What we're talking about
It's not uncommon to start building your business on the side while holding on to full-time or part-time employment elsewhere to continue paying the bills. But you might get to a stage where you want to dedicate more time to your own business, or where the business has grown so much that you have little choice but to start pursuing it full time. This guide will help you make that switch.
Why it's important
According to software company Zapier, 40% of Americans have a side hustle alongside their main job. But picking the right time to quit your stable job and take your side hustle full time should be a considered decision. This isn't about simply handing your resignation notice to your current employer. It's about making sure that you're able to leave at the right time – both from a financial and personal point of view. Although there's no way of knowing the perfect time to quit your job, you don't want to leave it too early in your business journey and risk putting your personal finances in jeopardy. Equally, if you leave too late – when your business is experiencing huge amounts of growth, for example – you could end up feeling burnt out while balancing the business and your job at the same time.
Things to note
• Plan ahead. Quitting a full-time, stable job to pursue your small business idea can be daunting because there's really no guarantee of how things will go in the future. Don't underestimate the value of planning at this stage, including the timing of the transition and forecasting what your business will look like in the future.
• Focus on the money. It's highly unlikely that your business will make up for a full-time salary in the early days, unless you've already seen huge amounts of growth. That's why it's important to keep at least a few months' worth of personal expenses saved up, as well as figuring out financial forecasts for your business.
• You might still need another job. Sometimes, even a personal runway that you've saved up might not cut it, especially if your business faces a downturn in revenue. If this happens, you shouldn't shy away from picking up other freelance or part-time work while you develop your business. Ultimately, your financial health is linked to your mental wellbeing.
How to go full time on your side hustle
1. Start by taking stock. Ask yourself a number of questions: where is the business at the moment in terms of revenue, growth, market share and brand awareness? Has your target market responded to and validated your idea? What are the profit and loss statements looking like?
2. Now think about where you'd like your business to be. This is a good time to ask what growth looks like for your business and what you need to get it there. Is it more time, more resources, more money or some combination of the three? Set some achievable goals and milestones to work out what you need to get there.
3. Put together forecasts. Assessing how your business has grown over the past few months – both from a customer and revenue perspective – make some predictions as to where your business will be in the next one, two or five years. A financial forecast will help you work out both revenue and the costs you'll need to incur to get there – including your own salary and whether you'll need to apply for external funding.
4. What's the lifestyle decision? Running a business certainly isn't always as romantic as it's painted out to be. Especially in the early days, you'll probably end up working long hours for little monetary gain. Evaluate whether it feels right for you to leave a stable income from a job to pursue your own business and whether you can take the financial hit. Have some money saved up – at least a few months' worth of personal expenses, if not a year – to cushion yourself during the inevitable fluctuations in business.
5. Assess any conflicts of interest. If your new business is remotely relevant to your current full-time job or career, it's important to iron out any conflicts of interest. If you work on your own business during company time, your business can technically be thought of as the company's intellectual property.
6. Keep yourself on track. Along with setting overarching goals for the growth of your business, you'll also want to set some personal goals to keep yourself motivated – especially once you suddenly become a team of one and there isn't necessarily anyone around to motivate you to continue working. These goals will also help you to know exactly what you need to focus on when you quit your job.
7. When you're ready, quit. Of course, do this on the best possible good terms that you can – particularly if your own business is at all relevant or similar to your old job. You might also want to check if you can make the transition slowly, rather than quitting altogether – for instance, you might want to shift to part-time or flexible hours, so that you can dedicate more time to your business while still having some steady income.
8. Keep taking stock. There'll probably be times immediately after you've quit your job that you wonder whether it was the right decision. That'll particularly be the case if your business doesn't quite make up for the financial hit of giving up a regular salary or if you find yourself struggling to work alone. Keep checking in on your own wellbeing – financial and otherwise.
• Quitting a stable, full-time job to pursue your business idea shouldn't be a snap decision. In fact, it should be well thought out and planned as much as possible.
• A massive part of your planning and forecasting process will include finances: the costs you need to grow the business and whether there's enough revenue to sustain a salary for you.
• Leaving a job doesn't just mean leaving a salary behind; it also often means leaving a team to shift to a life of working by yourself. Evaluate whether this is the right choice for you.
Perspective. Here's one quite extensive framework – based on one founder's personal experience – for knowing when it's the right time to quit your job.
Example. You're not the only person resigning from your job right now. The Great Resignation, following the pandemic, saw lots of people in various industries do so. This guide includes a good example of a resignation letter.
Tool. You'll probably need to tighten your personal purse strings if you're finally taking the leap from full-time employment into entrepreneurship. Having a personal finances tracker or budget tool can help you build up some of those savings. Try Mint, Emma or Goodbudget.