I recently met an amazing founder. His company had incredible potential. But he was afraid to quit his job and pursue it full time. So, when is the right time to go all in?
Just like a startup, people have runway. Your runway is the amount of time until you run out of cash at your current burn rate.
For startups and for individuals, I recommend 18 months runway. 12 months is the bare minimum.
When to Quit Your Job
Let’s say you spend $8,000 a month. 18 months runway is $144,000. Save up $144,000, and you have enough runway to go full time on your own business.
That may sound like a lot of money. But many of the folks who start tech startups work in FAANG companies making huge salaries. At those rates, you can save up $144,000 pretty quickly.
But there’s another trick that can get you your freedom sooner: cut your spending!
What if you could get that $8,000/month down to $5,000? Maybe you cut some trips and eating out. Perhaps you move to a cheaper place.
Now, you only need $90,000. That could mean pursuing your dreams a year sooner!
And of course, if you can raise an accelerator check of perhaps $125,000, you may not need any personal savings at all.
How to Handle Your Finances as an Entrepreneur
Here’s how these 18 months will work…
For the first year, just go all-in on your business. Do everything you can to make it a success.
The hours will be long, but you’re working for yourself on your own dream. That helps a lot.
After 1 year, assess where you’re at financially. Are you making enough to cover your personal burn? If not, can you cut the burn further?
Let’s say that after the first year, you’re not making anywhere near enough. Perhaps your business is paying you $2,000 a month and you need $5,000.
In that case, it’s time to start looking for a job. You’ll still have at least 6 months to do that, which should be enough time.
My Experience Quitting My Job
In 2019, I quit a great job in tech. I wanted to invest full time.
Those 6 years have been some of the best of my life!
I was lucky to have that job and my co-workers were great. But to tell you the truth, I never missed that office for a day. I don’t think I’ll ever forget the moment I walked out for the last time.
I maintain my freedom by keeping my spending reasonable. I live very comfortably, but I don’t live in a huge mansion or cruise down the Hudson on a yacht.
That freedom makes me way happier than fancy stuff ever could. And every morning, as I see folks at the bus stop headed to New York City to work for someone else, I’m grateful that I can do what I want.
Wrap-Up
You may be terrified to quit your job. Society tells you that you have to work for someone and bring home a paycheck.
But in reality, you don’t.
If you have a business you want to pursue, save your pennies and get yourself in a position to quit your 9-5. If that involves cutting your spending, so be it.
Having the freedom to pursue what you love beats a Mercedes any day.
More on entrepreneurship:
The Best Service Providers for Startups
When an Investor Pulls Your Term Sheet
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