This article first appeared on September 8, 2010.
I’m stuck in a job I hate and have a decent idea for a business, but I am wary about taking the plunge and starting up.
How do I make sure I’m not taking too big a risk with my family’s future and mine by quitting my job and going it alone?
It’s a tricky situation isn’t it? A few years ago I left a very well paid job to start my own business and I lost count of the number of people who confessed to me that they wished they were doing what I was doing.
So how do you make the decision? Well, there is a lot to consider, but as a starting point I suggest you focus your attention on the merits of your business idea and your short-term financial needs.
The business idea
When you are stuck in a job that you hate pretty much any idea for a business can seem quite attractive, so the first question I would ask is: “Which am I more passionate about, fulfilling the purpose of the business or getting out of my job?”
The purpose of a business is a concept you might not previously have thought about. Essentially it is the reason a business exists. If you feel passionately about the need to start and run this business – that there is a gaping hole that needs filling – then your chance for success is greatly enhanced.
An example may help: British company Bravissimo was started by a rather well endowed woman who couldn’t find pretty bras to fit her, she set out to rectify this and the purpose of her business continues to this day to be to help “big boobed women celebrate their curves and feel good about themselves”.
When you feel passionate about the purpose of your potential business you feel compelled to start it. And this passion gives you the energy and the resourcefulness to make it happen. I suggest that if you don’t feel this way, then it’s not the right business idea.
Your financial needs
When you haven’t got a family to support you can get by sleeping on friend’s couches and eating baked beans, but when you have dependents it’s a different story.
I would start by doing an honest appraisal of your own finances and determine the minimum realistic running costs of your family. Then look at your savings (savings less set up costs for the business) and answer the question: “how many months can we survive on zero income?”
Next do a robust financial plan for the business and answer two important questions: “What are the set up costs?” and “How many months will the business be running before it can pay me enough to cover my family’s running costs?”
Now, because we entrepreneurs are optimistic types and woefully underestimate how long it will take for the business to be able to pay us, go back and add an extra 50% into the time and an extra 25% into the costs.
I would then compare the two calculations. If you are adrift, that is you have months where you will need money but the company won’t be in a position to pay you, you need a safety net. An often-used safety net is working part-time (either in your old job or as a contractor). Of course, this slows down the progress you make on the business but can make the first few months of starting a business much more palatable.
The other option is borrowing (from the bank or family and friends). You will see that so far I have assumed that you have funded the business out of savings and that’s because generally starting a business using borrowings feels substantially more stressful than starting using savings. And of course, it leaves you with no where to go if you fall short.
You might be thinking that the financial numbers I suggest you put together are rather short-term. They are. But unless you can navigate through the short-term, there simply will be no long-term. Of course, you should do financial projections for the business for the medium/long-term to assess its viability as a concept, but don’t let the prospect of making millions distract from your short-term needs to pay the bills.
Focussing on the business idea and your financial needs seems rather analytical and when you are in a job you hate it often impacts you, and your family’s, wellbeing. So the answer is not to stay in a job that you detest, but rather, to invest your spare time researching business ideas that will enable you to escape. And when you do find the right idea and are about to resign from your job, you may get the last minute jitters.
If so relax and remember that there is still a talent shortage – businesses need good people – so you can always go back to being an employee if the business doesn’t work out. Few of us actually do it but it’s a comforting thought to have up our sleeves.