produce.

Plugging that $1,000 example into my business above, I would run square reports and look for my average sale. Right now my average sale is $64. To gross $1k I would need 16 transactions of $64. But likely to NET $1k I would need around 35-40 (this depends on your business margins).

Then I would run reports to see how many transactions I have in a month and I'd look for some data here month to month (obviously the longer you're in business the better your data is going to be)... 

From there you need to ask yourself: is it feasible for me to pull in 35-40 more customers? What can I do in my business that I am not doing now that can pull in those customers?

Business plans need to be dynamic and change as business conditions change. The beauty of being a small business is adaptability.

[Fairestcape]

About 35 years ago, I set up my own business, and while the nature of what we now do has changed and evolved over the years, the core principles of running a business remain. In the startup phase, I had interviews with a number of funding sources whose initial requirement was to know what my "Business Plan" was.

I told them this in two words - "Make money"...
One source (a bank) said: "No, we need a written Business Plan".
So I took out a piece of paper, and wrote on it -
"BUSINESS PLAN"
"To make money (and profitably)."
He was not impressed, and (as is the case in most funding enquiries with banks) declined to go any further. (NOTE: Try to avoid banks if you can, as a funding source).

My facetious approach did not endear me to most other investors, but the one who did end up providing funding and support had a quiet chuckle when I uttered my two-word "Business Plan", and he immediately followed with: "That's a good plan... now - what's your STRATEGY?"

AH ! This was the question I was waiting for...

You see - a PLAN is not the same as a STRATEGY.

Far more important than the "plan" (ie: what you intend to do), is the "strategy" (ie: HOW you intend to do it).

The "plan" comes together AFTER one has defined the core strategy.

There is a popular saying: "Rather than finding a gap in the market, first find out if there is a market in the gap". When you look at it this way, you've made the first step in a strategic approach (as opposed to a planned approach).
Determining whether a business opportunity is viable has at its foundation, solid evidence that there are people out there (individuals or companies) who will buy what you intend to offer.

Your strategy's objective is to logically define how you will go about developing your product/service, to whom you will market it and HOW, and (crucially) that this will be done profitably.

Only when this has been determined, is it time to "plan" the steps needed to execute it.

And furthermore - that plan must be flexible - to the point, if necessary, where it can rapidly be abandoned in totality if it fails to support the core strategic intent.

Many businesses fail because they feel rigid adherence to the "plan". ("Our plan dictates we do this... we can't change the plan!").

Perhaps its just the nomenclature that is incorrect... When you're asked for your Business Plan - perhaps what they really want is your strategy...

And if you feel you need an MBA in order to start or run a business, here's my 5-word MBA:-
"Don't run out of cash".
It's served me very well for nearly 4 decades.

[Bronze_Palms]

When I quit my full time job, it was after months of deciding I liked my new path enough to fight the struggles that were going to come with it.

I found that working 50% on the business and 50% on my job was not enough to keep me fulfilled and busy in both. Quitting my job allowed me to focus 100% which was better for my mental health and, ultimately, the performance of the business.

[lenjobakes]

When I made the decision to focus on my business full time it was because I just knew that I couldn't work for anyone else in the field I was in.

I was increasingly frustrating with the lack of efficiency, poor standards, crap ingredients and the like. Staff weren't valued and as a direct result they didn't value their jobs and didn't put in a huge amount of effort in the final product.

Could I just have stayed and worked really hard to make everything there better? Sure. But I knew that I would never see the return on my investment in the same way I would if I just opened my own space.

I was lucky to not own anything (no personal assets to lose), not have any debt, and live with my parents which meant that I could quit my job (one of them) and leap headlong in operating my own business.

[cupzcoffeeaz]

Super useful! I've been on this boat for 3 years, and I still haven't decided to jump 100% into my business.. 
The one consideration I've taken is being able to reinvest most of the profits to generate a higher income so that when the day comes, I can afford comfortably to quit my job. 

It still sounds scary to pull the trigger, but I am finally getting closer to pulling the trigger. Curious, what have people done to get out of the analysis paralysis to pull the trigger?

[lenjobakes]

@cupzcoffeeaz It was really a "just do it" moment for me, to be honest! If it really all went pear-shaped, it would take 7 years to have excellent credit again after declaring bankruptcy. That was my mindset.

Now, as I mentioned, I didn't have any responsibilities and didn't own any assets, so being afraid of losing the investment was all I had to fear.

But I wasn't happy. Every day that I was waking up not working for myself was a sad day for me and I wanted to be happy.

Maybe going from part-time to full-time without any other support isn't right for you, though! Maybe try scaling back at your FT job and investing that time in your biz and see how you go so the transition can be more gradual!

[FeelTheRelease]

@cupzcoffeeaz  I am right there 50-50.  My current job allows me to pay all my bills while I work the other part time to building up my business.   Being self employed allows me to do that.  It takes the edge off of wondering if I can manage financially, while I manage and save the EXTRA income as my business grows.  

[JUYBoutique20]

When I decided to go full time with my business, I was blessed to not have to worry about leaving a job.  My last kiddo started school and we pcs'ed so it was what I needed to occupy my time and thankfully it took off.  I would say make sure you can handle your current bills and just go for it.  I'm so much happier working for myself than I was working for other big box companies.

[Dianne02]

I tun a trade sale called t & z trading and I first did it as a side thing where I just helped people but now it's a full time job

[Helen]

That's great to hear @Dianne02!

[Fairestcape]

@cupzcoffeeaz Being "bold" is one thing, but being cautious is more prudent when considering starting your own business. If possible, have a viable "fall-back" option in case things don't work out (around 80% of new startups fail in their first year - try to be in the other 20%). The more dependant you are for a steady income (paying rent/mortgage, food for a family,etc) the greater the risk.

While many start-up's get excited and say "I have found a gap in the market!" - a more important question needs to be asked: "Is there a MARKET in the gap?" And if you can tangibly determine that there IS such a market, how are you going to penetrate it? What is your STRATEGY to find good customers, and to sell your goods/services at a PROFIT?
Unless you do this, no product or service will work... You have to know how you are going to find buyers for your goods - AND how you are going to make a profit... making a SALE is not the same as making a PROFIT. If you sell something, and overall lose money (negative margin) doing so, then you will go bust - fact.
Operating at a "loss" is not the same thing in some cases, however. In almost all cases, businesses need to INVEST in order to operate, and to scale up. While investing in a quest to achieve these goals, the business may indeed be "loss-making", and the key here is knowing the projected turn-around point - that point at which the cost of gearing up translates into positive margin. Lenders and investors want to know this "turn-around" point and will want to know in detail, your STRATEGY to achieve this.

No matter what business you are in (especially a start-up) managing the business on strict business principles is essential - with a focus on managing the financials. Do some basic courses in business financial management and accounting principles. You don't need to be an expert - but bad (poor) money management is probably the biggest reason why a business fails.

[Pompey657]

Since I was old enough to understand about the value of money I realised that starting and running a business was always something I wanted to be involved in. Honestly financially and mentally it is very demanding.  The stress and strain of being under pressure to perform for your family is extremely exhausting but in the same context very rewarding and reassuring when things come together. I am very new to the industry but my people skills and general management capabilities along with my Ideas are good qualities to keep me moving in the right direction.