Working full-time while pursuing a new venture on the side is a lot of work. If you’re wondering when to quit your job for your business (and finally leave the rat race behind), you’ve come to the right place.
In this post, I’ll walk you through when you should write that resignation letter to your current employer, how much
Let’s dive in.
Things to Consider When Quitting Your Job for Your Business
Before going all in on your side hustle, there are a few things to consider (despite being at your wit’s end and DYING to leave your current job).
Everyone’s situation differs, and people leave (or stay with) their jobs for various reasons. We know people whose content sites make triple what they earn from their salary but remain at their day job.
So, before jumping ship, think about these things first:
The Power of Starting Small with Your Side Hustle
Because you’re small, nobody knows about you. You can go in any direction with zero obligation to third parties. You have no “legacy tasks” on your plate.
This leaves plenty of room to make mistakes because nobody cares because they don’t know you exist yet.
In your site’s early days, it’s easy to burn the candle at both ends (i.e., working full-time and building your side business).
Unless people say to you, “Why haven’t you quit your job already?” think about staying on a little longer.
The Power of Focus When Forging A New Career Path
When you quit your job, your business has to earn
So, instead of thinking from a sense of play and curiosity, “what can this business be?” you’re thinking, “I have to pay my rent at the end of the month, or I’m homeless.”
That places a huge burden on you. Worrying about where your next dollar comes from is a distraction.
Growing your side hustle with your back up against the wall because you have no other income is challenging (both financially and psychologically).
Sidenote: While this back-against-the-wall mentality can work to create an unwavering attitude toward goal achievement, you can also try working backward.
Imagine you’re stuck at a job you hate. And building your business IS THE WAY OUT.
Use your poor circumstance as your “why.” There’s only one way out of this job, and that’s building your business.
This way, you still have income, but you’re also motivated to get out because the fear of staying stagnant and not leaving your job is unbearable.
This affords you more time to think broadly about your vision and hone your focus (while becoming the best in your space).
Otherwise, you risk getting stuck putting out fires trying to earn today’s
Further Reading:
Benefits to Starting Your Own Business
“I get to be my own boss.”
We hear this all the time. Entrepreneurship can have huge rewards in terms of revenue growth, and the payouts can be insanely HIGH.
Just read this Twitter thread from Andrew, averaging $51k a month for four years after building two niche sites.
I have built two niche sites that have generated over $2.6M million in *just* affiliate revenue since Jan 2018.
That’s an avg of $51.4k/month for 4+ years. 🤯
I’m going to share what I’ve learned.
My first thread 🧵👇
— Andrew Fiebert (@andyfieb) June 6, 2022
Being your own boss does have its perks. As a startup of one, you get to keep 100% of your profits. There’s nobody you have to answer to in the same way as in a traditional job.
You can also set your own hours and work when you want.
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Drawbacks to Starting Your Own Business
The worst part of starting your own business is that you assume all of the risks and financial liability.
That includes:
- Paying taxes
- Growing revenue
- Generating leads
- Keeping customers happy
- Paying operating expenses
- Purchasing health insurance
You shoulder all of the responsibility AND blame when things go bad.
So while not having anybody to answer to is great, the buck stops with you.
How Much Should I Save Before Quitting My Job to Start A Business?
A good rule of thumb is to be earning between 1.5x-2.5x your current salary before going all in on your side business. This ensures you have plenty saved in case you take a financial hit.
Having enough
It prevents you from being forced to make any drastic lifestyle changes or significantly cutting back on your expenses.
Your savings cushion is your moat.
Sidenote: When Andrew left his day job to go full-time with Listen
That’s a safe play.
You’ll also have to consider health care costs. Most employers provide full health + dental coverage, but when you’re a solo act, you’re footing the bill in that department.
If you’re a family of four, you could end up paying upwards of $2,000 per month. That’s a significant expense you’ll need to plan for.
W2 Pay vs. Self-Employment Pay
Ideally, whatever you get paid from your day job (W2) is what you keep. You’ll owe nothing nor get a refund from the IRS.
But, when you work for yourself, every dollar earned is pre-tax.
You’ve got to set aside
Allocating
Tip: Take one-third of your pay and put it in a tax savings bucket. Then, in April, when you’re filing taxes, you’ll have plenty of
Another tactic goes like this:
- 15% to taxes
- 15% toward operating expenses
- 10% profit (this is your business’s savings)
- 60% of revenue goes to you (this is your owner’s pay)
There are thousands of ways you can do it as long as the numbers make sense for you.
Running your business like this ensures your personal and business banking accounts never mix.
The book Profit First goes into insane detail about setting up your business finances and is an excellent starting point for anyone who’s self-employed.
What If I Want to Buy A House?
If you’re thinking of buying a house, consider hanging onto your W2 job a little longer. It’s tougher to get a mortgage unless you have several years’ worth of tax returns from your business.
Seeking Profit co-host, Emil had a problem getting a mortgage after becoming self-employed. When he started his agency, he couldn’t get a loan because he only had nine months of earned income from his new business.
But banks told him he needed two years of tax returns to get a mortgage.
Tip: Emil recommends the bank First Republic, calling them a “godsend for small business owners.” They reviewed his nine months of income and gave him a loan. They’re a smaller bank with a unique operating style. Search for banks that are small-business-friendly.
What Is the 50-30-20 Rule?
The 50-30-20 rule says to set aside 50% of your income for essentials, 30% for discretionary spending, and 20% for savings.
Essentials include things like housing, utilities, and food. Discretionary spending could be gifts for family and friends, fun activities, dining out, concerts, and more.
Savings includes emergency funds, retirement accounts, and big expenses (e.g., a house/car/dream vacation).
You can adjust these percentages based on your specific circumstances and what’s important to you.
If you have no idea how to save, the 50-30-20 rule is a good starting point.
When to Quit Your Job for Your Business | Final Thoughts
I hope this post sheds a little light on when to quit your job for your business. It’s usually a good idea to have a little cash cushion to keep you afloat.
That way, you can weather any rough seas that might happen in the beginning.
Andrew mentioned his niche site was earning 2x his salary at his full-time job before quitting. While 2x might not be in the cards, it’s a good reference point.
You’ll have to do the math and find what makes sense for you. Like any business, the numbers have to add up.
Just know you’re not alone. People build up their side hustle into a full-time income all the time. We’ve helped so many do it too!
If you want more on this, check out the latest episode of Seeking Profit!
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