Quitting my Job to Start my Own Business

In My Humble Opinion
1

Hi Everyone,

Long time reader, first time poster, yada yada yada…

So about six months ago I made a transition from a job I liked, to a job that I thought I would like more, but in reality now I dislike very strongly. A gamble that didn’t pay off the way I expected, but now at least I have a much more clear picture of what I would and wouldn’t enjoy doing for a living.

Now I’m thinking about leaving my current job to start a business doing pretty much the exact same thing I was doing at my previous job, only for myself. It is a trade/craft profession, and I already have the tools and skills that I feel I would need in order to be competitive in my area.

The thing that is holding me back is that I don’t have much more than 1 or 2 months in savings. On one hand, the job I have pretty much takes me paycheck to paycheck without any real contribution to savings, with an almost zero percent chance of a raise/moving up, and I’m already living as frugally as I can. But on the other hand, it wouldn’t take much success on my own to meet/exceed where I am now financially.

Considering all of this, the best way I can explain the way I feel is it if you were on a sinking ship, you wouldn’t hold on to it as it went under because you might end up drowning if you jump off.

I feel it’s worth mentioning I have no considerable assets, wife, or family that would feel the immediate effects of me failing. My gut tells me this is the right way to go, and I feel like if I make the jump, I’m going to look back and wonder why it took me so long.

There are a lot of perks to being self-employed, but I know there are also drawbacks. Has anyone else ever done something like this? What was your experience? Anyone who hasn’t want to weigh-in anyway?

2

Almost no new businesses are an immediate success–it takes time to become profitable, for example to find customers.

If you don’t have several months of living expenses in cash, why can’t you edge into it on a part-time basis (weekends…)? Likewise switch your full-time job to a part-time job…

3

Conventional wisdom is you need at least six months living expenses in the bank before opening a law practice. Dunno if that applies to your business or not, but running a business is tough. 'Start up costs can eat into your nest egg quickly. Office space, utilities, phones, computers/technology, marketing, supplies, furniture, licenses, insurance (if you can afford it or are required to have it)…none of that stuff is cheap.

4

How are you going to fund this business venture? Get something concrete before leaving your current job. Whether that’s a small business loan from a bank, or a contract with a benevolent venture capitalist, or whatever. Don’t just venture into the unknown without a solid backing behind you.

5

Thanks for the replies. I figured it wouldn’t hurt to get some unbiased opinions on what I’m thinking before I fully commit one way or another. I’ve thought about trying to work in doing it part-time, but I think it would be a tough sell to my employer, and pretty indicative I have one foot out the door already. I guess that wouldn’t be too terrible of thing though if I was planning on leaving anyway. Ha!

Maybe I’ll explore some other options again of trying to build up a little cushioning before going out on my own.

6

The chief question here is “do you have to start this business immediately?” You’ve got a plan, but you’ve also still got a paying job - why not stay there until you can move on with less uncertainty? My advice would be to start reducing your living expenses, which will increase your savings and prepare you for the lean early years, and figure out how much money you need to both start and run the business and support yourself for a year without making a dime at it. When you reach that goal, that’s when you move on. People talk about how 90% of new businesses fail - a lot of that is lack of planning and preparation, because people decide they’re fed up and just go.

I was lucky and unlucky. My job was eliminated so I didn’t get to plan things out ahead of time, but I’ve always had really low living expenses, plenty of savings, and the business I started took under $5k to get going. Things are just above a trickle but growing steadily. If business levels out before the year is up, I’ll take a part-time job to make additional money.

7

Have you sat down and figured out exactly what your costs would be for this business?
Write down all the fixed costs (insurance, office rental, etc.), and all the per-job costs (materials, tool replacement), and what you would charge per job. How many jobs would you need to break even? How many jobs to profit what you’re earning now?
Most important, how much time and money would it take you to get those jobs (advertising, meeting with potential customers, bidding jobs, etc. Remember to add in the time for the jobs you bid on but didn’t end up getting)?

If you haven’t done this, you’re not ready. If you can’t do this, you’re certainly not ready.

8

At least as a thought experiment, you should consider keeping your full time job for a while and working the part time self employment as much as you can. Work full time at the job you dislike, then work a few evenings a week and on weekends on top of that doing what you enjoy.

