It’s usually a mistake to jump straight from a 9-to-5 job to running a business full-time. I explained why in my previous article: It’s easier to take necessary risks when you have the security of a steady income.
Still, most entrepreneurs want to reach the point where their startup is paying their bills. But how do you make the transition from salary earner to full-time founder?
I’ve made that switch in my own life, and as the CEO of a startup incubator, I’ve helped hundreds of other people make it, too. Here’s my four-step roadmap to full-time entrepreneurship.
1. Have lots of ideas.
I know it sounds strange to say you should just “have ideas.” Isn’t coming up with a disruptive, super-profitable idea the biggest challenge in business?
No. Viewing startup ideas as rare and precious resources is a major misconception that causes two important mistakes. The first is failing to act on good ideas because they don’t seem like world-changing innovations. You don’t need to be the next Apple or Google to build a hugely successful business.
The second, much more serious, error is going all-in on one idea before you test it. This is how new entrepreneurs blow their life savings building products that nobody wants. If you think great ideas always lead to great startups, you can miss the warning signs that there’s no market for what you’re selling.
The truth is that execution matters much more than inspiration. There are no billion-dollar ideas; there are only billion-dollar companies. Instead of falling in love with one business concept, force yourself to brainstorm a ton of them. The seeds of good ideas are everywhere.
• Personal skills: You can monetize them as paid services.
• Business tasks people find annoying: Offer to automate them.
• Inefficiencies that slow down your work: Create and market a solution.
• Untapped markets: Why isn’t Group X buying product Y? Is there a way to sell it to them?
• Painful buying experiences: Give people an easier way to shop for something they want.
By the time you fill a whiteboard, it should be a lot easier to see that ideas are a dime a dozen. Pick one that you think you can start with your current resources—but don’t go all in on it just yet. Keep your day job for now.
2. Start a side hustle.
Once you’ve chosen an idea you like, figure out a way to pursue it in your free time. This will often require you to strip it down to its cheapest, simplest version. That’s a good thing; it’s exactly what startup coaches mean when they talk about a “minimum viable product,” or MVP. It’s a great way to validate your idea. You’re confirming that at least some people will pay for a solution to the problem you’re targeting.
The other advantage of working a side hustle is that it teaches you valuable skills. Running a startup isn’t just one job; it’s eight or nine mashed together. At least a few of them will be brand new to you. Building an income stream in your spare time gives you practical experience with those skills.
You’ll learn about marketing and market research. You’ll practice crafting offers and closing sales. You might even hire a part-time employee or two. All that experience will be valuable when you go full-time.
3. Build a safety net.
I suggest setting aside the income from your side hustle into a “freedom fund” and keeping this separate from your long-term savings account. The freedom fund exists for just one reason: to cover living expenses while you launch your startup. Think of it as a personal runway.
Your approach to building your freedom fund will inform your choice of side hustle. Will you focus on something with high earning potential? Tailored services such as bookkeeping, grant writing or consulting can often be quite lucrative and let you build up your safety net quickly. Alternatively, you could try to build up recurring revenue and let a steady income take the place of a bank account. This might be slower, but it’s often easier to scale in the long run.
Remember that it’s OK to choose something profitable over something you’re passionate about. There’s nothing wrong with a temporary side hustle that lets you gain experience and build up your freedom fund.
4. Cut the cord.
You’ll never know for sure when you’re ready to make the jump to being a full-time founder. That’s why you should commit to a cutoff in advance. Don’t waste time wondering whether you’re “really” ready. Let the numbers decide.
The rule I recommend is very simple. You might consider shifting to full-time entrepreneurship when one of two things happens.
• You have enough money in your freedom fund to cover six months of living expenses.
• Your side job is bringing in enough monthly revenue to pay your bills, plus a little extra that you can invest in growth.
Once you have a backstop in place, it’s time to swing big. Start devoting all your work hours to building a venture-backed startup. This is the business that you want to fuel with investor capital and launch into the stratosphere. Landing seed money is always a challenge, but investors will take you more seriously if you’ve gone all-in.
Your venture could be a scaled-up version of your side business. Or it could be a totally different idea that was too challenging to pursue in your free time. I prefer the first option when possible because it gives you a head start on validating your idea, but it’s ultimately your call.
A venture startup is a bigger risk than a low-cost part-time hustle. But if you have a solid freedom fund, the worst that can happen is that you’ll have to start over with a new idea. Gamble with money you can afford to lose, not your life savings.
