How to build your business before quitting your day job
Like diving from a cliff the first time, leaving your job to dedicate yourself to your own business can be quite daunting prospect. There should be much more consideration to making a decision to quit your job than simply “look before you leap.” There are ways to approach this without burning bridges, while building wealth and increasing the likelihood of success in the new venture.
Determine a good crossover point, so that you can enjoy the best of both worlds. Why not maintain those relationships developed during your career while gaining some early traction? Much of what works and doesn’t work in a venture can be figured out before making a full commitment to it. You can work toward a bottom line measurement, where profit trajectory from the business crosses your income needs, before you make the leap. This is not always easy to do but will be worth the effort.
If done well, quitting your job to dedicate yourself to your business will be a natural transition, even if this is your first time. Here is a list of ten things to work on to determine a good crossover point. In other words, don’t quit until:
There is a good product or service offering in place. An idea, set of samples, prototype and the like do not count. There needs to be a real business opportunity in here. Wherever possible, it should be proven, backed by a good plan and operating on a sound business model. It takes solid front-end marketing to determine that. There is rarely any value in quitting a well paying job on just a hunch there is a good business opportunity. Whatever it is, it needs to be priced for sale and priced for profit with all the costs of overhead, production, sales and distribution factored in.
There are real customers. Unless you are selling quilts, family and friends are not considered customers. Whether your customers are end users, distributors, retailers, businesses or the general public doesn’t matter as much as whether or not they are real and sustainable.
There is enough money in the bank to sustain a prolonged dry spell. It can take three years to develop a business to the point there is enough profit above and beyond the needs of the business to generate a healthy income for the owner.
The business becomes more enjoyable and satisfying then the job. This is easier for people who hate their job than it is for those who are very passionate about their work. There needs to be passion and enthusiasm for the new venture, otherwise it is bound to fail. This is always true if you are the one leading it and doing the sales. With few exceptions, this also holds true if you are simply taking over an existing business with a track record and organization in place. The attitude of the owner affects the whole enterprise.
The product or service offering is not being trampled by a major competitor. If a big competitor can afford to and does make a big effort to undercut your offering and has the ability to out-market, out-produce and out-sell you, the business could quickly become a race for the bottom.
The business will not likely go broke within three to five years. The sad reality is that about half of all companies are simply not around five years after they are started. About a third of the ones that close do so because they lose money, another third break even and the remainder are profitable. There are many reasons for a company to close its doors, but not making a profit is obviously the main one.
You develop the self discipline it takes to tough it out in your own business. Not having a boss or system in place to keep you working makes it easier to become distracted and lose focus on the needs of the business. Putting off necessary sales calls to head off to the beach on a nice summer day is a surefire way to undermine the chances of success.
You have become an expert in your chosen area. Leaving a 20 year career in the insurance industry to start a venture manufacturing a new health food snack bar is likely going to become problematic. People in both the insurance and food industries will be skeptical unless clear expertise has been developed in the relevant areas. This is why it is often easier to transition from a job to a business in a similar area or expertise. An insurance veteran offering a new product or service in the insurance field will have less trouble establishing credibility as an expert.
You have enough of the right “friends” in the area. A productive network is a great asset in building a business. If you have the right people in the right places available at the right time, your business is much more likely to succeed than if you don’t. Use tools like LinkedIn, Facebook and industry networking events to enhance your network.
You have key mentors and advisors in place. These people can help you develop the business long before full deployment. Call on more of your growing network of “friends” as things develop. These advisors can also help with determining when to quit your job (or the business).
It boils down to really knowing yourself and knowing your stuff before going into your new venture with a full commitment. You should know the area well enough to be able to write a book about it. This helps eliminate the tendency to respond to the frequent “once in a lifetime” opportunities that come along.
Develop the business under trial conditions as much as possible while you are still maintaining your job or career. You won’t likely be able to generate much volume or profit during this phase. It is often hard to go out and make sales calls during the day while you are working 9 to 5 job. However, it is quite possible to do substantial test marketing and research without having to quit your job. There can usually be enough product or service development work done where needed to get it into a saleable enough form to get orders from real customers – enough to prove out the business and maybe make a small profit. Plus build your network, expertise and credibility in the area.
Develop your business to the point that you simply are forced to choose between your job and the business. Do that, and you’ll be much less likely to hit rock bottom when you make the leap!
If you have any additional suggestions, please post a comment.
Peter Paul Roosen and Tatsuya Nakagawa are co-founders of Atomica Creative Group , a specialized strategic product marketing firm. Through leading edge insight and research, sound strategic planning and effective project management, Atomica helps companies achieve greater success in bringing new products to market and in improving their existing businesses. They have co-authored Overcoming Inventoritis now available.