Pursuing an Entrepreneurial Spirit: Deciding to Leave Your Employer the Pros and Cons

Making sound decisions in the management of your business is a key part of success. At this point you may have already been pondering some of the pros and cons of leaving your current employer. Part of the entrepreneurial spirit is realizing you want something more tangible in life which involves the successful development of your own business. The hard part sometimes is determining when to make the jump. We will discuss many of the pros and cons of leaving your current employer. After the discussion you will be able to choose the plan that is right for you.

Let us begin with some basic statistics from the Small Business Administration. Common annual count shows that there are approximately 28.2 million small businesses in the United States and about 600,000 new business are formed every year. Approximately 10 to 12% of them close within a year period. About half of all new small businesses survive at least five years and a third survive ten years or more. There are a number of reasons for the statistics as to why businesses close. But your success is based on your planning and personal drive.

When deciding whether to leave your employer or not, let us discuss some of the reasons why entrepreneurs begin their own business.

  • To control your destiny. Many entrepreneurs wish to take control of their lives and make their own decisions. Opening a small business gives them the ability to do so.

  • Flexibility with hours. Many entrepreneurs desire to work outside of the normal 9 to 5 traditional schedule and control when they go in and when they leave their job.

  • A better work life balance. Many entrepreneurs desire the flexibility of working for their own company so that they can better control the work life balance and determine when they want to take time off and when they want to work. Entrepreneurship provides the benefits of you deciding when you want to be at work.

  • You're able to choose the people you want to work with. This is often limited unless you own your own company. Many times the entrepreneur has a desired core team of networked individuals whom they desire to build their team.

  • With risk comes rewards. In the business world opening a business is risky, but there is also a significant pay off for the individual who develops the business. As an entrepreneur the payoff is all yours.

  • Greater personal satisfaction. Many entrepreneurs have a different mindset and wish to take on additional challenges that others may not desire. Some people enjoy working the 9 to 5 for their boss but others desire the challenges of opening their own business.

  • Living your dreams not someone else's. Entrepreneurs work significant hours but oftentimes it does not feel as much like work because they are doing what they want in life.

  • You have your own following. Many entrepreneurs enjoy building their own customer base and relationships they go well with their clients. These are customers which are specifically tied to their business.

  • The opportunity to give back. Many business owners have become great philanthropists within their communities. Many entrepreneurs realize once they have achieved their goals with their company they feel the desire to give back to the community and provide opportunities for others and donate to charities.

Never burn bridges, you may need to come back to your previous job and it is always good to build a networking core. This may depend on the current relationship you have with your employer. You may leave on good terms or you may want to tell them adios. A key part to remember when deciding to leave your employer is to always remain professional. You never know, you may want your job back and even if you dislike your current job and never want to go back you want the separation to be amiable. This is especially important for your future reputation you never know when past acquaintances will become future customers.

When you are deciding to leave your current employer or job it is a good idea to make an analysis of and take an inventory of what skills you have. Take inventory of all of the skills you have developed from working with your current and previous employers. When you have a skills inventory it lets you understand what you are good at and what you are not. Then you can improve on your weaknesses. As an entrepreneur every day is a learning experience. Savvy business operators keep in tune with the current trends and in new ways to become more productive and efficient as well as knowledgeable in ways to increase profits.

What skills do you already have? Are you good with the administrative tasks? Are you a good project manager? Are you good with people? Do you enjoy business? Can you make things? Can you fix things? Are you creative or innovative? Fundamentally, you have a number of skills you can apply to your own business that you already have and you know this because you have told yourself "I can do this".

Pros of Entrepreneurship

  • You have the pride of ownership and the ability to tell your friends and family that you own your own business.

  • You have the flexibility to manage your own time. You are giving up the daily grind of 9 to 5 for your own hours but you determine when they start and end.

  • There are many tax breaks for entrepreneurs such as writing off expenses for utilities, phone bills, car payments, travel, and food. You may also qualify for additional business grants.

  • You have the opportunity to build a business you can pass on to your family.

  • You have the benefits of job security in times of economic downsize or layoffs.

  • You will experience many challenges and opportunities bringing on a personal sense of satisfaction.

  • Financial independence is another key reason to leave your current employer. Entrepreneurship has always driven the individual desire for unlimited opportunities to make money.

