It’s the ultimate dream. Transitioning from the daily 9-5 grind to being legitimately self-employed. To put in your two weeks’ notice and set out on a journey to build something entirely of yourself.
But it’s also terrifying. There’s a reason why 44 million Americans have a side hustle, and yet there are only 32.5 million small businesses. It’s scary to take the leap from a few extra dollars every month to full time entrepreneurship – leaving behind benefits and job security for the unknown. How can you know if it’s time to quit your day job?
Part of it is financial. Nearly 40% of millennials with a side hustle say it’s half of their monthly earnings and 1 in 3 people with a side hustle overall need the income to survive. It’s one thing if the money is extra and helping you get ahead of your bills. It’s another entirely if it’s the only thing keeping you afloat.
Let’s look at what it means to transition from side hustle to full-time business ownership – what needs to be in place, what goals you should have already reached, and what to expect after you make the leap.
Knowing What You Want Before You Quit Your Day Job
A recent Hustle report found that only half of respondents loved their day job, but 76% loved their side hustle. It’s no wonder so many people daydream about leaving the former behind for the latter.
But it’s important to know exactly what you want out of the next stage of your career before you act. Hating your job isn’t a very good reason to start a business. How do you know you’ve addressed the reason you hated your job? Do you love what you do on the side? Are you prepared for the rigors of business ownership? Here are some questions you should be able to answer before you take the next step:
- What skills and abilities do you enjoy utilizing and how do you use them now in both your day job and side hustle?
- Are your skills scalable to a full time freelance, consulting, or service business? Can you find enough clients to keep yourself busy?
- Are there other jobs you wish you had and are you qualified for them? Is your unhappiness because of a skills gap or specifically about your current work situation?
Be realistic and honest with yourself – it’s important you fully understand what influence your decisions will have on your life. Just quitting a bad job won’t necessarily make you happy if the next step isn’t in a better direction.
Mapping Out the Logistics of Your Change
Next, it’s time to evaluate the details of such a move. Making enough money is only one part of the equation. There are several things to consider when you make the switch including:
- Health Insurance – Without employer provided insurance, you’ll likely need to purchase from the individual exchange, which can be costly depending on the state you live in.
- Taxes – Self-employed individuals pay both the employer and employee portion of their FICA taxes, effectively increasing what you must pay each quarter significantly.
- Expenses – When self-employed, you are responsible for all of your normal business expenses: travel, computer equipment, software. Make sure you take these into account.
- Savings – Even if you have a solid side hustle lined up, it takes time to scale your efforts and increase revenue enough to full offset your day job. A good starting point is to have six months of savings set aside to guide you through the transition, or the ability to cut your spending for a few months in between.
It’s easy to wake up and decide it’s time, but make sure you map out what it will take financially to realize a change or you could end up in a dire situation.
Start Scaling Your Side Hustle Now
To help with point #4 above, start scaling your side hustle well before you quit. This is a tricky balancing act, but it can be done if you manage it carefully. Your biggest roadblock in growing a business while you maintain a day job is time. You only have so many hours in the day and it takes more of them to build your client list and expand your business.
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But there are several things you can do to start scaling before you quit your day job, including:
- Improving Efficiency – You’re already likely a very efficient person to have a successful side hustle and a day job, but look for ways to further increase it. Streamline your work into the cloud so you can access it from any device. Implement a task management system. Setup a project management tool to organize your work. Build a system that can scale with you and start to help you get things done faster.
- Hire People to Help – Use freelance directories like Upwork to hire people who can help. Find the tasks that take you the most time and leverage experts who can give time back in your day. From prospecting for new clients to completing routine writing tasks, fellow freelancers can help you automate certain elements of your new business so you can grow it faster.
- Start Networking – Build your network as much as you can in those early months before transitioning to full time. The more people you know, the more connections you’ll have when it comes time to start scaling your efforts.
As a small business owner, you will have to wear many hats and work long hours, but it should be rewarding. This is yours. You own it and can put your name on it with pride. The better you prepare for that, more clearly you understand what you want to get out of it, and the more people you bring in to help support your efforts, the more successful you will be when you finally make the leap.