77% of Americans between the ages of 25 and 34 would rather work for themselves than for someone else. That’s understandable. After all, we’re a country of people born and raised on the notion of freedom and independence. American crowds love to cheer during the national anthem when they hear the line “land of the free,” and entrepreneurship resonates with us the same way. A bad manager, a stressful commute, and a few years of doing a job you dislike can make employment feel like a prison instead of a privilege. Unfortunately, not many people know how to start a business while working full-time. Many of them just stay at their jobs forever or wander from job to job hoping one will finally be different.
That’s also understandable. Working a 9-to-5 job keeps you busy for at least eight hours a day, if not more. Maintaining relationships, cleaning your home, and staying in shape leave you with very little time or energy to build a business. It is possible, though: Over 4.4 million companies started in 2020 despite the pandemic. Mine was one of them, and I started it while working full-time. You can do the same thing. Here’s what you need to know to pull it off.
Choose a Great (Not Perfect) Business Idea
Before you can try to start a business while working full-time, you need to figure out the right one to start. Unfortunately, those earliest days are often among the hardest for people. Many struggle to find the perfect business idea and end up jumping from one to the next, never committing. That ends in a dozen half-finished projects and nothing substantial to show for all the effort that went into them.
The truth is that there is no perfect business idea. You’re much better off selecting a proven idea that caters to your strengths and doing it better than your competitors. Here’s a checklist you can use to make sure an idea is at least workable:
- Profitable: Your business should have the potential to replace and surpass your previous full-time income, preferably within a matter of months. You don’t want to tread water financially for too long, and you’ll need to be able to fund lost benefits (health insurance and retirement matches) on top of your lifestyle.
- Leverage Your Skills: A common cliche is “If it were easy, everyone would do it.” The slightly less well-known follow-up is: “and no one would pay for it.” Your business should solve a problem you’re well-equipped to handle that others struggle with in some way.
- Enjoyable: One of the main reasons people want to start a business while working full-time is because they don’t enjoy their current jobs. The core function of your business should be something you enjoy. Try not to monetize a favorite hobby, though. You’ll probably find you like it less if you make it a full-time business.
- Scalable: To start a business while working full-time, you’ll need to be scale the business down at first. That’ll let you get some paying customers and test the business model while keeping costs (money, time, and energy) low. You can then scale it up once you’re confident that the model works, and you can transition to the growth stage.
Get Proof of Concept
What do you think constitutes a business? Is it settling on a perfect name for the company or building a fancy website? Maybe it’s having a batch of fancy eggshell business cards with Romalian type, like Christian Bale in American Psycho.
Those are all nice, but none of them are what makes a business. In our capitalist, dollar-based society, “business” is fundamentally the exchange of goods or services for currency. That means that to have a business, you only need two things: paying customers and something they’re willing to pay for.
That doesn’t mean getting a bunch of your friends to say “What a great idea, go for it!” or “I would totally pay for that!” It means getting people to give you money in exchange for whatever product or service you plan to offer. Three customers is a great place to start for most businesses. One can be a fluke, two might be a coincidence, but three is a pattern.
Save Startup Funds as a Safety Net
Some people (not all) can build a business in their spare hours. Even if you can, it’s not nearly as efficient as devoting your prime working hours to the effort. You’ll have to contend with:
- Competitors who have much more time to devote to their business.
- Limitations from your job, such as non-compete clauses or a need for anonymity.
- Reduced efficiency and energy due to a greatly increased work-load.
Your business will have the best chance of success if you can quit your job and give it your full attention. Someone working a full-time job with 2 to 3 hours a day to put toward their fledgling business can devote a maximum of 15 hours to it during the weekdays. That’s less than half the amount of someone working at it full-time, and they’d probably be tired and inefficient during those hours.
Your startup funds should be at least six months of expenses. You don’t want to have any fear that you won’t be able to make ends meet. As a naturally cautious man, I had about twelve months’ worth saved up before I felt comfortable transitioning to full-time self-employment.
Consider the Financial Costs of the Business
I strongly believe it’s best to start a business that doesn’t require much financial investment upfront. Every business has a chance to fail, but capital-intensive businesses can fail disastrously.
For example, most service businesses are unlikely to bankrupt you. If your house-cleaning business fails, you’ve lost your time and the cost of some bleach that you should probably use on your own toilets anyway. On the other hand, spending $50,000 on coding for what you think will be the next big social media app is a tremendous risk. If it doesn’t produce a return, you’ve lost your time and $50,000.
Be cautious of any business that might require something like:
- A storefront or an office with significant overhead
- Expensive manufacturing equipment
- The acquisition, production, and housing of inventories
- Hiring employees
If you do decide to start a business along these lines, make sure you understand the risks and take steps to protect yourself from financial ruin. You may have to seek outside financing and professional financial advice.
How to Transition to Full-time Business Owner
There’s no universally ideal time to quit your job and work on your business full-time. It would be nice if your business income replaced your wages first, but that’s a demanding and sometimes impossible ask.
Quitting once you’ve proven the concept and saved up enough financial runway is the bare minimum. Leaving your job once your business generates enough revenue to cover your expenses is probably the most balanced goal. Note that it’s a lot easier to do that when you have a budget in place and spend less than you make.
Whenever you quit, transitioning from being a full-time employee to running a business full-time is intense in more ways than one. Even with enough cash in the bank to cover you for months at a time, you shouldn’t throw yourself recklessly into self-employment.
Set Goals for Scale
Growing a business into something that can replace your full-time job takes focused effort, especially if you’re doing it in a limited time window. Make sure you have specific goals to structure your growth and scale up as quickly as possible.
I recommend setting net income goals since that’s the best measure of a business’s success. Create artificial deadlines, then do whatever it takes to generate a monthly income that reaches your goal by that date.
Making enough to cover your expenses is always the most important goal to reach. At that point, you can stop draining your startup funds (though they’re still nice to have) and continue your efforts indefinitely.
Plan Carefully, But Don’t Be Afraid to Act
It’s easy to talk yourself out of even trying to start a business while working full-time. After all, it feels riskier, but there are risks to every path in life. There’s an illusion of safety in employment because your paycheck shows up every two weeks, but it’s not guaranteed. Remember, 15% of American adults lost their jobs during the pandemic.
If you do your due diligence, you can transition from employee to business owner with a minimum amount of risk. Choose a proven business idea, get some paying customers, save up your financial runway, and then give the business your undivided attention. If you need help figuring out whether your financial foundation is strong enough to make the switch, talk to a Certified Public Accountant or another financial expert before taking the plunge.
Are you thinking about starting a business while working full-time? What’s the biggest challenge you’re facing? Let us know in the comments below!