Call it a tale of two entrepreneurs.
Erin Entrepreneur has lofty dreams, plenty of optimism, and a willingness to work hard. Then they quit their job, secure a small business loan, and their business goes belly-up within six months.
Eddie Entrepreneur is just as ambitious and just as hard working. But they could use a little more blind optimism. They keep talking about their dreams of one day starting a business, but five years down the road, they’re still no closer to their goals. They never quit their day job, but they don’t know what could have been, either.
The reality is, you don’t want to end up like either of these would-be entrepreneurs. How do you find the middle of two extremes and build up a side gig into a professional business? How do you avoid burning bridges while still moving forward?
No two tales are alike, but before you quit your day job, make sure the following steps are part of your story before you take the leap:
Step 1: Develop a Real Business
When a reader asked Fortune’s Anne Fisher about knowing when to make the leap, she pointed to MJ Gottlieb’s expertise. Gottlieb has written books about how to avoid the typical “rookie mistakes.” His conclusion?
“Don’t quit your job because you believe you have a great idea for a business. An idea is not enough.”
Even experienced corporations with entire marketing teams never know if an idea will fly with the market. All of the product testing and focus groups in the world aren’t a substitute for real-world results. So until you have real revenue coming in from a side gig, it’s not yet time to think about quitting the day job.
Step 2: Give Yourself a Financial Cushion
If you’re 25 and single (with miraculously low student loan debt), a simple emergency fund and some revenue from a side gig can sometimes be enough to feel relatively safe financially. But what if you’re 35 with three kids and a spouse who works part-time? The financial equation changes.
If you have only a small amount of revenue but know that your business can grow when you have more time to invest, you still need money to fall back on if the business heads south. You shouldn’t just put aside some money to invest in the business — you should put aside some money for yourself.
NerdWallet suggests checking your business finances before quitting your day job as well. You can even run these ideas by local advocates for small businesses in your area. Check out online courses from the Small Business Administration and check out what they have to say about quitting your day job first.
Step 3: Test Out the Light Version of Your Business
Right now, your business could be at any stage from an idea’s most basic seed to a real revenue generator. And though you may think that quitting your day job will give you the time you require to make it work, remember: that’s just a hypothesis.
Why not take the scientific approach and test it out?
Try running a lighter version of your business. Don’t lease commercial space just yet; see how much you can achieve digitally. If your business relies on transportation, use a personal car for now.
If the business shows signs of growth and potential, then you’ve got a good indicator that it’s ready for prime time. If not, iron out the wrinkles before quitting your day job.
Step 4: Writing Down a Marketing Plan
Whether or not your business makes money is ultimately down to marketing — and your ability to attract revenue. Even if your side gig is generating money, nothing really
Know your target customer. Consult our recent post on nailing down a positioning strategy if you’re not sure how to go about this.
Create your unique value proposition. What’s the problem you’re helping people solve? What about your business is so different from other businesses that people will line up at your door? Until you can answer this honestly, you’re not ready to leave the day job.
Determine a marketing budget. One of the advantages of having revenue already coming in: you’ll have an idea of what you can spend on marketing. Even if you don’t have revenue yet, try to determine a budget from scratch. You can always adjust it as your business develops.
Step 5: Watch Your Business Grow Before You Leave
In Puneet Mehta’s write-up for Forbes, you’ll find all sorts of insights from someone who’s done it before. Mehta started talking to friends to look for leads before quitting his day job, and soon he was creating enough value for these clients that he didn’t have to wonder. The one-time side business was doing so well that keeping a full-time job on top of it was a disadvantage.
You don’t have to strike it rich before you leave your day job, but you do need some assurance that your lifestyle won’t change very much by making the switch. If your business is still too young to replace your current salary, try and re-invest in its promotion before you take the leap.
Step 6: Don’t Hesitate
All of the steps thus far are all about avoiding becoming Entrepreneur #1 at the beginning of this article. But what about Entrepreneur #2? What if you spend a lifetime waiting for a side gig to take off?
The answer is through consistent action. Don’t let your side gig be something you simply talk about. The entrepreneur’s life is about sacrificing your time now for rewards down the line. Give up a lunch break to work on your business plan. Ask friends about potential clients. Use part of one paycheck to purchase that website and set up a legitimate online presence.
In the words of Albert Einstein, nothing happens until something moves. Be consistent and be prudent — but never stop moving. It may seem like a long way off now. But one Monday, you’ll arrive to work and realize the day job is no longer needed.
What steps did you take before taking your small business full-time? Share with us in the comments below.