If that sounds too horrible, it should be a sign starting your own business might not be right for you. For one thing, you’ll probably have to work that hard for quite a long time while you’re establishing it. For another, you’re bound to find yourself in that exact situation anyway. Working all week on what you love, then spending hours and hours more doing things you don’t care for - like bookkeeping, trying to figure out taxes, scrounging up new customers, etc.

9

My husband went self-employed. It was three months before he got his first invoice paid. I would strongly advise against doing this until you have a bit more savings in the bank.

10

If you tell people what the industry is, you may well get some shockingly specific and relevant advice. And unless you are going into left-handed mandolin repair, it’s unlikely to be too revealing of your identity.

11

Many people start building a clientele before they leave. You said trades - lets say you are a plumber.

Make up business cards now. Put out an ad on Craigslist. Let people know that you don’t currently do emergency work (at least not during your normal hours) - but you are available evenings and weekends for home improvement projects that need a plumber - or non emergency repairs. Over a few months, you will start to build up a clientele - and that clientele will let other people know…“Clorox helped me plumb my bathroom when I installed it - give him a call.” “Oh, my garbage disposal needed replacing as well…Clorox did great work.”

Bank that money from the side jobs. When you quit, you’ll have two things - more than two months of money in the bank, and a start on the business. You’ll also have some idea of how viable the business is - you’ll make your mistakes with little risk.

If you are handy as well as within your trade (e.g. you are a certified plumber, but you are like my neighbor - you can really fix anything), you might want to start your side/Craigslist business offering handyman services (or have a second business doing that at a lower rate than the thing you trained for). As your business grows, you will be able to take fewer of the handyman jobs and more of the skilled jobs - but starting out, you’ll bank more dollars and develop more contacts.

DON’T drum up business through your employer. It isn’t ethical. If you form personal relationships with your clients (like a hairdresser does), its more appropriate to let them know WHEN YOU LEAVE that “this is where you can reach me.” (Hairdressers, lawyers and accountants sometimes take their clients with them, even though their employment agreement might say they can’t.)

12

When I started my business, I planned for it to be unprofitable/high cost for the first two years. You need to be forward thinking. Maybe take some local business courses? Survey your industry. Is it client-based? Then Dangerosa’s suggestions are great. Is it product-based? You’ll need a superb website.

Give yourself a year to get it off the ground, another year to make a real go of it, and switch real jobs in the meantime if you really can’t stand what you’re doing.

13

Everyone is spot on with advice about money. The odds of jumping into a business that is profitable right away are very slim. When it does happen, it’s only because you’ve lined up a big client before starting the business.

What you also need to think about is whether you want to be self-employed. Someone else used a plumber example, so I’ll use that as well. If you really like plumbing, you might think you can go into plumbing for yourself. But do you like sales, bidding and estimating? Billing and collections? Bookkeeping and taxes? Can you take care of time/project management yourself?

This is a classic trap for self-employed people. They think that a plumbing business is about the plumbing and it’s not. The best plumber in the world will fail without the sales and administrative skills to back that up.

Then you think “I’ll just hire people to do those things for me” right? But now you’re a manager on top of all that! Did you go into the plumbing business because of your love of managing and supervising other people?

So you have to have a very honest discussion with yourself about how you feel about all these things. Where are you skilled? What tasks do you enjoy doing, and what tasks will you tolerate? Is the job description of being self-employed one you actually like, or do you only want to do part of it?

14

I took a leave of absence to run my business and was fired when it got back to my company. It worked out well as I had allready established my client base. I would not just quit a job and build a business from scratch unless the demand for my product was unusually high.

15

One of the conditions of my current rental agreement is that I’m allowed to do any repairs I deem necessary, informing the owner (my grandma) but making the actual decisions myself and paying for it myself.

Step one is redoing the whole electrical circuit, which was already behind code back in '67 when it got put in place. The guy who’s going to do it works as a maintenance guy in a hotel M-F and does plumbing and electrical work in the weekends (electrical plus plumbing is such a common combo here it even haves its own name).

16

I was able to set up shop as self-employed with very little time and about zero investment, but that’s because I already had in place all the elements I’d need and because I happen to have the kind of unusual skills that make headhunters ring you up all the time; the type of contract is different but the way to get work is the same as it was before. The pay is higher but I have to pay for my “benefits” myself (UHC, safety training, wellness checkups… vacation is what happens when I’ve just finished a project), have to do my tax withdrawals myself and don’t get paid when I don’t have clients but still must pay social security and so forth.

