Should You Quit Your Job To Be A Full-Time Entrepreneur?

If you have been pondering the question of whether you should quit your job to focus full-time on your startup, you better not flaunt this privilege around. In this downturn economy, some would kill to retain their job. With this in mind, you might want to reconsider that $64,000 dollar question, perhaps chuck away the thought and head back to your cubicle. But if you’re serious about breaking away to do your own thing, then here are some pros and cons to quitting your job, and some considerations you must keep in mind when doing so.

PROS

- You get to focus your attention full-time on your startup baby.
- Potential investors might find that as a sign of commitment and therefore will be more willing to invest in you.
- Easier to arrange meetings and make business calls during business hours.

All these pros allow you to really focus on your startup and germinate it, ensuring the maximum chance of success. In this case, contrary to the usual advice of ‘not putting all your eggs in one basket’, you don’t diversify your time and effort in this case. In the case of your own startup, it does not make any sense to want to diversify. Why would you want to decrease the startup’s chances of success? Do it once, do it well. Give it your best shot. No point doing a startup if you don’t intend to do so.

CONS

- You lose a rice bowl (no more steady stream of monthly income).
- Your savings will slowly be depleted.
- If you change your mind and want to rejoin your company a few months down the road, your position may no longer be there.

The cons to quitting your job can be significant or not depending on your situation. If you have saved up a good amount of money (at least a year, look at the considerations below), your situation might not be that precarious and you have about a year of buffer. However, if you haven’t managed to save up or only have enough cash to tide you over for a few months, this is when things get a little more complicated.

WHAT YOU SHOULD CONSIDER AND HOW TO DO SO

- Do you have enough savings to feed and house you and your dependents for a year?

You have to be prepared to go without salary for at least a year or more. This would be the safest route to take because cashflow in a young company is always uncertain.

Many first-time entrepreneurs are usually very ambitious and overly optimistic. I’ve seen many business plans with projected PROFITS of S$1million after year one. Seriously! That’s way too ambitious and too unrealistic. In all likelihood, you will be slogging away for a good few years before you can even see S$1million in revenue, not to mention profit. Unless of course, your company is one of those out of a million that sees exponential growth.

- What you should do to figure out how much you need for this one year:

(1) Analyze your past expenses, gather all your receipts or try to make an intelligent guesstimate on the monthly cost required to sustain you (and your dependents).
(2) Make sure you have at the very least, six months worth of this monthly cost in your savings bank account or other highly liquid asset. This means, no fixed deposit obviously, or even stocks. Though stocks are highly liquid assets, you can’t be too sure at what price you will be able to cash them out. With unexpected timing, you could be making a huge loss and not be able to attain the amount that you thought you could. If you can budget for a year’s worth of this monthly cost, all the better.

- Will you be willing to deal with the constant stress with developing the product, testing the buggy website?

Work is going to be never ending, there will always be something to do. And the beauty is, you can never get away from it all! You have no one to answer to except yourself (unless you have a team and board of directors), suggesting the fact that there will also be no one to monitor your progress and push you.

You need to set your own deadlines and milestones and have to be able muster up the tenacity and determination to push yourself to adhere to them. Getting away from the ‘office’ might be a hard one especially if you’re working on a web startup. Work follows you throughout the day like a shadow you can’t shake off and you have to be prepared for that.

- Can you deal with sticky equity issues and difficult customers?

Whether you like it or not, these issues are going to come up. You need to know how to pick your team, deal with shares and options, choose your board of directors and manage your customers. A teacher and mentor of mine back in Silicon Valley, John Nesheim, maintains an excellent blog on entrepreneurship. Check out what writes on people here and here.

There might be countless other issues you need to consider, and many more pros and cons to quitting your job. In the end, what a budding entrepreneur really needs to do is to make sure any decision has to be well thought through, and plan for any contingencies. Good luck.

Photos courtesy of Karen Eliot and jillclardy.

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