I am 25 years old, have an MBA, and a good work. I want to establish my own company, but I’m scared that quitting my work will be a mistake. I’m undecided about whether I should stay at my current position for a few more years or establish my own business.
Difference between when to start a business and quit a job.
There is a difference between starting a business and quitting your job.
At the age of 22, I started my first business with a cheap car and affordable rent. Ramen noodles and Mountain Dew were two of my favorite foods. I’m now 40 years old, with a wife, three children, a mortgage, and other responsibilities. We serve Indian food via DoorDash. My current expenses are certainly ten times higher than they were previously.
When to take risks
I would advise you to take risks now, as you are 25. When you are younger, it is easier to start a business from the ground up.
Reason to take risks
This is why:
- You have more energy
- fewer family commitments (children)
- lower living costs,
- more time to pivot, change course, or, in the worst-case scenario, return to work for another company if necessary.
- Your opportunity cost is much lower – whatever salary you make now at 25 is likely to be lower than when you are 35 or 40, so giving it up is not as difficult.
To put it another way, when you’re young, the worst-case situation isn’t all that horrible and is pretty straightforward to remedy. If you are unmarried and young, you can simply find another work to cover your basic living needs. It’s a different story if you’re older and have to care for others as well.
You don’t need to quit your job, before starting a business
Now this is does not mean you have to quit your job before starting your business. Can you do both for a while? If so, you will need to find a way at your job to make sure you aren’t working any extra hours on taking on too much as you’ll need any extra time possible. So in other words I don’t think you can be “employee of the year” shooting for a huge promotion and also starting a business on the side. But I do think you can effectively work the job while getting the business started.
When to quit the job?
Now let’s consider when it’s time to quit the job and go full-time with the business.
For this, I disagree with some others who say wait until you make more in your business. That is waiting too long to quit. Keep your living expenses the same and when you start making any money in your business, save that to pad your emergency/backup fund.
I think the goal initially is just to prove viability. Can you actually make a profit with this business concept? Lots of business models don’t work. Don’t quit your job until you know your model works and there is a demand for what you are selling, that is willing to buy from or hire you for that product/service.
There isn’t an exact time but I would say if you reach a point where you are making around half of your salary then that is time to consider quitting the job. Once you quit, your savings can help bridge the difference. Plus you will find you will grow the income more quickly once you go full time with your business.
I was working part-time while starting my business (see if your job will consider that) and made the switch when I had signed $1,200/mo of clients. My rent was maybe $800 so I figured I could make it work.
It will feel a little risky but not so bad, as you will know that by staying at your job you are limiting your business’s growth. You will likely have too much on your plate at this point and will have saved a nice stockpile or emergency fund too by this point.
There is also something to be said about having a little pressure on you. That helps you perform. This is fine when you are young, but it’s a different situation if you are older with a mortgage, children, etc. In that case I think someone should keep their job much longer.
One last idea…. If you can make decent money doing gig work on sites like Upwork then maybe consider quitting the job much sooner and using that to supplement your business income. That’s easier to adjust up and down so you can free up time when needed.
So that is my advice. Consider how to start the business while still working your job. When you have a decent amount saved and are making maybe half of your salary then quit the job and go full time with your business. At 25, err on the side of risk. It’s like investing in stocks. The older you are, the more conservative you should be. When young, take chances. In fact, it’s quite the same as stocks – you are considering investing heavily in one particular stock (your business) of which you would have complete ownership of and complete control of.
I’m really happy I started my business when I was young. I don’t think I’d be able to make the switch now at 40 from a job to self employment if I hadn’t then. I can’t imagine many scenarios where you would regret this. The decision here should be how and when to quit your job and focus on your business, not so much “if”.