I want to quit my job and start a business. What should I do? part 1
Entrepreneurship is idolized in American culture, but is it right for you? We take a deep dive into whether or not this is the right path to take, weighing the pros and cons. This is part 1 of a 2 part series.
Author: Frank Wazeter, Nov. 4, 2020
I hear all the time from people saying how they’d like to start a business or it’s their dream to be their own boss, or how they admire other people who’ve started up their own gig. It’s a deep part of American lore and culture to admire the people who ‘strike out on their own,’ and ‘live life on their own terms.’ This is part 1 of a two part series. View part two here.
The American Entrepreneur is the latest version of the Cowboy, the Pioneer who moved West, the Gold Prospector that left all behind to prospect for gold in California or Alaska. Holding up visions of wealth, prestige and freedom.
But is it really for everyone?
I’d argue definitively not. While I’m biased towards entrepreneurship personally and fundamentally believe that anyone is capable of starting their own business, it’s simply not the right fit for the majority of people.
The criteria that’s most important is whether or not you have, or are willing to develop, the mental disposition for what’s required to build a business. It’s tough: but not in the vague sense how most people say it’s ‘tough.’
You have to get really comfortable with failure. Most ideas won’t work out. At least, not in their original idea form. If you can’t get comfortable with being wrong or overcoming failure day in and day out, then it’s probably not something for you.
When you first start, it’s really lonely. Most of the connections you have are probably people who are working for companies. That means that you’ll have to re-establish a whole new base of friends and connections because the friends you had simply won’t understand what you’re doing or be able to sympathize.
Most people you know will give you feedback like “that’s really hard, I couldn’t do it” or “you’re making a big mistake.” Often these can be the people closest to you, making the feedback especially harsh. While it usually comes from a place of love, it’s not exactly confidence building.
You won’t make significant money in the first two years. On average, the first two to three years of starting a business, all the money the business makes has to go back into the business to help it grow. That means likely you’re looking at a potentially significant pay cut.
Running a business is not about only being “good at what you sell.” The “build it and they will come” strategy may work in Field of Dreams, but it’s extremely bad business advice. You have to also be good at sales, marketing, administration and handling many simultaneous tasks from a leadership position.
Primary Benefits of Being Employed By Someone Else
Working for someone else isn’t all bad. For many, it’s the best decision they can make because generally speaking when you’re working for someone else, you have a focused job role around one or two primary tasks. This focus allows you to keep building your skill set around these core activities and not have to worry about the million other factors that go into growing a business.
For example, many people who start a business are looking to go deep and spend most of their day doing whatever it is they’re passionate about - whether that’s programming, art, design or building things. If this is your primary motivation, to do the thing that you’re most passionate about, your best bet is probably to find a great company already doing that that lets you do the thing that you’re passionate about.
If my chief passion was illustration, then I’d be looking for a company involved in illustration looking for illustrators. That’d be the simplest possible way to guarantee that I’m able to do what I’m truly passionate about. As mentioned before, most of the time running a business you aren’t doing the thing the business does. You’re managing sales, marketing, clients and accounting around the thing your business does.
If I was passionate about architecture, I’d find a great architectural firm to join. If it’s programming, I’d find a company building great software.
Plus, when you start a business for the first time, you likely aren’t going to be getting the ‘cream of the crop’ clientele that lets you work on the ‘extremely cool’ projects from day one. You’ve got to build up to that with, again, focus on reputation, sales and marketing.
So if your primary goal is to do what you're passionate about, then the best way to do what you’re passionate about is to find the top tier companies already doing that and join them.
To Start, The Pay Is Going To Be A Lot Better At a Company.
Even if you land immediate contracts and sales that get you started, again, most of that money in the first 2-3 years of operation has to go right back into the company. You have to buy equipment, find people to help you, reinvest back into sales and marketing and then pay for the project, materials or product to begin with.
If you’re not comfortable with adjusting your lifestyle to account for the cash squeeze, then you’re probably better off refining your job interviewing skills and finding great companies to work for.
When I first started Wazeter, Inc. I had to stop looking at Linkedin or Facebook because I’d constantly be reminded of people I used to work with who I knew for a fact were making more money than I was. You start to question whether or not you made the right choice when you constantly see people growing and thriving while you’re struggling to get the ball rolling.
But, this is also relative. If you’re in a position that you’re making $40,000+ a year, it’s going to be harder to replace the income in the first 2-3 years. If you’re currently making $24,000 or less a year, then that’s a much easier number to make up for in the first few years of business.
If you value consistency above all else, working for a company is probably better.
Consistency isn’t something that’s achieved when you’re running your own business until you get fairly well established. It requires a consistent sales cycle, usually established with a strong internet presence that can help you with prospecting new customers and clients and at least some decent ‘word of mouth’ going with referrals.
