Online Entrepreneurs: Should You Quit Your Day Job?
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First, the bottom line: Quitting your day job is the dream of many online entrepreneurs. Choosing whether and when to do so are difficult decisions that depend on both your savings — you should have enough to pay your living expenses (including health insurance) for nine months—and realistic projections of your online business’s earnings. As your online business gets started, you may want to consider other options, such as flextime and telecommuting, before pulling the plug on your day job.
Three Reasons to Keep Your Day Job
Losing a regular paycheck is the obvious downside to leaving your day job. Many entrepreneurs rely on steady income from their job while reaching profitability in their online business. However, there are other benefits of holding a regular job:
Your credit rating. Having a day job makes it easier to borrow money and get credit cards and loans.
Your tax deductions. At tax time, you can deduct your business losses from your day job income.
Your benefits (tangible and intangible). You've probably already thought about health and dental insurance. Depending on your position, you may also be walking away from unvested stock options, the benefit of earning sick and vacation days, pension plans, matching funds for a 401(k) and discounts at Great America. (Keep in mind that purloined office supplies are not a job benefit. See below.) And while you may be tired of the co-worker in the office next to you, you could come to miss collaborating and socializing with others in your workplace.
Go Part-Time, Flextime or Telecommute
How does Superman do it? He’s busy saving the world and yet he still has time for his job at the Daily Planet. If you’re one of the hundreds of thousands of online business owners who also hold down a day job, you probably wish you had super powers, too. How else are you supposed to maintain your dual identity, grow your online business, and still succeed at your 9 to 5? Here are some suggestions.
Is there any way for you to tweak your work schedule, reduce your hours, or telecommute? Many companies offer these options, but don’t be dismayed if your employer is not one of them — yet. You may be able to convince your boss to change course. There are books, career counselors, and websites that are devoted to helping you achieve that goal. One site,Work Options, helps you write a proposal for your boss and even provides scripted responses to typical objections such as, “We’ve never done this here before,” or “If you telecommute, everyone will want to.” Here’s how these arrangements can work for you.
Flextime. Flextime permits a nontraditional schedule for an employee — for example, working a full-time job in less than five days. At least one study has found that flextime improves productivity, lowers costs, and decreases absenteeism.
Telecommuting. It’s no surprise that more employers are providing a telecommuting (working at home) option. It cuts operating costs (especially costs associated with real estate), it brings some workers (especially salespeople) closer to customers, and like flextime, it’s great for keeping employees loyal and happy by eliminating grinding commutes and allowing workers to spend more time with their families (and on their online business).
Part-time/job sharing. Going part-time (assuming you can afford it) allows you to keep a regular paycheck and maybe work benefits, too.. Some employers create part-time positions by job sharing — two workers sharing the duties of one full-time job. Although job sharing may not sound workable at first, it is effective. For example, after the furniture chain, Ikea, began providing benefits such as job sharing (as well as telecommuting and condensed workweeks), sales staff turnover dropped from 76% to 36%.
Get organized. If keeping a job and running your business is making you feel scattered, take some time to improve your organizational skills. It may be the easiest, least expensive way to improve your business and reduce some of your stress. Check out LifeOrganizers, where you'll find helpful tips on organizing your life and business.
Two popular organizational gurus are David Allen (Getting Things Done), and Julie Morgenstern (Organizing From the Inside Out). Allen’s methodology combines discipline, action, and office supplies. Morgenstern concentrates on helping you organize your mind first and your tasks second. Her premise is that, if your thoughts are disordered, you’ll continue to create unrealistic schedules that increase frustration.
Get help. Sometimes the best way to juggle the day-job/business lifestyle is to bring in someone else to help with your business. That doesn’t mean you give up control; it just means you must pay and supervise someone else.
