So you’ve started a part time business, but how do you know when it’s time to quit your day job? Giving up a steady paycheck to pursue your passion is not an easy decision. But you can and should follow your dreams if you can maintain your current lifestyle and meet financial obligations.
Before you turn in your resignation, have a heart to heart talk with the family and then, ask yourself these questions:
Will my part time income meet or exceed my fulltime salary?
If the answer is yes, then start writing your resignation. The goal of every small startup is to eventually replace full time pay. If you’ve been working for several years building a successful enterprise and have a solid customer base, manageable cash flow, cash reserves, and potential for steady growth; it’s likely that you will be successful.
Will I lose benefits like health insurance or a health savings plan?
As a former employee and a new business owner, making money is not your only concern. You will have to pay for your own health and life insurance and that can be expensive! Before you quit your day job, talk to an agent to determine how much it will cost to maintain similar policies for life and health insurance.
Is my business stable enough to meet financial obligations during the down times?
Being your own boss sounds glamorous, but the buck stops with you! Win or lose, you’ve got to keep up with personal expenses and business overhead—even when business is slow. If you are short on savings, consider applying for an accounts receivable loan to finance your new enterprise. Even if the bank turns you down, an AR loan gives you cash based on outstanding receipts to help keep you in the black!
Does my family have a second stable income to fall back on?
During the first three years, it is common for new businesses to struggle to stay afloat. To avoid undue stress on family finances, make sure your spouse’s income is sufficient to meet obligations while the company grows stronger and more financially stable.
Becoming a business owner is exciting but it comes with a price. If you plan ahead, set aside savings and have a second steady income, pursuing your business passion will pay off.