So, you want to make this the year you ditch the day job to finally run your business full time. But are you ready? Is your business ready? There are many questions you’ll need to consider. The questions below are just some of the factors you’ll need to think about before you make your dream job a reality.
Square Small Business Evangelist Aylon Pesso (based in the U.S.), a former small business owner, consultant, and Square Seller, shares his tips for anyone considering taking their business full time.
How strong is your customer base?
Are you relying on a small handful of customers? What if they were to disappear in the morning? How much growth is forecasted? Is growth guaranteed?
Aylon Pesso (@Pesso), says:
When thinking about your customer base, it’s important that it’s sustainable. Successful businesses tend to have a mix of returning customers and a constant flow of new customers. Some returning customers will stop coming for a variety of reasons, so making sure that you’re always bringing in new folks is essential. Start keeping track of who is buying your products, how often, and how much they’re spending. Then start working on marketing efforts to bring in new customers and take note of what happens. If it’s harder to get new customers than you thought, you might want to take a closer look at your business model.
Is your business plan up to date?
A business plan is an incredibly useful document and it will continue to be important as your business grows. For example, you may need to take out a loan. Financial Institutions and investors are likely to request a business plan to understand more about you and your plans for growth.
If you haven’t had a chance to create a business plan, there are many templates available online that can help you to get started.
If you’re not looking for loans or investments, you may not necessarily need a full, formatted professional business plan. But it can’t hurt! It is extremely important to have some type of written plan (and backup plan) for your business model for yourself so you can make sure that you’ve thought everything through, that your business has a solid foundation, and to remind yourself of your plan as you go. Take your time, think things through, do a lot of research, and start with answering the following questions:
✔️ How will you structure your business? Are you going to start a corporation? Are you running it alone or with partners? Will you have employees? How and how much will you pay everyone?
✔️ What are you planning on selling? How will you stand out? Why will people buy this from you specifically?
✔️ What do you need to run your business — a location, equipment, skills, suppliers, anything else? How will you get them?
✔️ How much will it cost you? How much are you going to charge? How much profit do you need? What will it take to make that? How much are you realistically going to make each year for the next five years?
✔️ Who is going to buy it? Why? How much are they going to buy and how often? Can you sustain your business with this target customer base?
✔️ How will you get these customers to buy? How will you promote and market your business? How will you afford all of this?
Can you afford to quit?
It’s worth asking yourself if you can afford to give up your current salary. There are many ways to determine this, such as drafting a list of your personal expenses for a week or a month and comparing the total to the income your business currently generates. Will the profits from your business cover your personal and business expenditure? Consider other factors like taxes, family, retirement, and costs associated with running a business (e.g., leasing a brick-and-mortar location or working with a lawyer or accountant as your business grows).
It can be really scary to give up a steady paycheck for the potential inconsistency of a small business. But just because it’s scary doesn’t mean that it’s necessarily the wrong move for you. Take a deep dive into your personal and business finances to make sure that you can sustain yourself and others on the profit (not just sales or income) from your business. Figure out how you will make it through low profit months or years. Are you going to be able to set aside money to sustain things during business downturns?
Also keep in mind that as businesses scale, challenges and expenses can grow exponentially. What may seem like an affordable and smooth transition while the business is part time may become unmanageable when shifting to full time.
This is not a decision to make lightly, so make sure you have everything fully lined up and it’s as close to a sure thing as possible. It’s always a risk, and you should absolutely talk to professionals and other business owners before making a decision like this.
What’s your exit strategy?
Similar to a business plan in many ways, an exit strategy is a document that outlines the future of your involvement in business. Will you sell the business when it reaches a certain size? Do you plan to liquidate all assets in certain circumstances, like when you retire? Could you sell your business to another company?
It might seem strange to think about how to leave your business before you’ve even fully jumped in, but it’s always important to think of an exit strategy. Both for if the business succeeds, but also if it fails. If it succeeds, you might not be able to do it forever. If it fails, you might not want to keep throwing money into it. Just like you may be planning now to leave one job for another, you may want to do the same later. Thinking this through now will save a lot of stress later.
Decide on what goals you have and why you’re deciding to run this business. Think of what success means to you and what failure means to you. Are you in it to make money or do you just love to run the business? Picture each of the next phases of your life, and plan out how and when you want to get to each one.
If you made this decision, what factors did you consider? Reply below to share more questions or tips for taking the leap to running your business full time.
Helen is a Seller Community Manager at Square and is the editor of the Seller Community Blog. She writes about small business and the owners & entrepreneurs that are a part of the Seller Community.
Cover photo image credit: Photo by Jens Lelie on Unsplash.
This article is only for advisory purposes. The information provided solely reflects the authors’ views and are not endorsed by Square. This article is limited in scope and is only intended as a high-level overview of the topics mentioned. Nothing in this article is or should be used as tax or legal advice. For guidance or advice specific to your business, you should consult with a qualified legal professional.
