How To: Leave Behind Your Day Job & Go Solo
One of the toughest decisions budding entrepreneurs face is when to set out on their own, full time. Leaving behind the reliable paycheck and benefits of your day job and dedicating all your energy to growing a business is a decision that requires planning, hustle, soul-searching and financial savvy. But experts don’t agree on a magic formula for this time line.
Melinda Emerson, small-business consultant and author of Become Your Own Boss in 12 Months, falls on the conservative end of the startup spectrum. At a minimum, she urges aspiring entrepreneurs to obliterate debt (including credit cards and car loans) and save up a year’s worth of living expenses before forgoing a reliable paycheck. Emerson says that a typical new business takes 12 to 18 months to break even and four years to move to true profitability. “I’ve coached hundreds and hundreds of people, and I’ve never heard an entrepreneur say they wish they’d quit their job sooner,” she says.
Emerson advises clients to take these steps before transitioning from staff employment to self-employment:
Create a life plan, not just a business plan.
“Spell out exactly what you want in your life and why,” Emerson says. “You may find what you really want is a new job—not a business of your own.”
“Air conditioners break down on the hottest day in July, and kids need braces,” Emerson says. “If you start a business, you’re going to be stressed about money in any case—you don’t want every single decision to be life or death. Then your quality of life just got worse.” Ask yourself: Are you swapping a job you hate for a business that is a noose around your neck?
Create a financial plan for your business.
Plan to bootstrap, Emerson says. Most venture capitalists are only interested in proven business models, and banks rarely loan significant sums to startups.
Test your idea.
By slowly building your idea on weekends and evenings, you can feel out the market demand for your product, and tweak accordingly. “Validate your concept,” Emerson says. “You need more than just your mom and boyfriend to like it.”
Barry Moltz is a business consultant and the author of You Need To Be a Little Crazy: The Truth About Starting and Growing Your Business, among other titles. On the question of when to make an entrepreneurial break, he errs on the side of risk. “You must quit your job as soon as you have paying customers who are not related to you,” he says. “You have to focus all your energy on making it work—otherwise you’ll never know if it had potential.”
Moltz agrees that a rainy-day fund is required. “Don’t bet the farm,” he advises. “But it’s totally unrealistic to ask people to have no credit card debt and six months of expenses on hand.” Still, he says, at some point you have to jump. “Most people are not cut out for self-employment, but you’ll never know unless you try.” Collaborating with a co-founder or a team of partners can help you take the step to quit that day job.
Moltz is also a fan of bootstrapping, though companies requiring high capital investments for development costs or machinery might need investors, whether they are friends, family or outsiders. “But too much money can make you stupid,” he warns. “You should never spend money before it’s time, but you can’t afford to be underfunded. The bottom line is you can’t wait for the perfect time. There never is a perfect time.”
Founder and CEO
Company: DentalPost.net, an online job board for dental hygienists, headquartered in Atlanta
Strategy: Lanthier gradually scaled back from her day job as a dental hygienist while the company grew.
Result: The business is expanding, currently grossing $2 million annually as Lanthier works on creating balance between her professional passions and family life.
I’ve been a dental hygienist since 1995. Then in 2002 I was trying to get pregnant and needed a flexible schedule to go to the fertility doctor, so I juggled various part-time and temporary hygienist jobs, ultimately working in more than 100 offices, some of them after my twins were born in 2004. This situation gave me control over my schedule and allowed me to work part time when my kids were young.
I also saw an opportunity. I knew so many people in my industry, and I had become the go-to girl for dental professionals looking for work and for dental practices looking to hire staff. We all relied on newspaper ads; Monster.com had barely launched. Our industry needed a place where people could meet online and connect.
In 2005 I started DentalPost, and it was profitable from day one. After I put the babies to bed, I would work on the site in the evenings until midnight or later. I worked my butt off.
