I am often asked why I don’t recommend you quit your day job when I am such a big advocate of entrepreneurship. The short answer is because the two can co-exist perfectly fine. It does not have to be a choice between one or the other.
In fact, I will never recommend (except in rare cases that are beyond the scope of this discussion) that you quit your day job and pursue entrepreneurship on a full time basis. There are way too many risks and uncertainties involved with such a drastic change in both your lifestyle and business plans. There is a bit of a culture shock if you will?
Many gurus tell you to quit your day job and rah rah about pursuing entrepreneurship full time. Their argument is often that it takes much longer to succeed at a business when only part time efforts are dedicated to it. True, I agree as well. But what is the alternative? Give up a steady income without a back-up plan? Stop the cash flow without having another to rely on? This kind of a commitment works in exceptional cases only.
The more prudent approach is not to quit your day job, and rather to test your small business idea while maintaining your full time job. Sure, it can be demanding on your time and resources, but what worthwhile endeavor isn’t? By taking this approach, you will have the confidence and peace of mind that a steady cash flow backs you up as your safety blanket in the event things don’t pan out the way you had envisioned. This also allows you to test various options until you discover the balance in one you truly enjoy that is also profitable.
Establishing a successful business takes time, at least to where you can replace the current income from your day job. If you were to quit your day job and dive in full time, would you have enough in your rainy day fund (reserves) to support your household and expenses related to your business venture?
Another critical component to consider is healthcare insurance. We often do not realize how expensive healthcare really is in this litigious society of ours until the burden to pay for it falls on us. Insurance is very, very expensive. What your employer takes out from your paycheck is a small component of the total amount, which your employer subsidizes on your behalf. A $150 premium paid by an employee per month can really mean that the actual cost of coverage is $900. Yes, your employer pays the difference of $750 on your behalf. So if you haven’t thanked them for doing so, now is the time.
You may argue that you don’t need healthcare when you are young. You may or you may not, I don’t know that. You may not either. Catastrophe doesn’t knock on anyone’s door before paying a visit. Empires have collapsed due to not having sufficient healthcare coverage. Do not ever make this mistake. There comes a point in one’s life where they can become self insured, but this refers to life insurance. Never, ever make the mistake of going without health insurance even for a day. If nothing else, don’t quit your day job just to stay fully insured.
Most of the side business options I strongly recommend revolve around the internet. I am a big proponent of internet based side businesses because of the following four critical factors:
Each one of these factors is critical if you travel for work, have a tight monthly budget you stick to, have a low risk appetite (need high tolerance) and would rather work on building a long term asset that generates passive income month after month. If you fit this description, then the internet is where you should be focusing your efforts into.
All that said, the internet is still in its infancy. That can be both good and bad. The good part? Can you imagine what will happen once it reaches critical mass just like radio and television did few decades back?
The bad part is obviously the recency and the uncertainties involved with it. There are still some unknowns and some groups often speculate stability / longevity and sustainability concerns. Moreover, things change rapidly overnight, making it difficult to stay on top of recent developments.
Think about it, I know it’s far fetched, but what if the Google Adsense program dies down tomorrow? Can you imagine the thousands (probably millions) of websites out there and the countless hours and dollars invested in them that were developed specifically for Adsense?
At the end of the day you just never know, so why get rid of a beautiful thing? I often say why try to fix something when it’s not broken? In addition, why put all eggs in one basket when conventional investing wisdom says to diversify?
If your side gig starts doing well, you can contemplate whether to quit your day job and move to it full time. But until then, what’s the rush? Enjoy the ride. I remember when my first few side businesses started doing well, I left my ultra-demanding career (and high paying as well) to move into a less demanding one (but more satisfying doing something I really enjoyed).
You can do the same. If you happen to be working in a job that pays well, but one that you don’t completely enjoy or get full satisfaction from, you can contemplate moving to a less paying, but more satisfying job once the income from your side business grows enough to make up for the lost income from your previous job. Just don’t quit your day job prematurely. Read that paragraph again.
By doing this, you get to keep the benefits discussed above (like health insurance), and at the same time get more satisfaction from every day that passes by. This will also help keep your skills sharp and keep you marketable over time just in case need arises. Like I said, you just never know, especially in today’s volatile economic times.
Readers: Should you quit your day job, or should you stay put?
Here is another compelling reason why you shouldn’t quit your day job.