Cons of Entrepreneurship

  • New business owners put in long hours for less pay initially. Maximizing your daily schedule, multitasking, and ensuring efficiency are very important.

  • There is significant risk involved in setting up a new business.

  • You will provide your own insurance coverage.

  • You will need startup and safety net money for your transition.

  • Pay may come infrequently or with a high level of variability.

  • You are responsible for all of the problems and don't get the option to leave if the work is not done.

  • New businesses take time and you do not receive overtime pay.

Always give your current employer at least two weeks' notice of your intent to quit. When you do so let your direct boss (supervisor/manager) know first. You do not want them to find out after others know of your intentions. Work with your boss for the best time to depart if you do not have to leave in exactly two weeks. Always thank them for having given you the opportunity to work with them … in case you need to go back or need to use them for a reference. Be cautious during any exit interviews to leave with a positive note even if the experience was not so great.

Decide first if you truly can afford to quit and the best timing. Let's looks at these key decision factors:

Living expenses – If you plan to leave your job you should have at least 12 months of living expenses saved up. This is a general rule of thumb and give you some protection until things get off the ground. Some of this will depend on your responsibilities as an entrepreneur, meaning, your marital status and family. Do you have a spouse who relies on your income? Are they supportive of the jump to entrepreneurship? Do you have children who rely on your income? The twelve month reserve will serve them well in the event it is needed. This is your safety net.

To help determine how much cash you need to leave your employer determine your monthly expenses over the last 12 months. Choose the three highest months of expenses and take the average of this number. Multiply the average times 12 to get the safety net you need.

Insurance – Health and life insurance becomes even more important in the event you change jobs. This is especially important if you are converting to a more risky profession such as an office environment for a construction related job. Use umbrella coverage if you have unknown risks, life insurance should always be maintained, and you should never go without health insurance coverage. There are a number of policies available for self-employed individuals.

Interested in learning more? Why not take an online Business Law for Entrepreneurs course?

Passive emergency income – What options do you have if you are in a bind for cash? Do you have additional savings, certificates of deposit, side jobs, or additional talents that can bring in additional income if you become strapped for cash?

Next steps:

Look at your pros and cons. Write them all on paper and determine if there are more pros than cons. If there are many cons on your list make sure you are willing to take on the risk. A simple list of the pros and cons may suffice for you. You may also want to further refine your ideas by performing a SWOT analysis. A SWOT analysis is easy to do. You draw a large square with four sections. In each section you write the corresponding strengths, weaknesses, opportunities, and threats of your entrepreneurial venture. This type of analysis will help you better see the complete picture of the business you are pursuing. It is especially important to know your threats and weaknesses in order to develop plans to address them.

Develop your plan

You should have a basic plan on how you will leave your employer. This includes your business plan, financial plans, a backup plan, and insurance coverage.

You have two options starting your business while you are still at you present job or taking the plunge. Both of these should be done after you have researched your ideas and developed a solid business plan.

Starting incrementally. This is the most popular choice because the risk is less. It allows you to build a timeline for leaving. Many entrepreneurs begin their venture incrementally so they still have the security, safety, and income from their present job. They work on their entrepreneurial dream after work in the evenings and on weekends until their venture is established to the level at which risk is minimized and revenue is established. Starting incrementally allows you to work out the bugs and experience the operations of your business prior to full implementation. Then when you are ready to commit totally you can notify your employer.

Taking the plunge. Taking the full "I quit" plunge is the least chosen option but nonetheless is a choice. This option has increased risk but is sometimes one that users choose because it is the right decision for them. If you do choose this method be strategic as we mentioned, provide enough notice and leave you employer in the best means possible. Determine your insurance needs, have a plan for 401 K investment or retirement plan rollover when you change jobs, determine funding needs, and develop as much of your business plan as possible. Don't forget and leave employment benefits on the table. Make sure you have been paid for any remaining leave time, vacation times, and you receive your last check. Many successful entrepreneurs have done this type of exit from their employers but it does have increased risk.

Are you on the fence?

So let's discuss some of the other factors when you're deciding to leave your employer. The entrepreneurs become excited with the thought of their business but often times do not plan well.

Ask yourself some questions that are related to the characteristics entrepreneurs require to be successful. These questions include:

  • Are you comfortable taking risks? Being an entrepreneur has a high degree of uncertainty, especially with variable economic markets.

