Brower: Don’t quit your day job, yet
May 16, 2018
In many of my meetings with people wanting to start or expand their businesses, I give this admonition: Don't quit your day job.
I know that some people may consider such a comment as a particularly skeptical bit of advice. People may think it suggests that I'm negatively judging a proposed venture or expansion, tarring it with the notion that it's likely to fail.
Nothing could be further from the truth.
I give that bit of advice mainly because most any new venture takes time to mature to the point where it can replace a person's income. The statistics are out there from a variety of sources, but in general a new business venture takes anywhere from three to five years to turn a true, cash-flow profit. Yes, some can succeed earlier than that. Others might take longer. The three-to-five-year number is a national average.
So if someone is working a job she dislikes, and she thinks she's going to quit her job one day and the next day replace that income with a brand new business venture, then she needs to think twice about quitting. Don't think twice about starting the venture; think twice about quitting the day job.
An exception to this would be if said entrepreneur has funded the new venture with enough capital to pay honest-to-God operating expenses for the first year of operations. This means the operating funds would have to include the owner's salary or pay for doing the work at the new business.
What that means is that the owner is borrowing or using invested funds to pay herself for at least the first year. If that's the case, then go-ahead and quit the day job. But remember, the pay for that first year is usually "borrowed" money or funds invested in the business.
There are times when this isn't the case, such as when someone starts a service business wherein the product being sold is essentially the work of the owner, for which the owner is paying him or herself. Many Grand County businesses are these sorts of service businesses and the people aren't really quitting their day jobs, they're just taking the same job but in their own company.
Which, when you think about it, isn't so bad, except for the fact that the reality of paying taxes, doing sales and outreach, employing other people and in general managing a business creates a new level of work that many people don't anticipate.
Why keep the day job? Because the day job is frequently the source of capital that entrepreneurs need to keep the new venture running and to feed and house the business owner. It's that simple. Work income ends up becoming capital invested in a new business. And as much as we all might want to think we can "get by" on skimpy income while starting a business, the truth is we all need to eat, stay dry and have a place to sleep.
In other words, we need to live while starting a new venture.
Business expansions operate under the same sort of constraints. An owner might want to expand his or her business and they might be wondering how they are going to pay for it. If a loan or outside investment are out of the question, then it's frequently the owner's sweat equity that becomes the capital needed to fund the expansion.
The good news in all this is that by holding on to that day job for a little bit longer a smart entrepreneur is building his or her way toward a much better day job in the future.
Patrick Brower is the Enterprise Facilitator for the Grand Enterprise Initiative. He offers free and confidential business management coaching to anyone who wants to start or expand a business in Grand County. He can be reached by calling 970-531-0632 or at email@example.com.