Towards the end of 2016, I quit my job where I was earning a six figure salary to pursue my dreams of being a full time entrepreneur and today I'm sharing exactly what steps I took to prepare myself financially to take the leap from being a full time employee to being a full time business owner.
There are many different ways to make the transition from employee to business owner, (one of the most obvious is to quit your job whether you have a plan or not) but I chose a slower and more thought out approach because I wanted to maximize my chances of success and minimize the amount of stress I could potentially face - specifically financial stress.
"If becoming a full time business owner is one of your goals, then you can definitely do it and do it successfully too, as long as you are willing to plan accordingly, put in some effort and be patient with yourself. "
If like me, becoming a full time business owner is one of your goals, then you can definitely do it and do it successfully too, as long as you are willing to plan accordingly, put in some effort and be patient with yourself so you can transition in a way that makes the most sense for you to succeed.
First up let's discuss why I took the leap into entrepreneurship full time -
Why I quit my six figure job to go full time in my own business
I've always dabbled in business in one way or another. From selling Avon to my mom's friends (way back in the day) to owning my own retail business to having a wedding photography business, Ive tried out and been successful at a number of side hustles. I've also had several failures and learnt a lot about what it takes to run a small business.
All of these lessons lead me to the point where I felt like I was ready to pursue my passion of running my own businesses as a full time gig.
I quit my job where I earned six figures (and had some pretty awesome benefits) because I wanted to do something that really mattered to me and wanted to live life on my own terms. I also knew that owning my own business would remove the income earning cap I had as full time employee - meaning there's no limit to how much I can potentially earn as a business owner.
All of that being said, quitting my full time job required some serious preparation on my end - both mentally and financially. And below are 7 things I did during my evenings and weekends to make sure I prepared myself as best I could and set a solid foundation to succeed in business.
7 Things I Did Before Quitting My Job
1. I created my business plan
One of the first things I did when I came up with the idea for Clever Girl Finance was to put it all down on paper. I laid out all my thoughts and ideas for my business, from the things that would be easy to accomplish to the things that were out of scope (and budget) that I plan on pursuing later. I also laid out my WHY for starting my business, who it would be servicing / helping, how much I would need to get it started and keep it running, my short and long term business goals and a bunch of other important details about my business.
Creating that first pass of my business plan helped me think through what it was I was trying to accomplish and it is something I frequently revisit and update.
Tip: Before you spend any of your hard earned money, you definitely want to layout your idea in the form of a business plan. It doesn't have to be 100 pages long or in a fancy presentation format but your business plan needs to answer a few basic questions including:
- What is your business about?
- Who is your target / demographic, what problem will it solve for them and why should they buy from you?
- What products and services will you offer?
- How will you market them?
- How will you fund your business (start-up costs and continuous operating costs)?
- Where do you see your business in 12 months, 24 months, 5 years etc?
- Who /what do you need to support you (people, tools)?
Also keep in mind that your business plan should never be static. As you grow in business, your business may evolve or you may change direction completely and so your business plan is something that should be revisited often.
2. I set up my business entity, trademark and bank accounts
Once I had my business plan laid out and was comfortable with what I wanted to begin working on over the short term (my brand, website, content creation, social proof, getting feedback etc), I set up my business entity (CGF is an LLC), set up my bank accounts - business checking and savings and began talks with my lawyer about establishing my trademark.
Tip: It's really important to separate your business from personal for a variety of reasons. First of all you want to make sure you are not violating any rules and regulations of owning a small business by ensuring your business is set up with the right legal entity for you (e.g. sole proprietorship, LLC, corporation etc).
You also want to ensure that you can accurately track your business financials (your transactions, profitability or losses, taxes) and most importantly to avoid any issues with the IRS.
3. I bulked up my emergency fund
Knowing that my intention was to take my business full time, I made it a goal to bulk my emergency savings up to cover more than the standard 3 to 6 months of basic living expenses. My goal was 12-18 months which I figured was a good amount to keep me going in the event that I didn't earn enough of an income as quickly as I hoped.
While my spouse works and his income could be my fallback in the event that things did not go accordingly to plan, I wanted my transition to cause little or no financial burden on him and I wanted to continue to be able contribute towards our household expenses seamlessly.
Tip: Make it a goal to fully fund your emergency account. Calculate what your monthly basic living expenses are and then plan to put aside at least 6 months in savings before you quit your job. One year would be even better!
4. I created my business budget
Creating a business budget helped me lay out what my startup costs would be as well as my estimated monthly expenses that I'd need to pay to keep my business up and running.
It also helped me determine how much, at a minimum, I need to be making each month in income to not only cover my expenses but also to break even and start earning a profit so I can pay myself a salary.
Tip: Creating a business budget is critical to the financial success of your business. It helps you track your income and expenses as well as helps you determine your business profits or losses.
Your business budget can also help you gain some really valuable insights on what's working best or what isn't in your business in terms of the products and services your offer and how much income they are generating for you. Learn more about business budgeting here.
5. I waited till I was generating some income in my business
Before quitting my job, I made sure my business was generating a consistent amount of income that I knew I could scale if I went full time. This meant that before quitting, I spent a lot of time testing out business models, products and services to see what worked (which I continue to do as I grow my business).
Having income coming in allowed me to reduce the stress of not making any money. While my income is still inconsistent, there is a baseline amount I know I will make each month.
Tip: Waiting until your business starts making some money is not a bad idea because it gives you an opportunity to "prove your concept" and also helps you determine what works well or not.
The income your business generates does not need to replace your work salary entirely, but it should be enough to cover your business expenses.
6. I started saving money for my business
Once my business started making money the next thing on my agenda was to put some money in my business savings account and business emergency account with a goal of getting my business to the point where it was 100% self sustaining - meaning the business funds itself and I no longer fund the business out of my personal money.
The savings accounts I set up are specifically for future projects (goal savings), to keep the business running in the event of a slow season (emergency) and to pay my quarterly taxes. The goal for my business emergency savings was to have 6 months of my operating expenses put aside, this includes any contractors fees I needed to pay (i.e. a virtual assistant).
Tip: Think of your business savings accounts (goal savings, emergency, taxes etc) similarly to how you would look at your personal savings. You probably have short and long term goals for your business that will need money to support them. In addition, unplanned circumstances come up in business as well where you'll need to cover the cost of something you didn't plan for. So it's definitely smart to start saving for your business as soon as you are able to.
7. I prepared mentally for the lifestyle & emotions that come with entrepreneurship
This is a big one. From balancing my business and full time job together, I knew that a lot of work, time and energy was required to make my business successful. While working full time there were never enough hours to get things done in my business. From the late nights to long weekends working on my business, I really had to decide that this was something I wanted to do long term.
From scaling things down financially to support my transition to being everything and everyone in business, I realized that patience and rest (so I don't burn out) would be my greatest allies.
Also a ton of emotions come with being a full time entrepreneur. From the exciting highs of being your own boss to the lows of feeling like you made a big mistake or will never succeed, it's important that you come up with ways to deal with the varying emotions you will experience and keep making progress towards your business goals. You can learn more here in this blog post.
Tip: Find people on the same journey as you or who are further along in business than you are and keep in touch with them. Share how you are feeling, talk business and get motivated and inspired by each other. Also, remember, patience and rest are critical on your journey.
Have you recently transitioned from being an employee to being a full time business owner? How did you prepare?
Planning to transition soon? What plans are you making?
Bola Onada Sokunbi