It’s not uncommon for a working professional to fantasize about becoming their own boss. Findings from a GOBankingRates survey polling 1,028 Americans revealed that 8% of Americans quit their jobs to start a business in 2022.
While this may seem like a small percentage, small business is big in the United States. Small businesses are often affectionately referred to as the backbone of America’s economy and studies from SCORE show there is a year-after-year increase in small-business applications. However, becoming a business owner seldom means experiencing overnight success.
Do You Know Your ‘Why’ for Starting a Business?
Why do you want to start a business instead of getting a different job? The answer to this question cannot be to get rich quickly or become famous or influential. Starting a business means leaving behind the comforts of the traditional workplace and embracing the non-linear path of entrepreneurship.
What’s your “why” for starting a business? Do you have an idea for an offering or service that can help make the lives of others easier? Is there a proven demand for what you can offer? Do you possess the necessary qualifications to turn an idea into a successful business? Determining the answers to these questions will better position you to understand if the idea you have is worth pursuing.
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Are You Financially Prepared To Start a Business?
If you currently live on a tight budget or enjoy the steady paycheck your employer provides you, it may be extremely difficult to transition into entrepreneurship. Quitting your job to start a business means immediately losing certain benefits, like health insurance, afforded to full-time employees. Moving forward, you will be held financially responsible for all expenses pertaining to your startup and the needs of others if you have any dependents who rely on your income.
Those who want to quit their jobs to become business owners are highly recommended to establish a proper financial runway before they decide to start a business. Pay off any outstanding debt you owe. Set aside at least six months’ worth of living expenses in your emergency fund and make sure you’re able to easily access these funds. Look at your savings. If you’re not sure there’s enough to cover business expenses, talk to a financial professional about what you’re planning to do for additional guidance. It’s also a good idea to look into any aspects of insurance coverage you will need that you may no longer have, such as signing up for independent health insurance.
Do You Have a Business Mentor?
Many entrepreneurs get caught up in the glamorized aspect of running a startup. They may let their imagination run wild thinking their business will be a unicorn and receive immediate interest from venture capitalists. Or, they may be much less prepared for what lies ahead. Wait, my business plan needs to be how long? How do I know if I need a storefront or office? What is incorporation and why does it matter for my business? Do I really need an employer identification number? Are trademarks and doing business as names (DBAs) the same thing? Who should my first hire be?
The best resource for getting the answers to these questions, and many more, is speaking with a business mentor. Ideally, this should be someone who is familiar with the small-business landscape. (Even better if you can work with someone in your given industry!) Resources like SCORE offer entrepreneurs the opportunity to connect with business mentors and receive free advice on everything from commonly asked questions to “know-how” within the field. These mentors can set you up with the necessary tools to become successful and help any aspiring business owner feel like they have a partner in their entrepreneurial journey.
Can You Start the Business Now?
Do you need to quit your job immediately to start a business or can you explore the idea of starting the business as a side hustle while keeping your full-time line of work?
It’s not uncommon for those interested in starting a business to start off with a side hustle and gradually grow it to become a full-time line of work. In some cases, testing as a side hustle may be the best approach if you are uncertain about the long-term viability of the business or haven’t fully fleshed out all of its goals just yet. So long as the side hustle does not pose a conflict of interest with your primary employer or negatively impact your work performance, it may be worth starting off as a side hustle with a few hours dedicated to the idea each week.
Over time, you may find the business grows and its growth allows you to develop a business plan and take it full time. Or, it might be a fun venture you enjoy doing that allows you to explore your passion.
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Methodology: GOBankingRates surveyed 1,028 Americans aged 18 and older from across the country between November 14 and November 18, 2022, asking twenty different questions: (1) What best describes the impact of Biden’s student loan forgiveness plan on you?; (2) How do you think student loan forgiveness will affect the economy in 2023?; (3) Describe your working situation in 2022; (4) Which best describes your working situation?; (5) What do you prefer your working situation to be in 2023?; (6) Did you look for better value in your job in 2022?; (7) Are you planning for any major job changes in 2023?; (8) Which of the following economic factors impacted your finances the most in 2022?; (9) What would you like to have happen the most in 2023?; (10) Are you in favor of more stimulus or inflation relief checks in 2023?; (11) If you had a major financial emergency in 2022, how did you pay for it?; (12) How did your stocks fare in the bear market of 2022?; (13) Did you put off a big purchase in 2022 due to the strained economy?; (14) What best describes the impact the Fed raising interest rates has had on you?; (15) Which best describes your top financial goal for 2023?; (16) Are you planning for any of these major milestones in 2023? (select all that apply); (17) What is your top financial stressor heading into the new year?; (18) If you are a small business owner, what has been your biggest financial challenge in 2022?; (19) How do you feel about the Social Security cost-of-living adjustment (COLA) of 8.7% for 2023?; and (20) How did social media most impact your finances in 2022?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.