These take time to establish and get going. So if the idea of not knowing exactly how much money you’re going to bring in each month causes extreme anxiety for you, then you’re better off with a salary.
The chief benefit of having a salary is that you have income that you can count on each and every month. You know at least the minimum number you’re going to get each pay cycle, and can count on more if you get performance bonuses or commissions.
Being able to go through a month or more without any significant income at all (which is a real possibility in business) requires you to be very comfortable with financials and cash flow projections. You cannot panic or get desperate in business in these situations otherwise you just make the situation worse.
Age Isn’t End All Be All, But it Matters
Statistically, the most successful businesses are started by people who started their business before they turned 30. This isn’t because 30 is a magic number, it’s because younger than 30 typically means you have less responsibility. The average 20-something in the United States doesn’t usually have children to take care of, house mortgages or expensive cars to pay for.
The less debt and the less responsibility you have, the more you can trim off in order to live minimally while you build up your business. Harder to do so when you become used to a certain standard of living.
The other demographic that does particularly well starting businesses are the 40 somethings. This is typically because there is more significant savings to fall back on and a more mature and calculated approach to building the business.
For many Americans working corporate, the 30’s are the “power years” where you see the most significant growth in salaries and have “figured things out” more versus your 20’s so you’re a bit more prudent in savings and taking care of financials. People who are starting a business in their 40’s are coming off of the “pad” of income from the 30’s and the more financial frugality that goes with it.
There’s also a sense of urgency to ‘get to work’ and get things done because you’re more aware of your own mortality and retirement the older you are, whereas when you’re younger it feels like you have “all the time in the world.”
Starting a Business Part Time As a “Side Gig” Is a Myth
If starting a business is tough, starting one in the ‘after hours’ is borderline impossible. I’m sure there are examples out there showing how it can be done, but it’s simply a matter of energy.
You get up in the morning, go to work, spend 8-9 hours working, sit in traffic, get home. By the time you get home it’s 6 or 7 o’clock at night. You’ve spent nearly 12 hours dedicating energy and focus to your job.
On paper, you think “I can work on my business between 6pm and midnight! That’s six hours a day!” Reality goes more like this: You’re exhausted, tired, thinking about whatever happened at work. You’re hungry, so you eat, figure “hey I’ll watch an hour of Netflix and then get to work again” and you end up watching Netflix until it gets late and you go “oh no, I have to get to bed to get up for work tomorrow.”
Worse on the time schedule if you already have kids and have the responsibility of taking care of them, who aren’t exactly going to let you ‘just focus on building your business after hours.’
Plus, the majority of business is conducted...during the business day! So you’ve already missed out on key times to talk to people, create connections and do the things you have to do to get a business moving forward.
I tried for 6 years to ‘start a business’ in the after hours, and I was one of the no-lifer ‘work-aholics’ at the time. I cut my cable off, only ‘hung out’ with friends maybe a handful of times a month and had a ‘partner’ who was also trying to do things after hours.
Even in that scenario, I’d still be primarily focused on whatever happened at work that day or what I’d have to prepare for the next day. The energy my ‘business’ got was second hand at best. Lots of ideas, no forward movement.
Then, when I finally left my last corporate job, I had the brilliant idea of working Uber & Lyft for a ‘few hours’ a day to make sure I ‘didn’t have to take money out of my business to pay my bills.’ It sounded nice on paper and sounded impressive to passengers. Reality was I’d spend 6-7 hours a day driving, be totally exhausted, and still not dedicate the time I needed to my business to move it forward.
The best thing that ever happened was Austin, Tx ‘banning’ Lyft & Uber 2-3 months into it, which forced me to work on my business and work on my business only. That’s when things moved forward.
“Part time” simply doesn’t work reliably.
Conclusion - Should I Start a Business and Quit My Job? Part 1
For most people, the reality is, you’re probably better off spending your time finding a better company with a better salary to work for.
Here are the primary benefits of working for someone else:
You spend most of your time doing the “thing.” So if you’re passionate about “doing X,” it’s best to find a job that lets you do X, and X alone.
If you find inconsistency in pay to cause anxiety, you’re better off working on ways to increase your salary. There’s a lot to be said about a consistent paycheck.
Unless you’re making less than $30k a year, the pay will probably be better at a company for the first 2-3 years at least.
So what about starting a business? Not to worry, in Part 2 we’ll cover the drawbacks of working for someone else, and the amazing benefits of business ownership in detail.
For now, we wanted to give as fair a hand shake as possible to all the alternatives, as starting a business is a major choice, and the more informed you are of the reality of your choices, the higher your chance of success.
Continue to Part 2 here.