10 Things to Consider Before Quitting Your Job to Start a Business

Making the leap from being an employee to becoming an entrepreneur can be an exciting and daunting prospect. While the idea of being your own boss and pursuing your passion can be appealing, it’s important to approach the decision with careful consideration, so that you don’t burn bridges and increase the likelihood of success in your new venture.

Here are ten things to consider before quitting your job to start your own business:

1. There is a good product or service offering in place. An idea, a set of samples or a prototype doesn’t necessarily count. There needs to be a real business opportunity that is 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 that there is a good business opportunity. The product or service offering needs to be priced for sale and priced for profit, with all the costs of overhead, production, sales, and distribution factored in.

2. 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.

3. There is enough money in the bank to sustain a prolonged dry spell. It can take up to three years to develop a business to the point where there is enough profit above and beyond the needs of the business to generate a healthy income for the owner.

4. The business becomes more enjoyable and satisfying than 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. 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 owner’s attitude affects the whole enterprise.

5. 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 outsell you, the business could quickly become a race for the bottom.

6. The business is not likely to go broke within three to five years. About half of all companies are 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.

7. You develop the self-discipline it takes to tough it out in your own business. Not having a boss or a 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 to the beach on a nice summer day is a surefire way to undermine the chances of success.

8. 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.

9. 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.

10. 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 knowing yourself and your business before making a full commitment. Developing the business under trial conditions as much as possible while maintaining your job or career is a good approach. Although it may be hard to generate much volume or profit during this phase, it is quite possible to do substantial test marketing and research without having to quit your job. Plus, it can be an opportunity to build your network, expertise, and credibility in the area.

In conclusion, quitting your job to start your own business can be a natural transition if done well. By following the ten things to consider, you can determine the best crossover point: when the profit trajectory from the business crosses your income needs. Do that, and you’ll be much less likely to hit rock bottom when you make the leap.