When you tell a friend or family member your new business idea and they say, “Don’t quit your day job,” you probably take it as an insult, right? Well, maybe your friend is just trying to give you some good advice. Startup business owners who don’t quit their day jobs right away are 33 percent less likely to fail than those who do, reports a study of thousands of U.S. entrepreneurs conducted at the University of Wisconsin-Madison.
The study, Should I Quit My Day Job: A Hybrid Path to Entrepreneurship, presents some theories as to why “hybrid” startups enjoy more success:
- People who are more cautious are more likely to start their businesses in stages.
- Cautious entrepreneurs may lay the groundwork for startup better than those who are more impulsive.
- Starting a business in stages lets you gain experience that gives your business a better chance at success once you do go full-time.
- Thanks to technology, business startup is faster, less labor-intensive and less expensive than it used to be, which makes it much easier to run a business while holding down a full-time job.
So should you quit your job to start your business?
Of course, there are plenty of people who do this and make a go of it.
Everyone’s situation is different, so as you mull the decision, here are some factors to consider:
- How long will it take for your business to break even and to make a profit? (You’ll need to create a solid business plan and financial projections to gauge this.)
- Do you have alternative sources of income, such as a spouse’s salary or personal savings, to tide you over until that time?
- Does your job provide benefits, such as health insurance and retirement plans, that you don’t want to lose or that would cost you too much to replace with equivalents?
- Do you have the necessary time and energy outside of your job to devote to your startup? If your job is truly 9-to-5, giving up TV and hobbies and working nights and weekends can get your business rolling. However, if you’re in an industry like financial services or technology where 60- or 80-hour weeks are common, you realistically don’t have the time or brainpower to start a business without quitting your job.
- Could part of your salary bankroll a business partner to do the day-to-day work and get the startup going; then you can join in later?
- What does your spouse or partner think of your quitting (or starting a hybrid business)? Neither option is easy, and you will need his or her buy-in for either one to work without creating resentment.
Clearly, there’s a lot to consider. It always helps to get impartial advice about an important step like this from an advisor like a SCORE mentor. If you don’t have a mentor, visit www.score.org to get matched with one and get on the road to your startup dreams.