Are you an employee with an entrepreneurial bug? Do you want to have the freedom, fulfillment, thrill, and potential financial rewards of building your own business? If so, how do you know if it’s time to make the leap?
Of course, there is no one size fits all answer, but here are some questions to ask yourself.
Am I financially ready?
Building your own business can give you an almost unlimited financial upside. However, many businesses fail, especially in the early stages. Many business who don’t fail struggle along for a long time without making much money.
It’s important to be financially prepared for a slower start than you expect.
If possible, start to build your business while employed full time (as long as it doesn’t violate employment agreements). Ideally, build your business until it brings in close to as much income as your job. As long as your business is growing and future prospects seem promising, quitting your job to focus on your business will be a no-brainer.
However, this perfect scenario may not be feasible. You will probably find it difficult to replace your full-time income with part-time attention.
I still recommend starting your business while enjoying a steady paycheck. Don’t step off the dock unless a boat is waiting, even if it’s a leaky old boat. Once your business starts generating income and appears to have the potential of exceeding your employment income, it may be time to make the jump. The boat only has to keep you from drowning while you work to improve it.
If you make the jump before the revenue from your business covers all your business and personal expenses, I recommend having savings sufficient to cover the shortfall for at least 6 months and preferably 12 months.
6 to 12 months will give you some cushion as you start growing more aggressively. Without much in savings you may be forced to bail from your business prematurely or give up control to bankers or investors.
Don't use debt to start your business! Using your own savings forces you to use more discipline. And if your business fails, you've only lost some savings. Banks won’t be threatening to take your house.
Am I emotionally ready?
Building a successful business requires a tremendous amount of grit.
I've written before about the emotional roller coaster most business owners go through. I’ve also written about the importance of resilience.
Are you emotionally prepared to handle the daily ups and downs? Can you stay the course without giving up when you experience a serious setback? Can you push through periods of self-doubt when you wonder if you have what it takes?
Running a business can be incredibly rewarding, but it will probably take some emotional pain to get there.
Am I mentally ready?
Starting a business requires tremendous self discipline and focus.
Most employees are forced to have discipline to some extent. Some are expected to show up to work at a certain time and stay until a given time. Most are given rather than choosing certain responsibilities. Some have performance reviews and a structured path to promotions.
Business owners have none of this forced discipline. You must create your own discipline.
Of course, you must serve your customers (or you won’t have any). But in most cases your customers won’t know or care what time you show up for work. The freedom to choose the hours you work is wonderful, but building a successful business usually means working many more hours than an employee.
Are you ready?
It’s important to be as ready as possible, but no one is perfectly ready, and there is no perfect timing. You will always have doubts and worries, and the earlier you can be prepared to start, the better.
If you spend another 10 years wondering if you should do it, you’ll wish you had spent the last 10 years building your business.
If you think you can handle the financial, emotional, and mental demands of starting a business, go for it!
Question: Business owners, how did you know when it was time to start your business?