The promises of a budding venture are rosy. This is your chance to work for yourself, not someone else. You have a higher potential of earning more. Above all, building something from the ground up and seeing your business take off is one of life’s greatest pleasures.
However, the consequences of failure are equally significant. So check these 5 considerations before handing in your resignation.
Do You Plan for Slow Growth?
It’s easy to get carried away by optimism and assume that your start-up will be wildly profitable. However, most businesses take at least two years before they become profitable. Plus, they only become successful once they’ve hit the 7-year mark. Don’t be fooled by stories of overnight success — these are exceptions.
A pre-pandemic study found that most small business owners reach profitability in the first four years. Net profit margins range from 1.5% to as high as 7%. Much of the first year’s earnings will go to expenses and reinvestment.
For the most part, a new business will be faced with financial and marketing struggles. Growing your customer list is also a Herculean task.
So be ready for slow growth. A healthy dose of optimism is needed, but if you’re leaving a stable job thinking that your business will make massive profits within a year, it might be helpful to take a second look at your projections.
Do You Have a Nest Egg?
Realistically, it will take a few years before a start-up becomes profitable. If you’re leaving your job to focus on the venture, you must have enough money saved up to support yourself in the meantime.
Use your projections to calculate the amount you need not just to survive, but maintain quality of life, too. How much do you need every month? How long will it realistically take for your business to make money?
If, after the calculations, you find out that your nest egg is not enough, reconsider your resignation. Stay in your day job just until you reach your goal amount. Here are some tips to reach the goal quickly:
You’re not alone in struggling to save — everyone has a hard time setting aside money. But automatic deductions work wonders because it forces you to work with what remains of your paycheck. If you’re not a fan of automatic deductions, you may consider applying for a debit card and giving your credit cards a break, so you won’t have to pay interest.
Cut Off the Wants
Avoid buying new things when you can work with your old items. Cook and eat at home instead of dining out. Invest in quality clothes instead of joining the fast fashion trends.
Have You Done Your Research?
The National Business Capital reports that 21% of start-ups fail during their first year. About 30% close down during the second year. In fact, about 70% of companies even fail by the tenth year.
These are not pretty figures — they present fundamental problems in the way new entrepreneurs handle their business. The reasons for failing are diverse. For some, money ran out. Others got into a poor business partnership, while others invested in inefficient marketing. In sum, many things could go wrong.
That’s why seasoned entrepreneurs cannot stress the importance of research enough. Expect to devote hours to studying your industry, business climate, legal matters, the product or service, and your target customers. You’ll have to consult established figures in the sector and survey potential customers. And if you plan to bring other people on board, you’ll have to learn to be an effective manager, as well.
Learning these takes time. If you’re not confident about the skills you have now, it may be wise to stay in your job for now until you have a solid footing in the industry you’ll enter.
Are You Fully Committed to Success?
Leaving a steady paycheck for an uncertain career in entrepreneurship is one of the most critical decisions you’ll make. It will affect not only your professional life but also your finances, relationships, and mental well-being.
Understand that a new venture demands your full commitment. As mentioned, it takes years for a business to be truly established and successful. It’s a long-term commitment. Be ready to give your 101% the moment you walk out the doors of your old job.
Remember that, by and large, there’s no timeline to your entrepreneurial career. If you reconsider quitting, it doesn’t mean that you’ll never start your venture. It’s simply a sign that you might need more time to get momentum going and prepare for the shift. After all, the best business people are those who are always one step ahead.