biz ladies: when to leave your job and start on your own

Today’s Biz Ladies comes from the wonderful ladies at Smart Cookies, the financial expert team. In this post, Katie Dunsworth, a co-founder of Smart Cookies and owner of Spark PR, shares her personal story (and tips) of making the leap from employee to self-employed. She offers some valuable suggestions for taking your business idea to the next level and making that transition out of the 9 to 5 a seamless and successful endeavor. Thanks, Smart Cookies and Katie, for this incredibly helpful post! — Stephanie

Read the full post after the jump . . .

Monotony. Boredom. Grating coworkers. Menial pay. Do any of these terms describe your sentiments about a day at the office? Each year, an estimated 1 in 12 people kiss their 9-to-5 day job goodbye and venture into small business ownership.

I count myself a lucky member of that club. In just two years, I went from being an underpaid and overworked employee to an award-winning entrepreneur with a six-figure income. I own my own PR firm and am one of the co-founders of The Smart Cookies, a money mentoring business I started with my four partners in 2007.

Our story began like many others: We had a great idea. We had a brilliant plan for what we could uniquely offer consumers. We were even lucky enough to have Oprah cover our money group concept, which led to a book deal and television show. But having an idea for a business is one thing; actually leaving the comfort of a steady paying job is something completely different.

Each of my partners and I read books, asked other entrepreneurs for advice and spent many sleepless nights contemplating the right time to quit our day jobs and take the plunge. From our more than three-year journey, we’ve learned some essential lessons to consider before starting your own business.

1. Do as much as possible to build your business on someone else’s dime.

  • Register your business name.
  • Buy a URL.
  • Decide whether to incorporate or register as a soul proprietor.
  • Create a brand and website for your business.
  • Develop a business plan.
  • Create a financial plan including projected operating expenses, taxes and earnings.
  • Find a mentor.
  • Hire a bookkeeper or accountant.
  • Open a business bank account.
  • If possible, take on clients, jobs and contracts.

These are just a few of the basics you can get in place before working full-time in your business. In fact, having regular income from an employer makes it a bit more realistic to pay for expenses like incorporation, web development and branding.

2. Create realistic financial goals and projections then have mentors review them and offer feedback.

Finding exceptional mentorship was probably one of the most impactful things we did in The Smart Cookies business. We sought out highly respected business owners with experience in everything from online business development to finance and asked them to sit on our Board of Advisors. When we started our business, they thoroughly reviewed our business plan and financial projections. Their feedback saved us thousands of dollars and completely altered our operating structure. I recall one example specifically: We were all excited to quit our jobs and start working full-time in our new business. We explained this to our mentors, who promptly convinced us that the longer we could stay in our regular jobs, the better this would be for the long-term security of our business. This was such an obvious and easy decision in hindsight, but at the time, we were so caught up in the excitement that we were getting a bit ahead of ourselves without noticing the obvious consequences.

Another critical element is relationships. Our mentors were very connected in our community. If they didn’t have specific advice, they were able to refer us to someone who did. By connecting us with world-class contacts, we were able to maximize the capital in our business and keep close tabs on our costs.

3. Save more and spend less in your personal life.

As a future business owner, personal and professional finances will be closely linked. In your first few years of business, you are realistically going to make less than your previous salaried job. Aim to reduce your living expenses as much as possible to compensate. This might mean moving, downgrading your vehicle or cutting your food and entertainment budget.

Some simple money-saving strategies we followed when we first launched our company included:

  • Ditching a car for a zip car
  • Moving in with a roommate or moving into a smaller, more centralized studio (cheaper and closer to transit)
  • Consigning clothes and household items for extra income
  • Switching from lattes to regular coffee — or better yet, making your own coffee
  • Cutting your restaurant and cocktails budget down by 50%

4. Allocate time and money to business development and marketing

I’ve met too many entrepreneurs who left everything the second they got one paying gig. Bad idea. I firmly believe that unless you have a plan and some proven experience creating regular ongoing revenue, you aren’t ready to leave your job. Getting your first paying job is a fantastic accomplishment. But it’s also incredibly deceptive. Now that you’ve got the contract, you have to spend more of your time providing the service you’re selling and less time on business development. If and when the contract expires, you need to ensure that you have new customers in the pipeline. Don’t fall into the trap of forgetting to plan for the next sales cycle.

You can avoid this by doing the following:

  • Treat marketing and business development as part of your job.
  • Carve out at least five hours a week for things like cold calling, taking meetings with prospective clients and researching marketing opportunities.

5. Get to know and respect the taxman.

Knowing and respecting the taxman will save you a lot of time and heartache down the road. No one likes to pay taxes, so accept that fact and move on. As Bill Bruns, Harvard Business School professor, said, “I want to pay more taxes. Meaning you should look at an exorbitant tax bill as a measure of your success.”

Enter into your business with a clear understanding of the following:

  • What does the tax implication look like in your line of business (this differs if you are a sole proprietor or an incorporated business)?
  • Based on your income projections, how much do you need to set aside for taxes every month/year?
  • What do you need to register for to make tax paying as easy as possible?
  • That an accountant with experience can support you in managing and filing your corporate taxes

A great resource for all you need to know about taxes for your small business can be found here.

