6 Steps to Take Before Quitting Your Job to Start a Business

Whenever I have a client call me with unbridled excitement to tell me they’re marching into their boss’s office tomorrow to quit their job and, to quote the song made famous by Johnny Paycheck, tell their boss to “shove it,” I tell them to slow down and hold on for a moment! Every entrepreneur has some important steps to take before quitting their day job.

I know this sounds a little odd coming from a guy who's been advocating small business since age 8. But one thing I’ve learned through all these years in business, both as an entrepreneur myself and from consulting with thousands of clients, is that although there can be amazing rewards and benefits to entrepreneurship, it can still be an up-and-down, financially volatile roller coaster ride, especially in the beginning.

Let me share six important steps that may save your sanity, your marriage, and your business before you quit your job tomorrow.

1. Don’t Create Unnecessary Financial Stress

First and foremost, and I’m going to say it forcefully: don’t risk the farm until you know the business is a viable operation.

Work your business in the evenings and on weekends. Maybe even partner with others who can provide some labor while you’re at work. Keep the base pay of a day job so you don’t create additional financial stress for yourself.

If you can’t pay the mortgage or rent, car payments, insurance, groceries, gas, and other basic expenses, you’re going to start drawing on resources you need for the business. Inevitably, you can chew through your savings or go into debt when, in reality, it may not have been necessary.

I know what you’ll do! You’ll be emotionally tied to your business like any good entrepreneur. Yes, you need to be emotionally invested in your business, but not to the point that you’re willing to risk your ability to pay the monthly bills.

2. Put Yourself in a Position to Make Rational Decisions

When you lose your base pay and ability to survive financially, you can start making short-term decisions rather than doing what’s best for the business.

You move into a mode of desperation. That’s a dangerous place to be, and I’ve been there.

Yes, you may pay the bills and survive, but you’re forcing a fledgling business to support you at the exact moment it may need every available dollar to grow. That can handicap the business, slow down its growth, and keep you from making the investments necessary to get it off the ground.

Don’t put too much stress on your business and force it to cover all of your living expenses before it can handle it. That pressure can kill a business that is desperate for capital to grow and mature. Be patient.

3. Keep Your Family on Your Side

Your spouse may be supportive and your greatest cheerleader. I get it. But when you’re unable to pay the bills, working around the clock, operating in a mode of desperation, and paying for groceries on a credit card, your family may start getting scared. At the very least, they may no longer be your biggest fans.

Worst-case scenario, the financial stress can turn your spouse and family against you and the business. It can lead to serious emotional distress, fights, and arguments about money.

Keep the day job, even if you feel like the business needs 100% of your time. Your family needs financial security too, or the business may not be worth pursuing.

Let the business grow at a reasonable pace. Don’t sacrifice your financial stability just so you can say you went “all in.” There will be a time to make the leap. You don’t get extra points for doing it before you’re ready.

4. Finish Your Business Plan

Have you truly taken the time to draft a comprehensive business plan? What does your marketing and strategic plan look like? These are important steps that need to be addressed in every business, and this is the time to do it while you still have a day job.

Don’t rush into an idea simply because you’re excited. Bridle your passion and channel it into planning, testing, and revisiting your plan until you’re confident it’s the right idea and the right time for you at this stage of your life.

One of the best things you may discover during the business planning process is that the idea you’re contemplating is a “fail.” That’s okay! It doesn’t mean you’re a failure. It doesn’t mean you aren’t going to pursue another business, and it certainly doesn’t mean you’re giving up on entrepreneurship. It simply means this particular business isn’t the right move at this time.

Finding that out while you still have a paycheck is a heck of a lot better than finding it out after you quit.

5. Test Your Product or Service

Have you been able to gauge how well your product or service is actually going to be received by the marketplace? I know you think it’s the best idea since sliced bread and you’re going to make millions, but are you sure? Have you market-tested your product? Have real customers demonstrated that they’re willing to pay for it? Do you have actual sales data, preorders, beta customers, recurring clients, or some other evidence that demand exists?

If it’s absolutely critical that you quit your job to launch the business, and there’s no reasonable way to start it during evenings or weekends, don’t quit until you can make a calculated estimate of sales and profit based on real data or at least meaningful market testing.

Enthusiasm is great. Evidence is better.

6. Make It Too Expensive to Go to Work

This is when I start getting excited about quitting the day job. Once your business is making enough money that it is literally and practically costing you money to leave the business and go to work, then it may be time to make the leap. Stated more specifically, do the math.

If the amount you’re earning at your day job no longer adequately compensates you for the measurable revenue or growth your business is losing because you aren’t there, now you have something tangible to evaluate. Make sure your business can afford you, and make sure keeping the day job has a real cost you can calculate.

Don’t quit because it feels like the right thing to do. Run the numbers, and then run them again.

It’s not worth the risk.

6 Steps to Take Before Quitting Your Job

Before you hand in your notice, make sure you can check these six boxes:

1. Don’t create unnecessary financial stress.
2. Put yourself in a position to make rational decisions.
3. Keep your family on your side.
4. Finish your business plan.
5. Test your product or service.
6. Make it too expensive to go to work.

The Bottom Line

Your new business may eventually need 100% of your attention, but in the beginning, what it may need even more is your financial stability. That stability gives you the freedom to make rational, long-term decisions, reinvest money into the business, and give the idea enough time to prove itself. Don’t quit your job because entrepreneurship sounds exciting or because you’re tired of your boss. Build the numbers, test the business, protect your family, and make the leap when staying at your day job is actually holding the business back.

And before you make that leap, get the business structure right. The last thing you want is to finally build enough momentum to quit your job only to discover you chose the wrong entity, missed tax-planning opportunities, or left yourself unnecessarily exposed. My team at KKOS Lawyers can help you evaluate your entity structure, tax strategy, and legal foundation so your business is ready for what comes next. Book a comprehensive consultation with my team at KKOS Lawyers before you quit the paycheck and make sure the business you’re betting on is built correctly from the start.