When to Quit Your Job to Start a Business (and When to Wait)

When I first decided to start a business, I didn't think twice.

I quit my day job and went all in.

Within about six months, I was broke, frustrated and scared.

So when people ask me when to quit their job, I give them the answer I wish someone had given me. Quit when your business has been paid at least three times, you know how to find the next client on purpose and your business income plus your savings will cover your living costs while you grow. Until then, keep your job and treat it as your golden parachute.

Here's how to know when you're really ready.

Why "take a leap of faith" is bad advice

Most coaches, strategists and gurus will tell you to take a leap of faith. Go with your gut. Trust your intuition.

I happen to think that's terrible advice.

There's a lot more to being a full-time business owner than quitting your job. And way too many people say goodbye to their 9-5 long before they're ready.

What happens next is predictable. The savings run down. Panic sets in. And panic makes bad business decisions. You take on clients who aren't a fit, sell offers you don't believe in and discount your prices just to pay the bills.

That's not the business you left your job to build.

What happened when I quit too soon

When I went broke those first six months, I didn't have a plan. I was getting scared.

So when someone offered me a job in my old area of expertise, I said yes and went back to work.

You could say I was selling out. Going back to work for The Man. In a way, I was.

But that job gave me two things I didn't have before:

1. It confirmed I never wanted to work for someone else again. When I signed on, I knew it was the last job I'd ever take.
2. It gave me a longer runway. With a steady paycheck, I could keep building my business without rushing and without making decisions out of desperation.

I didn't give up on my dream just because I had a steady job. I kept building.

Within about a year of going back, I was earning more than enough from my business to replace my paycheck. I'd actually doubled my income.

Then I felt good enough to leave for good. And this time it stuck.

Your job is a golden parachute

What I'm about to say may sound controversial: don't quit your day job. Not yet.

Not until you've built a strong foundation in your business, where you have the skills to market and sell yourself and you know you can bring in income on your own.

I know you can hit a point at work where you think, "I've had it!" and want to walk out then and there. Hold back.

Look at your job as a golden parachute. It lets you drop gently into your business, with enough safety that you're never acting out of desperation.

Because I'm guessing you want more than a business that pays the bills. You want one that reflects who you are -- your talents, your gifts and your dreams. That's why you want to leave in the first place.

Sign 1: You've been paid at least three times

Before you quit, make sure you've been paid. Not once. Not twice. At least three times.

When you get paid once, it could be chance or beginner's luck. Twice, maybe it's a fluke. Three solid times and it's starting to become a business model you can repeat.

Make those three sales count. They should be for the same offer at a real price, ideally from people who aren't your friends or family. That's your proof that strangers will pay for what you do.

If you haven't got there yet, start with how to get your first 3 clients without an audience.

Sign 2: You know where your next client is coming from

Three sales prove people will buy. The next question is whether you can make it happen again on purpose.

Ask yourself:

• Do I know exactly where my last three clients came from?
• Could I get another client next month if I had to?
• Do I have a way of starting conversations with potential clients every week, not just when I feel like it?

If your answer to all three is yes, you have the beginnings of a system. If your sales just happened to you, you're not ready to rely on them yet.

Sign 3: Your numbers cover the gap

This is the part most people skip because it's not exciting. Do it anyway.

Work out three numbers:

1. Your monthly living costs. Everything your household needs, including health insurance and taxes you'll now pay yourself.
2. Your average monthly business income. Over the last three to six months, not your best month.
3. The gap. Living costs minus business income.

Then multiply the gap by the number of months you think it'll take to close it, and add some breathing room.

Say you need $5,000 a month to live. Your business has averaged $2,000 a month for the last four months. The gap is $3,000. If you think it'll take six months of full-time work to close it, you need $18,000 in savings, plus a cushion for business costs and surprises.

If you have that, quitting is a calculated risk. If you don't, it's a gamble.

Sign 4: You have a reason bigger than hating your job

"I can't stand my boss" will get you out the door. It won't get you through month four, when a client cancels and a launch falls flat.

You need a powerful why -- a deep motivation that pulls you forward. It's what gets you up in the morning and carries you through the hard days.

Because there will be hard days. Running your own business is wildly fulfilling. It's not easy.

Write down why you want this. Not what you're running from, but what you're running toward. If it still moves you on a bad day, you're ready.

Before you can make money while you sleep...

I want you to go into this with your eyes wide open.

Being your own boss isn't a romantic fantasy where you lie on the beach drinking piña coladas while income magically flows into your bank account.

As I tell my students:

"Before you can make money while you sleep, you've got to make money while you're awake."

Full-time business ownership is about doing the work, day in and day out. Showing up. Selling. Delivering. Fixing what's broken. The freedom comes, but it comes from that work.

How to build your business while you still have the job

If you're not ready to quit yet, good. That means you get to build properly.

• Block time every week. Five to ten focused hours beats twenty scattered ones. Put them in your calendar like meetings.
• Choose one offer. One clear package for one specific group of people. Not a menu.
• Have conversations every week. Your time is limited, so spend it talking to potential clients, not polishing your logo.
• Check your employment contract. Look for clauses about outside work, competing with your employer or using company time and equipment, and stay well clear of them.
• Set a quit target. Write down the income, number of clients and savings you'll need. When you hit all three, you go.

This stage has its own guide: from side income to your first $30K year.

You don't have to go from full-time job to nothing

Quitting doesn't have to be all or nothing.

Some in-between steps:

• Ask to go part-time or to a four-day week
• Move to a contract or freelance arrangement, sometimes with your current employer
• Take a lower-stress job that pays the bills and leaves you more energy for the business

Each one buys you more time to build without putting your family on the line.

One word of balance, though. Waiting for complete certainty is its own trap. At some point the safe choice becomes the risky one, and I wrote about that in why playing it safe is the riskiest move in your business. The signs above are there to give you confidence, not to keep you in your job forever.

Where coaching fits

I want you to make this decision with confidence and clarity, so you know all you have to do is put one foot in front of the other.

You don't have to figure it out alone. Momentum Activate is the level of our 12-month business coaching program for business owners from $0 to $29K a year -- often still working a job, often before their first sale. Your Momentum Coach helps you build the offer, the client conversations and the numbers that tell you when it's time to go.

If you're not sure whether coaching makes sense this early, read should you hire a business coach before your first sale?, and see how we work with business owners who are just starting.

When you do say goodbye to your 9-5, I want it to be the last time -- just like it was for me.