Building a business takes time but even if you’re ways away from quitting your job you need to start creating an exit plan.
Why? Because otherwise you don’t have a goal to work towards. Your exit plan should involve a date when you will give notice to your job, a set revenue and profit amount you need to bring in through your business and a set dollar amount that you will have as a runway allowing you to focus on the business and not stress about your personal finances.
Vague doesn’t work here. Some day or soon doesn’t work here either. You need to have dates and numbers to work with that you can measure.
For example: you know you need to bring in 3,000 dollars a month to live on. A lot of people do the mistake of thinking that’s it. They forget they need to pay self employment taxes, health insurance, and more. You need to add at least 25-30% to cover that. Most also forget that there are expenses related to the business and that revenue isn’t the same as profit.
If you’re business isn’t bringing in that kind of revenue yet and you don’t want to wait until it does to quit your job you need to build up what is called a runway. Money that will keep extending the runway and fill the gap between the money you can draw from the business and the money you need to live on so that you can take off before the runway runs out or you crash. I advise people to have at least one year of expenses set aside, preferably two.
Now before you do that I suggest getting with a few business savvy people (who run successful businesses…not your uncle who reads the Money magazine) and go over your game plan with them. Do you have a viable business that you can grow within a set amount of time to the level of revenue you need? If not, then you need to either adjust or take a gamble.
Why is it so important to figure out how much revenue you need to bring in each month? Because that will help you pick an exit date. Based on your current financial situation when will you have that money in savings? What is the revenue growth? Will you be able to quickly find a new job if you need to if you run out of money before your business hits that level?
One of the major reasons why businesses fail is because they run out of money. Among a few other things. A great book to read to understand why so many small businesses fail is the E-Myth by Michael E. Gerber (affiliate link).
I know this step can feel overwhelming but in order to leave your day job you need to have set goals and as much concrete data to work with so you can set an exit date. The “I’m so tired of my day job so I’m just going to quit and hope it works out” isn’t the way to go unless you have something already in place like a business you can grow and a runway you can live on.
Also when you decide on an exit date something very powerful happens within you. Your mindset changes. You are working towards something.
Once you get to that point make sure you do not burn any bridges. When you leave your day job leave on good terms. Ask if you can stay on as a consultant. A lot of companies today are already looking to make their employees into 1099’s so it won’t hurt to ask. It is estimated that by year 2020 that 40-50% of current corporate positions will be asked to switch to 1099’s and become freelancers (Intuit 2020 report).
So go and take a look at your finances, the business you are building and then pick a date for when you are going to quit your job.
If you need help with this step on how to create your exit plan sign up for one of my Butt Kicker sessions or contact me for an individually designed package. I’d be happy to review where you are and help you set more concrete goals.
What struggles are you facing in terms of setting a date? Or if you have set a date are you on track? Share in the comments below.