For all things Smart Cookies, you can follow us on Twitter, “Like” us on Facebook or hit up our website at http://www.smartcookies.com/.

Alanna

This is fantastic! I’ve always wanted to start a business but the idea of quitting my job without a safety net frankly scares me. I think that that is a big myth about starting a small business. You’ve got to build your net first.

Sarah

This is a sure sign – I have left my job today – thank you for the advice!

Stacy

This is a fantastic post. Great info. I’m going to print it out and cross reference with what i’ve done so far for my small business. Hope to be that 1-in-12 sometime in the next few years!

Ronique Gibson

Love this article.. it speaks to how I built my brand in the last 2 years, for myself without having to rely on someone else, or having to worry about being fired. :( I for one was in the architecture/construction business and I decided to start a blog site where I collected my own thoughts, and questions my friends and family had about home. I then realized I needed to build my brand while still paying the bills! The smartest thing I did? Get a smart phone.. my iphone enabled me to check on my site, answer comments, interact on social media, and build my brand on your own.. steady but surely, you will be able to leave when you’re ready! Today I head Stagetecture and love my Freshome Exec. Editor position. What a difference 2 years made. :)

jamie

Excellent advice… now who wants to take a look at my monthly spending and see how and where I can cut it? I see nowhere to spare! And I’d LOVE advice on the transition phase of how to juggle full time AND side paying gigs until you can escape the 9-5!!

Jane Hay

For me, this post could not have come at a better time. I’m currently working to get my new business off the ground and hope to break free from the 9-5 within the next year or two. Thank you, thank you!!

Emma

Once again, Andrea – thanks for a great, inspiring post. Similar to the lovely ladies who posted comments above, I’m on this same path and it was great to read very practical advice to calm the excitement……! (Repeat to self: this is a business, this is a business!) I’d love to see some more posts from you on this – how about the first days: where to start when the sheer amount of possibility/excitement can overwhelm? Keeping the motivation going when the initial energy burst wanes? I’m employed at the moment with a burning ambition to establish myself as a self-employed solopreneur and I’ll be referring back to this article when I get nearer my time! Thanks x

Katie

I agree with the other ladies who have posted on here. I love this and needed it too! I’ve been struggling with figuring out exactly how/when to transition out of employee and into 100% entrepreneur, but haven’t made the jump yet. Thanks so much for the advice!

Tania

Thank you…great tips. I’m not an entrepreneur but am a writer with a financial controller day job (did I mention I’m exhausted? happy but exhausted). I have many friends who ask for my help when starting their own business and many often forget about figuring in taxes (& insurance if applicable) when pricing their product or services and determining their true margin.

Mariana

What a great article. I’ve been flirting (dating?) with the idea of opening my own small business and see so many options for how to get started in my area of interest. I’m still a few years away, but I find your post to be really practical. Thanks for the advice.

Andrea

Thank you all for your amazing comments – we always love sharing our knowledge with our fave audience.

Emma – we made a few changes as the article was written by another Smart Cookie, Katie Dunsworth as it was her story to tell but I will let her know about your suggestions on follow up articles.

thanks!
andrea

Ceelo

Great post and excellent tips. I would like to humbly point out “soul proprietor” should be “sole”. It may be confusing for people who try to investigate further.
Wonderful advice, though!

Marta Spendowska

Great advice — love the idea behind the zip car, although never tried it out.

I left my job after knowing I can take care of it all — from creating the contract to finalizing the work (I’m a designer and illustrator).
The one thing I was sure is in place was to have some saved money, for at least 6 months. Even though I knew I’ll have some jobs right away, because I started freelancing before, I wanted to feel this security blanket.

Great to hear about the success of smartcookies!

:: Marta

Sara

I quit my job February, not because I was ready, but because it was slowly killing me. I needed the freedom to find myself and I knew what I wanted to do. I moved out of my apartment into a tiny bedroom at my parents, finished paying my car and took on freelancing while working on opening my own letterpress studio.

I’m happy to say: I opened last Friday. The response from people has been amazing. I have even been asked to sell in a couple paper boutiques.

Sure, I had to do A LOT while not making money all the time. I have no insurance, and I live at my parents. But I am the happiest I have ever been… ever.

brenda green

As i have invested more in my businesses, i spent less on extra personal items, cut bills and make sure the money for business is doing a lot for me. I work full time and business is second til the income from it exceeds what i make from the job and for more than a few months to know it is consistantly enough. Anticipate more funds are needed for health insurance without company paid coverage.

Olive Green Anna

Thank you. This post came right at the right time.

I have been longing to make my business full time. But I cannot afford it yet and have chosen to stick to my day job and make plans on making my Business full time int he future. Keeping my personal budget low and saving up to have back up to really jump start my business.

Thank you so very much!

anna

Jenny Tiskus

Thank you for the wonderful advice. Perhaps you meant sole proprietor, instead of soul? Although I love the idea of injecting yourself into your business!

Nik

On time. I am starting a business and am always asking about these exact things whenever I meet anyone who’s owned a business. Even if they have not been successful I feel I can learn something. One of the things that really struck me was the bit about Mentoring. I need to work this into the plan. Any ideas on where to start? Time to expand those networks I guess! Thank you.

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