I saw an article today on Inc. titled 15 Terrible Excuses For Not Starting Your Own Business.
My first reaction was really? 15 terrible reasons?
Then I quickly realized that the title of blog posts are really just to get people to click and read. To their credit, I did click and read, and I’m even sharing the link in this post!
While I agree with some of the “terrible” reasons that are shared in the post, I think there are many good reasons to not start a business, or at least not quit your day job to start one.
Your finances can’t handle inconsistency
If you are living paycheck-to-paycheck or have a lot of debt, it may not be a wise idea to quit your job to start a business. Businesses can have revenue that varies greatly month-to-month and year-to-year. One month you may be landing a bunch of work while the other months you may not be bringing in much business. It depends on the business, but in general jobs provide much more consistent income than business ownership, especially start-ups.
Some may argue there is no job security so it’s a risk to keep your job. In reality, though, if your finances can’t handle consistency you simply can’t afford to not have a consistent paycheck. Instead it makes more sense to start a side hustle or start a business that you can work on outside of your regular job hours. Yes, this may not be the ideal scenario, but neither is having finances that can’t handle inconsistencies.
Your business is actually self-employment
One thing to be careful about is recognizing whether the business you are starting is actually self-employment. There’s nothing wrong with self-employment but it’s important to recognize when your business is self-employment.
The biggest problem with self-employment is that typically you are just a contract worker. If you are a freelance writer the only way you can make more money is if you work more hours. A business owner, on the other hand, looks to manage their business at a high level and create more and more work that can be handed off to employees.
Ideally a business owner’s primary goal would be to take themselves entirely out of the business structure. This is the main idea behind the hit book The Four Hour Work Week and is one of the things I look for in a side hustle. Think twice before quitting a steady job simply to become a contract worker whose pay and work is inconsistent.
You’re learning/developing skills at your full-time job
Working as an employee means you have access to the employer’s resources. Whether that’s software, co-workers, or training programs, being an employee comes with a lot of advantages that business owners do not have.
A small business owner who wants to learn a software isn’t going to get on-the-job training in the same way an employee is. Many employers will allow employees to learn new skills and further develop skills they already have while “on the clock.” As a small business owner you not only have to foot the bill for software or training, but you also have to spend the time training without financial compensation.
You can start a business on the side
Do you really need to quit your job to start a small business? One of the best pieces of advice I received in college was from my marketing professor. Before his days in academia he worked in start-ups all over Europe, often-times as a CEO. He also started a number of his own businesses. He said it’s best to try to start something on the side, because you really have nothing to lose but your “free time.”
Let’s face it: most small businesses fail. Why take the risk of starting a business when you can start one while still being employed full-time? This can’t be done for every business or line of work, but there are plenty of entrepreneurs who have established businesses who started it while also working full-time.
Don’t quit unless you absolutely have to, and even then it might not be a great idea.
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These are all good reasons to not quit your job and start a business. Instead, work through whichever reasons apply to you and make a plan for how you can make business ownership a realistic part of your life. The last thing you want to do is take the plunge into business ownership on a whim and regret it later on.
If you are thinking about quitting your job to start a business, do any of these reasons apply to you? Business owners – do you have any advice for those who are looking to take the plunge?
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Photo by Alan Cleaver
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I would definitely try to start a business while working. That seems like the better option, although you would have less time to dedicate to it at first. It just seems too risky to dive in without testing the waters.
Good post DC. I agree, most small business fail and while the lure of it might seem nice there is a ton that can go into it that many don’t realize. I think the first point is a huge one. If you can’t handle it financially then it likely should be one of the last things on your mind, of course that presents a challenge to build yourself up financially to get to that point. With that in mind, I’d say it’s generally best to start something on the side, see what it can do and go from there. I would disagree, somewhat, with your distinction on what a business owner is though. For many just starting out they’re unable to start right away where they’re passing off work to someone else in the beginning. They’re just wearing both hats…assuming they’re wanting to grow beyond just freelancing of course. I don’t know that necessarily makes them any less a business owner. In our case, we needed to be doing all the work in the beginning in addition to bringing it in. Now we’re handing a chunk of it off so we can be more traditional in the sense of managing the workflow and only doing the work for the higher level clients.
No job to quit here :) While I agree that having it’s probably best to start something on the side, not having a consistent stream of income has really put a fire under my ass in getting my own business to work.
Thank you for writing this, David! It sort of drives me crazy when people quit their jobs to start a business without have a detailed plan. Mostly, it comes down to money. If you don’t have enough savings to live on for a year or two, I think it’s rarely a good idea to quit your job while you start your business. I have two friends who’ve done this who are both broke.
Good rundown–thank you! I definitely fall in the camp of aiming for self-employment rather than starting a business for many of the reasons you list here. At the same time, I see the myriad benefits of my current employer and don’t plan to quit until we’re essentially financially independent. You’re right that employers offer us so much more than just a salary, which I keep reminding myself… :)
In a way, my business is just “self-employment.” However, we’re working on the “business” side of things, slowly but surely.
The only reason a lot of the businesses in my town exist is because people were willing to make that jump to what you have described as “contract worker” …or they do have a business, but the returns are so low they might be better off working for slightly more than minimum wage and not having the stress associated with being the owner.
I think that a number of people are quick to start their own company because they are frustrated with their current employer, yet they miss the fact that the current employer, although annoying, is providing a number of great resources and one of the best is one the job training. I did not love the financial advisory company I worked for; however, the amount of training they provided was second to none and helped me build the skill set that I needed before I went out on my own.
