Having now been involved in the startup scene for over 4 years, I’ve seen the rise and fall of many companies that were started on the proof of passion. While I’m all for venturing forth and taking a leap of faith, I’m very aware that startup life for the most part is over glorified. Let’s not forget, every rose has its thorn.
Before you go about quitting your day job to pursue an idea, here are 3 reasons why you shouldn’t quit your day job:
1. You still don’t know if your idea will succeed
Being passionate about something is a great start but having proof that the idea has shown signs of success is even better.
Business ideas are expensive. Not just in terms of money but also in time. It’s imperative that you find out as soon as possible, if something is worth pursuing. Do people want your product? Does your brand actually resonate with customers?
One of the easiest ways to do this is to construct a landing page via Launchrock, SquareSpace, WordPress, or Strikingly to promote your brand. When I started my trench coat line, I was able to gather 1,500 email address, gain some press and sell a couple coats before I had put money towards production.
With 1,500 email addresses I was able to tweak my branding and messaging. I could also effectively figure out what price I could charge and who my customer base was.
My initial focus was to find out as quickly as possible: does someone care about what I have to offer?
Be sure to ask around and get real feedback from people who aren’t just your friends. Your friends for the most part care about you and ultimately don’t want to shoot your idea down. Some of them may not even be your target customer and therefore their opinion may be a bit irrelevant. Others will have no clue what they’re talking about and will just give outright bad advice.
You want to go out there and talk to the customers who will purchase your products and buyers who will place your products in their stores. Having passion and vision is not enough…it must be met with real market demand. Waiting until the “perfect” moment may hinder you from figuring out how much you can and should charge.
Before going into production and sitting on inventory, go through a sample production run. Photograph your products and create a lookbook, then try to sell your products. This will help you iterate on your pricing and really figure out who your customer is and what are they willing to pay.
2. You haven’t figured out your business model
Just having a viable product is not enough–you must understand your business model. Specifically: who is your customer, what are they willing to pay, what will your costs be, and what is your most effective channel to generate revenue.
At the very beginning you should be focused on the things that matter for your business. For example, it may not be the best use of your time to spend weeks on end trying to lock down the perfect logo or brand. Instead, your time may be better spent trying to lock in buyers and customers.
Truly understanding what your profit margins will be, who your customer is, how much you can charge, and how can you sell 10x of what you’re currently selling as quickly as possible is the foundation of your business model.
Your intended brand versus the brand that your customer will perceive may be two completely different things. This may severely influence your price range which may also limit the materials you can use and the overall designs you develop. This is also a key cornerstone of your business model and is something that should be worked towards.
3. You don’t have enough cash reserved
As I said before, ideas are expensive, both in money and in time.
If you are thinking about quitting your job you should:
• Have enough emergency cash to survive 6 months to a year on savings
• Have a grasp on how your new company can support both itself and you
Reaching the point of break-even, profitability, and sustainability may take a while. It’s paramount that you go through each stage (break-even, profitability, and sustainability) as quickly as possible.
The last thing you want is to have to rush back into the job market months after you quit because you’re running low on cash. You also don’t want end up with a pile of debt in the spirit of chasing your passion.
You will want to be resourceful and should be delaying certain expenses until you absolutely need them. Some of these things include formally incorporating your business, hiring a lawyer or accountant, and registering your trademarks. You will be surprised at how much you can get done without these things in place.
Whichever number you have estimated for total cost, you may want to multiply the number by 2 or 3. Projects always take a turn and it’s important that your financial situation does not impede progress or halt a project altogether.