I can finally smell freedom.
It’s been nearly 10 years since I started to dream about running my own business full time.
But actually making that dream into a reality has depended on two things:
- Creating a business I’m passionate about - COMPLETE
- Financially being able to support myself
When you have substantial monthly expenses, like a mortgage, quitting your job is never going to be an easy decision. But keeping up with immediate expenses is not actually what I’m most concerned about.
What really worries me is how the pressure of not having a guaranteed salary can lead to making bad business decisions.
For instance, where you have to accept half your hourly rate because there are bills to pay. Or taking on clients you don’t necessarily want to work with, as there’s no other choice.
How can you grow a business if decisions are based on surviving and not on growing?
So, how do you avoid getting into this gloomy situation?
By creating a QUIT PLAN.
The Quit Plan is made up of planning for personal and business finances, reviewing business opportunities, having a backup plan and planning when to quit your job.
You can create your own Quit Plan by following these six steps:
- How much money do you need to live?
- How much money do you need to run your business?
- How much money do you need to quit your job?
- How can you quit your job and still make money?
- What would you do if things go wrong?
- Create your summary Quit Plan
Before we get into details, the advice in this post should be used as a guide to creating your own Quit Plan only.
As you will see in this post, I generally take a conservative view to quitting my job. But, if you feel like taking on more risk or your business is doing really well, feel free to tweak the numbers to fit your situation.
How Much Money Do You Need To Live?
Make a list of all of your expenses over the next 12 months. I like to put them under the following categories but you can choose your own:
- Home Expenses
- Car / Travel Expenses
- Personal Expenses
- Entertainment Expenses
Next, add a 10% miscellaneous expense to your total monthly expense, to plan for those moments you didn’t plan for.
Here’s an example:
As you can see, we need £3,488 on average every month to cover our living expenses.
With this view, you can easily see expenses that are “nice to have” rather than “essential”. For example, going out to eat, and taking holidays are nice to budget for, but can be easily removed if you can’t afford it.
How Much Money Do You Need to Run Your Business?
Similar to creating a personal expense budget, you need to create one for your business.
What I love about creating a service based business, is that the monthly costs are relatively low compared to other types of businesses.
For instance, if you compare it to owning a retail shop, there’s no monthly rent, building maintenance or full time staff to pay. After all, I’m running it from home and hire freelancers when I need them.
And, as the business grows I can scale up the operation and manage costs accordingly.
Ok, let’s get back to creating a business expense budget. To do this we need to estimate the following costs:
- One Time Costs - one time purchases you need to make to get your business off the ground and grow. For example, new laptop, furniture and office supplies.
- Fixed Costs - expenses which do not change, for example, software and salaries you have to pay every month.
- Variable Costs - expenses that will change based on your sales, for example, freelancers are alarge part of my expenses for my online marketing business. As I take on more clients (i.e. make more sales), I need more freelancers to help me service them.
Here’s an example:
You can see that on average we need £977 per month to run the business.
Having this visibility give you a lot more control over my spending, which alone can lead to more profits for my business.
Now you know your numbers, let’s move on.
How Much Money Do You Need To Quit Your Job?
It’s now time to take your personal and business expense budgets and figure out how much money you need to quit your job.
I’m sure you’ve heard people talk about saving enough to keep you going for 6 months, 12 months or longer. I even know people who have had less than 3 months.
Personally, I think you should have 12 months as a minimum, 18 months would be nice and 24 months is comfortable.
I plan to have at least 18 months saved.
But, did you notice that my savings goal is based on my expenses only? I don’t take any income I will earn after quitting into account.
Even though I will continue to make money from property investments and the business itself.
I do this to help me create a positive mindset. Imagine having enough savings to cover your expenses and then extra income which feels like a bonus.
Like I said earlier, I want to make decisions based on growth, not under pressure.
The rest of this post is dedicated to establishing your mindset by taking the pressure off yourself even further.
How Can You Quit Your Job and Still Make Money?
It’s easy to waste energy worrying about how you’re going to survive after quitting your job.
Worrying, is not healthy for you or your business. You need to get hold of this thought now.
You can do that by getting on top of any unnecessary expenses and identifying ways you can still make money after quitting your job.
For instance, my wife and I agreed that I would quit first and she would continue to work for at least 6 months. She’s very understanding. 🙂
I’ve also invested in a few properties over the last 7 years, which gives us a mid four figures of income every year.
On top of that, I plan to have paying clients before I quit and as you may know, I’ve set a target of reaching £5,000 monthly revenue by the time I quit. This alone, is a massive stress reliever.
I appreciate not everyone will be in this situation, so let me give you a few more ideas:
- Set your own business income goal and work towards it. Earning £1,000 per month whilst working is doable
- Move back to your parents house if you’re currently renting
- Rent out a room in your house or flat
- Reduce some of your luxury expenses
- Stop eating out by cooking more yourself
- Get rid of your car and use public transport and walk more
Have any other ideas? Add it in the comments below.
Before you start making huge sacrifices. I don’t recommend losing all the luxuries from your life, just look for opportunities to be flexible.
I believe you can continue to live a life full of rich experiences and grow your business at the same time.
As Greg Anderson said, “Focus on the journey, not the destination. Joy is found not in finishing an activity but in doing it.” Tweet this quote.
What Would You Do If Things Go Wrong?
The easy answer to this question is to go back to work.
I don’t know about you, but that’s the last thing I’m planning to do.
It’s the reason why I haven’t rushed into quitting my job. Instead I’ve focused on activities that will reduce the risk of having to go back to my 9 to 5:
- Building up my savings
- Creating additional income through property
- Getting paying clients for my business
Ok, here’s what my “Fall Back” list includes, starting from the top:
- Diversify my business - my core business is doing online marketing for businesses and providing 1:1 coaching to entrepreneurs. A few ways I make money are:
- Offer local group online marketing courses
- Create an online marketing course
- Start teaching web design
Now, create your own “Fall Back” list and make sure you think outside the box.
For instance, my core business offering is not website design but since I have many years of experience I can help people create their own sites without spending a huge amount.
As you can see, if your core business doesn’t work out straight away, it’s not the end of the world.
You have options.
Create Your Summary Quit Plan
Time to put it all together.
I do this by creating a simple summary Quit Plan by using the information created above.
You now have all the information you need to set a realistic date around when to quit your job.
Download a copy of my Quit Plan template and start putting your own one together.
Oh, and please do share your experience of quitting in the comments, I’d love to hear it.