YES!!! The “business” vs “self-emloyment” is an important one, and one I’m literally just figuring out myself this year… Blogging for a living falls a lot into here btw :) At least the one I rock. (I suck at handing stuff off….)
These are excellent tips, DC. I see so many people opening their businesses without having a solid business plan in place, including managing a highly volatile income, because they are frustrated with their 9-5 job. And I think you bring up an excellent point in self-employment versus business. It’s not that self-employment is bad, because it’s certainly not, but as you said you are generally a 1 man shop and in my mind a bit more at the mercy of your clients than if you have a business. Yes, a business needs clients but a google update doesn’t wipe out all of my business either. On the flip side, a self-employee person generally have very low overhead and more flexibility so they can slide back into a part-time or full-time job more easily.
TheWriteBudget Not only is it too risky, it also seems unwarranted in most cases. I suppose if you really had the funds to recover if the business plan fails then it might make sense.
FrugalRules That’s a fair point about the business owner distinction. I’m kind of piggy-backing on Robert Kiyosaki’s distinction of self-employed versus business owner. Yes, many self-employed are business owners, but most stay as self-employed versus growing and adding employees. There isn’t anything wrong with that, I just think more people should be honest with themselves about whether they are trying to build a business that can be sold or whether they are simply self-employed.
brokeandbeau I definitely think your chance of success increases if you “have” to make it work, but overall it probably is best to not quit a stable job if you don’t have to.
theFinancegirl I think sometimes it’s good to take “shots” at businesses that have potentially a high payoff, but typically the groundwork for these businesses can be laid while you are still actively employed. If you must quit your job it’s best to have a detailed business plan that has realistic financial forecasts of what you can expect to make.
I agree with this David. As you said many mistake business for self-employment. My husband has his own incorporated company, but basically he is just an independent contract worker.
I totally agree that anyone of thinking of starting a business or freelancing needs to do it on the side first. I didn’t have a choice in my situation as I was laid off, but if I could go back and practice while I was still full time, I would. Plus you save a lot more money that way too!
I go through all these reasons when I get the itch to try something on my own. I guess it’s the whole grass is greener thing. My current job is great and I’m happy as it provides a great steady income with room for advancement. Plus I can work on my side hustles when I get home.
DC @ Young Adult Money FrugalRules Totally agreed DC! It can be a challenge to have that honesty with yourself. I know it was a challenge for us and we got to a point where we asked ourselves what it was we actually wanted. We want to be the ones dealing with the higher level issues and growing a business that could be sold off at some point or just managed while not dealing with the day to day work.
The consistency of a paycheck from an employer is a good enough reason for me to keep on keepin’ on. Maybe one day, when my income from my side hustles match or exceed my current pay at my job, I’ll think about jumping ship. Great reasons!
Mrs. Frugalwoods Salary is definitely only part of it. There is so much more that is part of an employee’s compensation.
Holly at ClubThrifty It definitely seems like you guys have been making strides towards turning your work into a business. With the flexibility you have with self-employment it’ll be easier to get the “business” stuff going.
moneypropeller Hmmm interesting perspective. I think it is different in some areas, such as companies that do plumbing, electrical, etc. This isn’t really geared towards those trades. I realize I’m assuming some stuff here, but it seems a lot of people want to start somewhat ambiguous online businesses. Those sorts of businesses do not require quitting your job imo.
blonde_finance I agree 100%. In all honesty, if you don’t start a business while you are in college, and you are able to get a job after college, you shouldn’t be in a huge rush to start a business. There’s too many good resources at most employers and there’s too many businesses that can be started at night and on the weekends (if you must).
BudgetsAreSexy This post was inspired primarily by the fact that I have blogging as a side hustle. It CAN be outsourced, and I know people who own blogs but do not write on them (or even manage them), but it can easily become a self-employment thing versus a business. In fact, I think it is really tough to get a blog to the point where it goes past the tipping point and can become a legitimate business.
ShannonRyan To your last point, I think it would be tough to move back into full-time work, at least in my field. Even taking a couple years off can hurt your prospects of getting back into the finance field. I like your business model, by the way, because even though your work seems to be generally “self employed” (at least the book writing aspect), it’s a product that can be done once and sold over and over and over, versus trading time for money.
debt debs There’s nothing wrong with being an independent contract worker, but I think people glamorize it and talk about how it’s a business when really it’s not a scalable business model.
Beachbudget I think you have a unique perspective on this because you HAVE been freelancing/running a business for quite some time now. I realize some people don’t have a choice, but if you do I think it’s almost always better to keep your full-time job and do freelancing on the side.
LisaVsTheLoans Sounds like we are on the same page! I would need my side hustle income to consistently exceed my full-time income (including benefits, which are often forgotten) before I take the plunge. I don’t foresee that happening haha.
Good post DC.
I’d like to offer a different perspective about self-employment. It’s not always synonymous with “contract worker”. I am self-employed and have a steady stream of income from a coaching business serving multiple clients who make 6-month to 1-year commitments. I had to decide last year whether to go big or not (we had the funds, solid business plan and the momentum to do so) and I decided I didn’t want to be pushing paper and preferred to stay hands on because I think I have the best job in the world. Being a boss, been there/done than over the past 20 years and I’m not that interested in doing that again for a while.
Incidentally, this business started out as a side hustle. I even had a full time employee while I was still working a corporate gig.
freepursue I think you did it the right way. It’s impressive you were able to resist quitting your job when you hired that first employee. I think most people would have quit before getting to that point!