Thinking about quitting your job? Read this first!
With summer coming to an end, thoughts of becoming our own boss fill our heads. While it’s not a terrible thing to become an entrepreneur, there are a few serious things you need to consider before jumping ship.
Are you financially able to make the transition?
If you want to quit your job cold turkey, and start that business you’ve longed for, you need at least 1-year of business expenses saved before making the switch.
- You’ll owe self-employment taxes based on your income, which can be up to 45% of your income depending on how well you do. They’re due in full each year. You have the option to pay them more often, [read about quarterly filing here], but you need to be able to pay them in full by March 15 of the next tax year.
- You need to pay sales tax based on your income, so you need to know how much each state you sell to charges, pass that charge onto your customers, as well as pay timely according to each state.
- How much will your supplies, websites, cell phone, utilities, leased space (office/store/storage), etc cost per year?
- Do you need employees or contract/freelance to help with manufacturing/production, shipping, payroll, bookkeeping, taxes, social media management/training, website management, etc? Over estimate a year’s worth to pad your budget.
- If you have employees, in addition to their payroll you’ll need to pay their social security, medicare, and federal unemployment benefits. You pay half of them from their paychecks and you foot the bill for the other half. Plan to spend 30% of your overall payroll budget separately for government employer taxes.
- Healthcare costs a lot. Over estimate for unknowns.
- Miscellaneous items, such as traveling to conferences, hiring a photographer, do you need company uniforms/polos, stationary, business cards, and brand development.
- There are always emergency situations, plan to have at least 10% of your annual income set aside to cover such things.
If you’re not ready to quit cold turkey, consider what you are capable of paying for and start your business as a side-hustle and work at it part-time. Consider your current personal expenses, and allocate money from your daily coffee/lunch/shopping budget towards your ‘my own business’ savings account.
Maybe you are able to get some after-hours clients for a few hours each week while you watch your ‘miscellaneous savings’ account fill up. What you spend that extra, not operating expenses, money on should be used to grow your business. Reinvesting in your business is equity, and that is a GOOD thing. Maybe your first miscellaneous goal is to hire a professional photographer for headshots, behind the scenes, and a few other various social media images you can use for your brand. Your next goal might be to hire a a PR professional to help you launch going full-time. I recommend HearsayPR.com. Now that you’re so close to going full-time, consider your next withdrawal from that savings account for a bookkeeper if you’re making more money now. Hiring a virtual bookkeeper, such as myself, will allow you to spend more time pursing your passion, and less time on paperwork. Find out more HERE.
You might work full-time hours at your job while you work full-time on your business, that’s not uncommon. Are you also scheduling time for your mental and physical health? Time to just watch TV once or twice a week, take an hour each day to get physical exercise, purposeful meals you eat at a table while not working, and definitely time for friends and family.
Balance, however that looks for you, is needed in addition to having money.