Is your resignation letter typed out and ready? Are you dreaming of the day you’ll walk into your boss’s office and finally quit your job? Do you sometimes catch yourself daydreaming, imagining the look on his face?
Perhaps you keep that letter in the drawer on standby. Meanwhile, you continue to dream of quitting your unfulfilling job and blazing your own trail as an online entrepreneur. But there’s that one nagging question:
What if quitting is a huge mistake?
The fear of failing is natural. Weighing up all the pros and cons before deciding is intelligent, of course, and the decision isn’t easy. There are plenty of risks and ‘what-ifs’ to consider. Fortunately, there are also ways to reduce those risks, and make the transition easier.
This post looks at five of the biggest hazards, and shows you how to reduce at least some of the risk.
1. The Risk of Losing Your Steady Income
What if you don’t have enough money to maintain your standard of living? This is surely the biggest risk, and the reason why many would-be entrepreneurs never quit their steady jobs. Even if you’ve squirreled away some savings, can you be sure it’s enough?
As a rule of thumb, your savings should cover you for six months to a year. Take the guesswork out of it. Create a detailed budget and decide what you’re willing to sacrifice. Then calculate exactly how much you’ll need, and remember – every penny you stop spending is a penny you don’t have to earn.
Forbes shares some practical advice to help you further reduce the risk of “leaving the warm security blanket of a job, and heading into the sometimes stormy seas of solopreneurship.” The highlights include:
- Get your credit in order while you’re still employed. Financing institutions are wary of individuals without a steady income.
- Pay off your big debts before starting. Having a big repayment hanging over your head will only add undue pressure.
- Make full use of company health benefits and bonuses. Every little bit helps, so time your departure carefully.
2. The Risk of Losing Your Home and Your Car
Perhaps you’re worried about taking out a big loan or second mortgage to start your business. What if you lose everything? This fear might just tip the scales in your decision making. Does the risk really outweigh the benefits?
Success is never guaranteed, so don’t risk everything you own. Instead, focus on reducing costs and shortening the length of time you’ll need to wait for profits.
You can also protect your personal assets by incorporating your business. This way you’re able to shield yourself from personal liability for the company’s debts. It might even reduce your tax burden.
There are always alternatives to personal loans, as well. Offering equity shares to a partner or an investor, for example, means the risk is shared. But it also means you’re in for a long-term partnership, and dissolving a partnership isn’t as easy as firing someone. You’ll have to weigh up the pros and cons carefully.
3. The Risk of Overestimating the Demand
What if nobody wants your product or service? You would have quit your steady income and traded it for an empty dream. You may never know what your real income potential is until you actually start. You need to be confident that you haven’t overestimated.
Reducing this risk will take a bit of homework:
- Instead of casting your net too wide, focus on a niche that has a strong demand.
- Figure out what you’re likely to earn – determine your niche market’s total dollar value, and multiply that by the percentage market share you’re intending to claim as your own.
- Test the demand for your kind of business against the market first.
- Study other startups to see how they tested the waters if you’re not sure how to proceed.
- If possible, line up a few ‘ready to go’ clients before you actually quit.
4. The Risk of Spending Too Much on the Startup Phase
What if all your money is burned up before the profits start to roll in? This is where the value of a good business plan really comes into play.
Your ultimate goal might be to have a nice corner office and all the latest equipment money can buy, but for now, what are the essentials? Strip your business plan down to the bare bones, carefully deciding which items on the list of expenses are really income generators, and which might be luxuries.
Your business plan should list your intended spending on assets, your startup expenses, plus your cash reserve for the first year. One of the following tools should help you:
Cut your intended expenses down ruthlessly. For example, use shared office space, and lease instead of buying wherever possible. Use freelance help instead of employing someone full-time. The list goes on!
5. The Risk That You Quit Your Job for the Wrong Reasons
What if after six months you discover that you’re not cut out to be an entrepreneur? Returning to your old job might not be an option, especially if you burn your bridges on the way out.
At least consider the possibility that starting your own business might well be the wrong choice for you. Perhaps changing jobs is a better solution. In other words, examine your motives.
Good reasons to become an entrepreneur include following your dreams, financial independence (eventually), and personal growth, plus the ability to help people. On the other hand, there are some wrong reasons to quit. Personal feuds at work and wanting to work fewer hours are on that list.
Anne Fisher offers the following advice in Fortune magazine: “Don’t quit your job as overreaction to a bad situation.” She urges would-be job leavers to ask the following questions before handing in that resignation letter:
- Are you ready to be flat broke for a couple of years?
- Are you good at solving problems and overcoming obstacles on your own?
- Would you mind giving up your life outside of work?
Quitting your job is a decision that cannot be made lightly or impulsively. There are many benefits of starting out on your own – certain freedoms, and the chance to do something you love. The disadvantages include losing that steady paycheck, and needing to work harder than ever.
It’s certainly not impossible. With some proper planning and careful thought you can minimize the major risks, and work your way into a position where you can safely hand in that resignation letter.
- Budget for 6–12 lean months without income. Work to reduce the waiting time for profits.
- Milk the company benefits that are rightly yours, and get your credit healthy.
- Keep debt and expenses to the bare minimum, and don’t risk all your personal property.
- Make your guesswork and estimates as educated as they can be.
- Stick to your budget.
- Quit for the right reasons, at the right time.
Did you quit your office job to become an entrepreneur? If so, what factors did you weigh up before you came to your decision? Let us know in the comments section below!