17

What don’t you like about your current position? What did you think you’d like about it?

18

Several questions:

[ol]
[li]Have you ever worked for yourself before ? - If not, then you are in for a huge letdown as it is extremely difficult.[/li][li]Is there a market for your business? - Have you performed the necessary studies of your field to determine if opening a new business would be viable in your area?[/li][li]Who is doing what you do now? - How are they doing at it? If you don’t know, then you are unprepared to go into business for yourself.[/li][li]Has anybody recently closed a similar business to yours in your area? - If so, why did they fail? How will YOU prevent your business from failing in the same or a similar manner?[/li][li]Do you have access to at least 1 years worth of funding to live on in case this fails? - If not, then you probably aren’t prepared to go into business for yourself.[/li][/ol]

Some advice (from experience): Start off doing things part-time or working for a potential competitor. See how that goes and whether or not you still want to go into business for yourself. Also, you might find that investing an existing business may be a better use of your time and resources.

19

I was motivated mostly out of pure spite to start my own business some 15 years ago or so. :slight_smile: I had actually started working on a small business about three years prior to walking out of my last factory job. My previous employer laughed at me. He said I was never going anywhere, and that I’d be a lifer at the old factory. Without spite motivating me, I’d probably still be there.

Another thing that inspired me was some pamphlet that was handed out at the old factory. Someone wrote a neat article on how and if one should start their own business. That was just enough inspiration to get me thinking more about it more than ever. I wish I still had that article. Anyway, at my age (late thirties at the time), it said it’s probably best to concentrate on skills you have already acquired. At first I thought I didn’t really have any skills, but looking back I had looked at many things my dad had taught me, and I had ready many how-to-books, and applied it. Some of these skills came in handy later on, and were crucial to my business.

I didn’t hire any consultant, I did my own casual study of trying to find out in my area if something I wanted to do was in demand. I determined the best I could that it was, and I felt like I had the skills to do what I needed to do.

I do see a red flag for you when you say you only have savings for a month or two. I had saved plenty for a working man, and didn’t borrow anything. I figured if hardly nothing came in for several years, I could still live off of my savings for several years. I had also accepted the fact if I didn’t make it, just a break from the factory life was going to still make it worthwhile to me to at least try it and quit talking about it. I also had no family at the time to support, so I was out on my own.

My business took quite a bit of capital to get started. My first year, I only brought in $5,500. I was runnin’ scared when the phone just wasn’t ringing, but this was still about what I expected the first year. Next year, $15,000, and I started to see a little daylight, but still wasn’t sure. Third year, around $25,000, and I eventually started having trouble keeping up with demand. There were many months I was putting in 16 hour days of hard labor during my building years. It was the third year (I think) that I did something others weren’t doing, and that was putting my prices in the phone book. That’s when the phone started to ring off the wall. Today, 75% of my customers come from referrals, when the industry standard is 25%. The phone book is no longer that important to me.

Every year, it kept getting bigger. So big, I had to take my prices out because I couldn’t keep up with the demand. To this day, I’m still the only employee. I’ve made employee of the year, every year. :slight_smile: Nowadays, I work about 12-20 hours a month, but the money still comes in better than it ever has. I did a lot of things right, and a few things wrong. I could make it bigger if I wanted, but god damn, the tax man cometh, and sure knows how to take the wind out of your sails! So, I’ll just stick to this size.

Try to have you some back up plans. Try to cover many angles. Learn to live off of basically nothing, be prepared to not have much of a social life, that can always come later. Put your business pretty much first and foremost, and don’t give up the first year or two. The third year or so, you can decide for yourself if this is going to be something for you.

It’s definitely a life changer if you can pull it off. To this day, I still don’t consider myself a businessman, so I can’t keep from smiling when others do. I had a lot of determination, hard physical work during the building years, reasonably good common sense (I think), some savings, a very strong desire to make my customers happy, and just a small amount of luck, which is the thing I relied the least on.

Good luck, whatever your decision.

20

You have some tools and skills.
You have some knowledge.
You have a little savings.
You have an idea of being in business for yourself.
What you don’t have is a business plan. You need a business plan.
See if SBA still has SCORE mentors.