I decided that I needed to commit to my new business, so I started to scale back my clinical work. But I never quit working as a hygienist. For the past few years, I have worked one day per week in a dental office, earning $48 per hour. This year my business will gross $2 million. My entrepreneur peers think I’m crazy, but my work is so rewarding. My patients love me, and I have saved seven lives by identifying fatal health conditions while examining patients’ mouths. By serving patients, I stay connected to the industry that my business serves.
I hired my first employees only two years ago. Now I have a good team in place and big plans for launching new products. I tell my employees, “You’re here so that I can serve patients.” Money has never been a motivator; helping people is my motivator.
Sometimes I think I should have scaled back sooner, but I didn’t want to feel like a quitter, and I didn’t want to disappoint my patients. I was also afraid—what if Monster.com squashed me or I otherwise crashed and burned? But when I jumped and let go of the security blanket, my confidence soared. It was a matter of finding the right timing.
Founder and CEO
Company: Two Maids & a Mop, an Alabama-based cleaning service franchisor with locations in seven states
Strategy: Holt saved for years to buy a small business with cash while accumulating a sizable emergency fund.
Result: In 2013 the company grossed $4 million and today operates 14 locations.
I wanted to be an entrepreneur my whole life. Part of that was fueled by watching my father, a government employee. He always taught me that I would never be happy working for the man. When I was in my early 20s, I read up on Warren Buffett and saw how he achieved success by having a clear plan. So I made a plan to save up to start a business, even if I didn’t have an idea of what that business would be.
I earned a biology degree in college and worked as the manager of a laboratory. I did well for myself, earning into the six figures while I was still in my 20s. But I was miserable. I had a long commute, and I dreaded driving into work each morning. I was so bored and had so many big things I wanted to do.
I lived very frugally. My friends would tease me because instead of going out like most people my age, I would stay in every night and eat frozen pizza. On the weekends, I took part-time jobs. In hindsight it was not the most fun time. But it was part of a bigger plan. I eventually reached my goal of saving $150,000—the first $100,000 for the business and another $50,000 for an emergency fund.
I spent a lot of time researching different business models and companies, and in 2003 bought a very small mom-and-pop cleaning business in Pensacola, Fla. They literally had five customers. But the business had much of what I was looking for: a recurring revenue model, location in a small market and the right price. Plus, I liked that it was close to the beach. At the time I wasn’t married, and I had the cash cushion, so I took the plunge, quit my job and moved to the Florida Panhandle.
Initially I had buyer’s remorse. It took six months to start turning a profit, and there was a big learning curve in terms of understanding the market and managing that workforce. But since then we’ve been named the fastest-growing cleaning company in America. I took the risk when the time was right for me.
Company: The Media Captain, a digital media marketing firm based in Columbus, Ohio
Strategy: While working full time, Parks built a side business and then dove into it headfirst after reaching an established goal.
Result: Today the company has clients around the country and a staff of four.
My background is in digital video and marketing, but I took a sales job right out of college to pay the bills. I really disliked the job, but mentally it was easier to build a business when I knew money was coming in. Plus my job provided experience with cold-calling sales and it allowed me to save money.
My goal was to get three clients who each paid a monthly retainer of at least $500. Then I would quit my sales job and focus full time on my marketing firm. I figured the worst-case scenario was that if I failed, I would at least have learned a lot of valuable lessons and skills I could then use to get another full-time job. I’d always had an entrepreneurial spirit. In high school, I sold sports tickets on eBay, and in college, I gave private tennis lessons. I had a lot of faith in my own ability.
During my weekends, evenings and lunch hours, I would do client video shoots and search engine optimization (SEO) campaigns. I knew that if I hit my three-client goal, I would be on solid footing. My family and friends weren’t so sure. Nearly everyone I consulted felt the risks outweighed the rewards and that I should stick with the sure paycheck of a corporate job. I listened to their concerns and considered them, but went with my gut. It was 2010, at the height of the recession—when companies’ marketing budgets were tight—when I quit.
Today the business is thriving, and it was actually a blessing that we started when the economy was slow. We got a foothold in the industry, and now that budgets are better, companies are spending with more established businesses like ours. There is no way I would be as successful as I am today if I had not quit my job and committed to growing this company full time.