Get the right day job. Some people are lucky enough to have a day job they enjoy and an online business they love. If you’re not satisfied with your day job, maybe you should consider an alternative. Okay, okay, it’s not an easy thing to do — but sometimes the change can help your business by bringing you in contact with new people or a new industry. As you can imagine, there are many books, videos, and websites offering advice on changing your job. In the book department, you can’t go wrong with the classic What Color Is Your Parachute? by Richard Nelson Bolles (Ten Speed Press). As for websites, the leader is Monster.com.
Avoid Problems with Your Current Employer
Your employer is more likely to support your online business goals if your dual role is not perceived as interfering with your productivity or competing in some way with the business. Here are some “Don’ts” for moonlighting employees and how to avoid them:
Don’t steal office supplies. If you want to avoid problems with your employer, don’t stock your new business with supplies from your day job. In The Scorecard at Work, author Greg Gutfeld says stealing office supplies is one of the five fastest ways to get fired. Historically, employees rationalize this theft saying “the company can afford it”. Because office supplies account for a fairly large chunk of the $67 billion lost to employee theft each year, employers apparently don’t think they can afford it—and are now more than ever on the lookout for disappearing staplers.
Don’t use computer time at work to run your online business. Your employer will view your use of company computer time for your online business as akin to stealing office supplies—that is, you are using company equipment and services for private purposes. You can rationalize all you want about your right to conduct auctions at the office but your employer will have employment laws on his side.
Don’t compete. It may seem logical if your day job is at an auto-parts company to start a competing online business. After all, you know how to obtain the products and you know the prices. Not a good idea. For obvious reasons, employers don’t like it when employees compete. It may also violate a noncompete or trade secrecy agreement you signed on the job. Think instead if there is a problem that you could solve for your current employer with your online business. Is there damaged or excess inventory your employer cannot get rid of? It may be worth offering to sell it on your own time, earning yourself a commission while earning some additional income for your employer. The risk of course, is that you are too successful, and your employer may want to take the whole operation in house!
How Do You Know When to Quit Your Day Job?
The time may come when you are convinced that quitting your day job is absolutely necessary. If you are not obligated to support anyone, indifferent to your career, flush with cash, and in love with your online business, you are an ideal candidate for doing so. Unfortunately, few of us match this description. Before taking that big step, make sure there’s firm financial footing beneath your feet. You’ll need to consider the following:
What’s the financial effect? To know what effect quitting your job will have, you will need to do some financial forecasting, both for your business and you personally. After forecasting your online business income, estimate your personal living expenses for a year by making a budget based on the past year's expenditures (or average the past two years' expenditures, if possible). Include in your budget those costs that are now paid by your employer, such as health insurance. Based on that budget, will you have enough income from your business to pay your expenses? Even if the answer to that question is yes, many financial planners recommend that you also have savings) to cover all expenses for nine months, in the event that the business projections were too optimistic. Beyond day-to-day expenes, also consider your retirement. How close are you to retirement age, and how will leaving your job affect your retirement? There are no bright lines for determining the right financial mix, but when you weigh these factors you should feel comfortable that you could weather a worst-case scenario, as in the online business not being the success you hoped.
What’s the psychological effect? How much of your identity is embedded in your current day job? Do you have friends there? Many departing employees are surprised how much they miss the social life provided by a regular job. How does your family feel? Will they support your decision and get behind your online business? Are people counting on you to take care of them? Again, there are no simple yes or no answers. You need to examine all of these personal factors before making your decision. Experts use self-actualization techniques to help you make these decisions. You can see how these techniques work in Barbara Sher’s book, I Could Do Anything If I Only Knew What It Was: How to Discover What You Really Want and How to Get It (Dell).
Two Tips If You Decide to Quit
- Don’t burn bridges. You may want the job back. Keep in touch with your boss and co-workers — there may be an opportunity for you in the future.
- Get your teeth cleaned. Before you leave your job, get in those doctor and dental appointments you have been avoiding. Health insurance coverage for self-employed people leaves a lot to be desired.