From Ask:
A reader asks…
I have a good job where I make a decent amount of money and have very little stress. I also have a side business that generates roughly the same amount of income as my day job. I want to do my business full time, and I know I can continue to make it grow, but my question is, when do I make the jump? When do I quit my job and do my business full time? We can live off the income from the business, but my wife doesn’t work and we have kids. If I was single I’d have made the jump a long time ago. But when now? How do I know when I’m ready?
Here’s my answer -
Usually people say “I make the same at my day job as I do at work….I can leave now.”
But the answer is … not really.
What happens when people decide to do the business full time is that they are used to living on 100% of the earnings from all sources.
The first error they make is not realizing how much their lifestyle actually costs…it’s more because of hidden expenses.
Like Bill said, you need to calculate the value of your salary AND benefits at work… family health insurance averages $1200 per month per family in the US for example. Matching contributions to your 401 k should be taken into account as should the value of other benefits like paid time off.
Are you really “making as much in the business?”
Probably you need to DOUBLE your business revenues or increase them by 250% to keep the same lifestyle if you’ve been living on both incomes.
The answer - financially - also depends on what you’ve been doing with the extra money.
Have you been paying off all debt so you need less to live each month?
Have you paid off your mortgage yet?
Or created a “transition” fund with cash enough for living expenses for a year in case the move to doing the business full time fails?
If you can live on the day job’s salary, bank the rest and/or pay off debt it may not be too long before you can go “full time”.
But if your lifestyle is being funded by both your job and your business, to quit now would just give you a hefty pay cut and loads of frustration.
The question you didn’t answer is… CAN you susbtantially increase your revenues to pay for leaving your day job?
It depends on the business.
Is it a growth field?
Is it as profitable after you have to hire extra workers and pay worker’s comp?
Many people aspire to “multiple streams of income”.
Do you have that already and don’t see it?
Or is freedom and pursuing a dream the key?
These are only questions you can decide.
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