The best, non-lucky way to get rich is to start a business. You don’t have to quit your job to start a business, but if you’re actually trying to get serious wealth from it (and not just “play money” or money for a one-off purchase like a new car) then you’ll eventually have to go full time.
Some people can manage to do two full-time jobs at once, putting in 40 hours for someone else and another 40 for themselves. If that’s you, you don’t need coaching because you already know. For the 99% of other people who are going to start a business, that’s probably not going to work because you probably don’t care enough about your day job to work so hard on both—even if you’d happily put in 80 hours a week for your business alone.
Side note: I don’t believe anyone does 80 hours/week. They might be able to do it a couple weeks or even a month before a big launch. But if they say they’re doing that for a year, I simply don’t believe them. Unless they count travel time as part of those hours, your brain simply cannot concentrate for 12 hours a day, 7 days a week—at least not sustainably.
If you’re trying to figure out how much you need to quit, the main economic factor you should care about is runway.
Runway is how much time you have to work before you run out of money.
It’s a common term in startup world. If you have $1,000,000 in the bank, and your burn rate is $100,000/month, then you have 10 months until you run out of money. You have a 10-month runway. Pretty simple.
Extending Your Runway
If your side business is already making money (even if you’re not at a profit) that’s great. Earning money to give you an extra few months to figure it out can make all the difference.
If your side business is already profitable, and you’re debating whether it’s time to quit or not—what the hell are you waiting for? Quit your job, give it your full-time attention, and drive that profit through the roof.
Tech startups sometimes aren’t profitable for awhile. They’re trying to “capture the market” and beat out other competitors racing into a blue ocean. To that end, they go from VC to VC trying to raise money to have an artificial “war chest.”
I understand that approach. It’s a great to both extend your runway and have cash to develop tools to grow even faster. Nevertheless, raising cash and building a runway should never be confused with winning. Cash is nothing more than a temporary measure. It’s merely a step on the path of generating profit.
Businesses who are perpetually fundraising and never actually generating profit—especially once they’ve captured the market (cough cough Uber)—are definitionally unsustainable.
Example: a One-Man Business Flipping Vans
Let’s say you’re just a one-man army. You are eager to start a business, and you have a few decent ideas. This isn’t a venture-backable company. You’re not trying to build the next Uber (lol) but you’re really excited about flipping sprinter vans to Colorado vacationers. How much money do you really need to get started?
For simplicity’s sake, let’s assume you’re not going to take out any loans or anything, and you’re going to do it all with saved-up cash.
First of all, if you’re using a service like Mint, you can see your monthly spending history. If you’re spending an average of $3,000 a month, and you reckon it’ll take you 6 months to flip your first van, then 3000 x 6 = 18,000. You need $18,000 for a 6-month runway.
If it’s a new project, double your budget. I would even double both time and money allocations. That would be $6,000/month for a 12-month project, and your required runway is $72,000.
That’s probably close to or more than what you’d flip your van for, but don’t fret. Your first always takes the longest. The first lesson is the hardest because you have the most to learn, like how to reduce your taxes when buying a vehicle.
The next van will probably take half the time, and therefore you’ll drive more profit out of it.
Success is an exponential curve, not a linear one. The more vans you flip, the cheaper it’ll get, the higher-skilled you become, the less time it’ll take, and the stronger your reputation will grow.
If you’re single and have no major risks or dependencies, then don’t wait for a 10-year runway before getting started. Start ASAP and make as many mistakes as you can as fast and as cheaply as you can
What if you have a family? Can you quit your job?
There’s always some kind of objection that it’s not that simple. “I have kids” or “what about health insurance?”
Valid questions. Taking care of both may shorten your runway but it doesn’t need to eliminate it. Budgets should have a buffer in them because there is always the unknown. The tricky thing about unknowns is that if you knew what it was, you could plan “exactly” for it. But you can’t, so you have to guess.
If I’m budgeting for an area I have no previous experience in (e.g. hiring an accountant) then I’m going to do research, and make an estimate. Then I’ll budget double what my estimate is, both in time and money, like in the van-flipping example above.
If I’m budgeting for an area I do have experience in, so I “should” have a good idea about what costs will be then I’m adding an extra 10% to whatever my number was.
If you’re waiting until you’ve figured out every unknown before you quit your job, you’ll wait forever. Stop acting like you’ll start your own business one day. If you can’t handle the unknown, you’re not built to be an entrepreneur.
If you’re thinking more “no, my money is fine, but my wife/kids/parents…” then I can’t help you there. If you’re launching a startup, you’re not just managing your team. You’re managing your family’s expectations and emotions—and your own. If you are unable to manage any of those, then step up your game or don’t start one at all.
Don’t Wait for Perfection to Quit Your Job
“If”, “but”, “once”. The entire game of creating an enterprise is a game of ifs. You have to be okay with risks.
I know a guy who quit his job to start a high-risk startup, move to a new city to join an accelerator for 6 months, travel around trying to fundraise, and brought his wife and child along for the ride. I don’t know him too well, but my impression after meeting his family was that he was first able to sell the vision to his wife before anyone else. She didn’t have to understand all the technical bits or the how of his startup. She knew enough to believe in him and have faith he wasn’t going to lead them into a dead end.
After selling to a big tech company, I’d say they won. His leadership and her faith and support pulled it off.
Simple Exercise: Imagine Yourself in 30 Years
I did an exercise with myself a few weeks ago. I imagined what I, 30 years from now, would want to say to my younger self today. The advice came instantaneously: “quit yesterday.” AKA stop waiting and start acting.
If you are in the one-man army category and want to start your business, you especially need to listen to this. There is literally no better time. You can get creative to reduce your monthly overhead and/or extend your runway. If your rent sucks, move to a cheaper foreign country for 6 months and build your business online. If you own your house and can’t leave, start AirBnBing out a room every weekend. Or rent it out entirely and find a friend or relative to stay with. Get creative and get aggressive.
Jeff Bezos has this shtick about a “regret minimization” framework. I guess that’s what I was doing when I imagined myself 30 years from now. Don’t leave unknowns on the table. Plan your runway and pull the trigger.