Don’t quit your day job (yet). Do these things first.
Side hustles are on the rise — according to a 2018 Bankrate survey, more than 37% of Americans are working on the side and that number is only growing. With 51% of millenials following suite, it looks like the next generation of the American workforce has an entrepreneurial side.
There’s one thing most side hustlers have in common: they want to work for themselves full-time. Whether you’re running an etsy storefront, contract consulting or building a consumer product, there are a couple of things you should tackle before you quit your day job.
In this blog post, we sat down with four founders in the Groundswell network to talk turning side hustles into startups, from knowing when it’s time to quit your job, to first steps and their tips on hitting the ground running.
Working a side hustle can be exhausting. Decision fatigue, managing your work-life balance and multitasking can all make the temptation to drop your day job hard to resist, but sticking out the grind until you’re fully prepared to make the commitment is well worthwhile.
When you’re starting your own business, especially in the beginning, you’re the only fallback on decisions large and small. And even when all of your excitement comes from your side hustle, you still have to ensure that you’re doing your full-time job well.
Thomas Larkin, who founded Larkin Industries back in September, said that it was difficult finding the balance because, “when you’ve made the decision to start your own business, you want to give it 100% — but your bills still have to get paid. So I was doing as much as I could to get to market as soon as possible.”
Not to mention maintaining a healthy work-life balance. When you’re already splitting your attention between two jobs, personal obligations can often fall to the wayside. Thomas said he was “fully engrossed, probably a little too engrossed” in his new business venture, focusing on hitting the market hard and fast. He was working 8 AM to 5 PM at his day job and then 6 PM until he went to sleep on business plans, financial models and marketing materials for Larkin Industries.
Market Validation
Though the temptation to narrow your scope down to your own company can be strong, there are a few necessary steps that you should take before quitting your day job. The first, and arguably most important, is market validation — ensuring that there’s an audience that’s willing to pay for your product or service. We did a longer post just on market validation and how to validate your idea without spending a dime — check it out here.
Due to the nature of his company, Brad Truesdell, CEO and co-founder of Tomahawk Robotics, stepped out of his full-time job without a single contract in place. But he and his cofounder, Matt Summers, made up for it in vigorous research into their market and potential clients.
“We were blessed to have a lot of background in the space we wanted to work in,” Brad said. “Knowing and understanding the environment you want to be successful in is a prerequisite, right? You really need to do your diligence on the market you want to operate with and make sure you do an honest assessment of your skill sets.”
“That’s something I never did,” Logan, Founder of Wolf Pack Design, said. That was where Logan made his first mistake in starting his company, “I forewent a lot of market research. I said, ‘I love this. I know what I want. I speak for every millennial out there and everyone’s my target market.’ That’s not realistic.” Once he figured out what his clients actually wanted, he had to reevaluate his skillset and hire for his team’s weaknesses.
Risk Assessment
The next step is an honest risk assessment, ensuring that you’ll be able to keep yourself afloat long enough to get to market and establish revenue. That means getting your financial projections right, saving money and lining up work.
For financials, the best place to start is your burn rate. Figure out what you need to survive and build a reasonable timeline for when you think you’ll start earning revenue. Then, just to be safe, know what you’ll do if it takes double that amount of time to get to market.
Thomas said that six months of runway was the sweet spot for him. That time gave him the opportunity to really examine what he was offering and to tweak his business model. It also gave him the flexibility to pivot when he really needed it. Thomas said that that time was important because, as a small business, “you’ve got to chop and change — you’ve got to sleep on [your business model] a couple times.”
For Thomas, the financial projections were the biggest flag that it was time for him to leave his full-time job. “I got to a point where I realized I could make money. That was the stage when I realized, ‘oh, I can pay myself and the bills’.”
And no matter how good your financial projections look on your current projects, you have to keep them coming. Charles Chen, Founder and CEO of Skymantics, said that “part of going on your own means looking for more work, even as you’re executing on the work you already have.” If that sounds exhausting, it’s because it is.
Charles advised that founders should “never go straight into a single gig as an independent without a clear plan for growth or opportunity.” For Charles, this means building “a wide and deep network of contacts and potential customers.” Or more simply, always be hustlin’.
Of course, no company is run quite the same. For Tomahawk, they couldn’t line up gigs before they quit their jobs. But for Brad, the risk was worth it — because it was “based on a relatively well-founded belief that there was a market need for what we could offer.” And given Tomahawk’s recent raise and more than tripling in size, it seems like the risk did pay off.
Some final thoughts. The entrepreneurs we talked to had a couple of pieces of advice that we didn’t dive into, but are well-worth mention:
- When quitting your job, never burn bridges. Besides the possibility that you might fail and be back on the job market, Charles points out that it’s important to continue to build trust, “because your former employer may also be an eventual client, in the next year or two.”
- Be prepared for the realities of entrepreneurship. For Brad, that meant being able to look new hires in the eye (many of them with kids, mortgages or other responsibilities) and tell them that his company was strong enough to take them on. Thomas added that starting a company, for him, means a potential lifelong commitment. Your startup can’t become the gym membership you don’t use.
A the end of the day, when it’s time to quit your job — you’ll know. For Thomas, the stars seemed to align. “I felt I’d taken [my full-time job] as far as I could, the financial plans for my company looked positive and we were making money.”
But if you’re looking for specific signs, there are two things to watch out for: you’re ready to scale, but you don’t have time; or if you can no longer do both jobs well. For Brad, the latter was the biggest argument to quit: “we could not make viable or earnest customer commitments, if we were working part-time. For us, we had to be all-in.”
Interested in support for your startup idea, or looking to get connected? Reach out to us to find out how Groundswell can help!