  • Do you have the proper support network? Meaning, does your family support you, significant other, or business partners?

  • Can you work well independently? You will be required to make many difficult decisions on your own and will need a skill set to do so.

  • Are you creative and innovative? Are you able to think up your own ideas and see new opportunities for your business?

  • Are you persuasive and do you have the necessary negotiation skills? Being a business owner requires smooth negotiation skills and persuasive speaking with customers, suppliers, and competition.

OK, so you feel like you are ready to leave your employer. Do you know the answers to the following questions?

  • Do you know why you're starting a business?

  • Do you know what kind of business you want to be in?

  • Do you know your customers and market?

  • Do you know what type of services or products you will provide?

  • Do you have the time to commit to your new entrepreneurial venture?

  • Do you know what type of employees you will need, supplies, and where the business will be housed?

  • Do you have the necessary financing or will you require a loan?

  • Do you know what type of taxes you will pay, insurance you will need, and the marketing requirements of your business?

Let's take a little test to help you decide if you truly want to leave your employer or not? These are some of the key job related reasons you should ponder and may be just what you need to make the split. Question, have you lost your lack of passion for your job? At one time you did you enjoy going to your job but don't feel the same interest level is there? Or have any of these actions or feelings occur?

  • Your pay or compensation is not what you desire and there is no option to change it, better it, or to improve it.

  • You dislike your boss.

  • You dislike your coworkers.

  • You're miserable every morning when you get out of bed and you dread going to work.

  • Your company is having troubles and ultimately you feel you will be part of the detriment.

  • You're constantly stressed at your job and work in a negative environment.

  • You feel the stress of your job is affecting your health.

  • You no longer desire the 9 to 5 corporate culture.

  • You don't have the right work life balance and are losing time for your family.

  • You feel underutilized and desire new opportunities.

  • You have had the same job for a long time and are suffering burnout.

  • You have no opportunity for advancement.

  • You are bored and stagnant and have no opportunity to learn new things.

  • That things occur such as a restaurant or improper behavior.

If you have decided it is time to move on and pursue your new venture let's look at how.

The best way to ensure your success is through proper business planning. A solid business plan is paramount for success. A business plan is a roadmap of the business your building. Every entrepreneur should have one. The reason being, that on paper it helps to determine if you have missed any key components to your business and allows for thoroughly planning every aspect of your business and developing contingencies. Several people who have written a business plan have used it as a go or no-go decision-making tool. Once they have determined the startup cost related to their dreams some realize they must find more creative financing, save more money themselves, develop further planning, or require additional resources before moving forward with their dream. Almost all banks will require a business plan when you are acquiring funding. These are the key components required in a business plan:

  • An executive summary of the entire document

  • A mission or vision statement telling readers the goals and direction for your business

  • The description of your company and what products or services it provides

  • A description telling why your product or service is different from others.

  • A description of your background, skills, and education and those of your team

  • A market analysis of your competition and explanation addressing how you believe you will do in the market

  • An advertising and marketing plan

  • An analysis of your financials which includes a cash flow statement and your revenue projections

  • The strengths, weaknesses, opportunities, and threats of your company

When you are deciding to leave your employer these are the recommended steps you will follow to begin on the right track.

  • Develop your business plan which will map out the key aspects of your business.

  • Take the necessary training that you need relating to taxes, business operations.

  • Determine how you will finance your business.

  • Choose a business location and determine local and state business requirements.

  • Determine what legal structure you will follow which we further discuss in lesson two.

  • Register your business name at the state level.

  • Acquire a tax identification number from the Internal Revenue Service and your state revenue agency.

  • Obtain the necessary workers' compensation, unemployment, and disability insurance.

Determine if there are any additional programs to assist your business in the startup such as:

  • Minority owned businesses

  • Women owned businesses

  • Veteran owned businesses

  • Environmentally friendly "green" businesses

  • Home based businesses

Summary Reminders and Takeaways

Whatever you have decided let us leave you with this thought. You may be moving forward with leaving your employer, you may be deciding to stay for a while, or you may have decided maybe the entrepreneurial jump is not for you. Statistics from the Small Business Administration show that 50 percent of small businesses fail after five years. That doesn't mean you have to be a part of them. With proper planning you are showing key competencies of leaders which includes seeking knowledge and proper planning and preparation. Forging your way into entrepreneurship is part of the great dream many of us have for our future.