When you’re getting ready to launch your business, there’s a lot at stake. You want to make sure that everything is exactly right so you can set yourself up for success. Though it’s important to be prepared, it’s common to feel like there’s just never really a right time to take that leap.
While it may not be your forever plan, it’s not the worst idea to launch your business part-time, allowing you to tackle it on the side while you’re still getting a steady paycheck and health benefits from your current employer.
Launching your business now may make you a part of a growing trend: diversity in business ownership is increasing across the board. According to the most recent U.S. Small Business Administration data, there are around 8 million minority-owned businesses (accounting for around 29 percent of all U.S. businesses). In particular, there’s been an increase in both Black and Hispanic business ownership, (9.5 percent and 12.2 percent of all U.S.-based businesses, respectively), in comparison to their population growth. Between 2007 and 2012, Black business ownership rose 34 percent in comparison with 6 pecent population growth; for the Hispanic community, the increase of business ownership was 46 percent, versus 17 percent population growth.
The State of Women-Owned Businesses in the United States report by American Express also speaks to similarly impressive growth. Between 1997 and 2017, the number of women-owned businesses has increased by 114 percent — more than twice the national growth rate of 44 percent for U.S. businesses in general.
There’s one thing that all business owners have in common, though, and that’s facing the challenge of getting everything up and running, leading many soon-to-be business owners to wonder whether they should start their business part-time or go all in upfront.
The answer depends heavily on a number of different factors, including your projected growth rate, your costs, your funding and your personal financial situation.
Projected Growth Rate
It’s uncommon for businesses to have their website go live and sell out of the products they have in stock or book up their calendar completely. This takes time and a lot of marketing, so you’ll have time on your hands to keep up with your current full-time job while your business is just starting to generate new leads.
Considering that about 50 percent of small businesses are run from home, you’ll likely have more flexibility to set your own schedule so you can still work your day job. As you scale up and see profitability increasing, that could be a good time to consider putting in your two weeks and focusing more on your business full-time.
Costs will be another factor to consider. All businesses have expenses, even if you’re running a service-based business with low overhead. Shipping, invoicing software, fees for licensing and paperwork, website fees and marketing costs all add up quickly. Many new owners lose money the first few months with all the costs of investing in a new venture while they attract their first clients. Having a steady paycheck to both pay your bills and have some extra to invest in your business can be a huge asset.
While looking at costs and projected growth rate, you also need to take a look at your business’s funding. Some businesses with low overhead may not need much funding, but those requiring expensive licensing, extensive marketing, and product development and packaging are much more likely to require significant startup costs.
If you have strong business funding — which can include funds from an investor, grants or a loan — it will be much easier to move into your new business full-time without having the financial burden weighing you down.
If you need to take out a personal loan, keep in mind that many business loans will require certain levels of profitability or that your business has been operational for a specific length of time. Fortunately, there are several personal loans available that can help you secure funding, even if your credit isn’t stellar. With 29 percent of entrepreneurs who closed up shop telling CB Insights that they did so after running out of cash, this is something to consider before you leave your full-time job.
Your Personal Financial Situation
The last major factor to consider is your own personal financial situation. Do you have six months to a year’s worth of savings? It’s not uncommon for businesses to struggle to see profit the first year, and the profit they do see is often reinvested back into the business to help it scale more.
If you don’t have enough personal savings to keep you going until your business becomes profitable, it’s likely best to start slow while keeping your full-time job in the meantime.
When to Jump in Full Time
There are plenty of great reasons to keep your full-time job when you’re launching your business on a part-time basis, but there are certain circumstances that may indicate it’s best to go all-in and leave your current job behind. These circumstances include:
- You’re in direct competition with your current place of work. If you work for a hair salon, for example, and want to start your own styling company, you’re running the risk of ending up in conflict-of-interest territory. If you’re starting a business that’s in the line of work you’re doing now, it’s best to leave with clean ties, especially if you’re in a client-facing role.
- Your business requires full-time work right off the bat. Certain businesses may require significant time investments right away. Business consultants, for example, may need to travel to their clients’ offices, deep dive into their practices, and come up with practical solutions over a period of a few weeks. This would be difficult to do while maintaining a full-time job.
- You believe you can scale to profitability quickly. If you’ve got a potential built-in client base and are familiar with the industry to the point that you’re confident you could start making income from the business fast, this is something to consider. Say, for example, you have five years of experience as a journalist and want to go out on your own as a freelancer. You likely have the skillset to do so relatively quickly. This would be a strong example of a low-cost business, and you’d likely have strong working relationships with editors at different publications who you could reach out to with pitches.
- Your current job is burning you out. If you’re already burnt out with the job you’ve got, you’ll likely struggle to keep up a full-time schedule and launch your own company. Sometimes a workplace isn’t a good fit, and in these cases it may be best to just put in your two weeks, especially if you have savings tucked away.
Overall, there is no one right answer to whether or not you should start your business part-time or go for a full-throttle launch.
Remember, you can always start your business part-time and then adjust quickly to put in your two weeks as soon as you feel that it’s needed. You can also talk to your boss about switching up your current role in your day job; some companies may allow full-time workers to step down to part-time roles, giving you more time to work on your new business while still holding onto a steady paycheck.
Think about what’s right for you, and what will put you in the best situation possible to help your business thrive. At the end of the day, that’s what matters most.