PERSONAL FINANCE: Before you quit your job to start a business

It is often said that the best way to make money is through entrepreneurship. This popular admonition has put pressure on many people who are in employment, who feel the pressure to jump into entrepreneurship, in hope that they can accelerate their earnings or even become wealthy.

But while many have taken the jump, only a few have made a good landing. Why is this? Like any other venture, there are steps that must be followed before you can successfully shift from employment to business. Take a look:

The allure of entrepreneurship

Manyara Kirago, the founder and CEO of Financial Counseling Limited, says that most people decide to venture into business due to the allure of wealth that entrepreneurship presents. “On the surface, entrepreneurship appears to be the best avenue because most of the wealthy people in society are business people,” he says. But there is a caveat. Mr. Kirago says that 90 per cent of all new businesses fail within the first five years, and of the 10 per cent that survive, only about 5 per cent are able to generate serious wealth. "Entrepreneurship will always be riskier than employment. Objectively comprehend the risk before you move out,” he says.

Business research

You will never survive if you enter business without proper business research, says Dave Peck, an entrepreneur and the author of Think Before You Engage. “You must carry out your research and develop a product or service whose solutions, strengths, weaknesses, and general operability you fully grasp,” he says. For example, if you want to start a cooking gas business, learn where and how you will source the Liquefied Petroleum Gas cylinders, which companies are licensed by the Energy Regulatory Commission to import LPG, and where you will make your refills. Also know which customers you are targeting and whether they will need your service, the number of rivals in your designated location, how you will market your services, and the employees you will work with.

Quitting and starting a business from scratch

It is never wise to quit your day job in order to start a business from scratch. On the contrary, your chances of success will be 33 per cent higher if you keep your job and start your business on the side. “The process of starting a business while retaining a day job in an existing organisation or business positively influences entrepreneurial entry and survival,” says the business start-up study dubbed ‘A Hybrid Path to Entrepreneurship’ that was conducted by the Academy of Management.

The capital

How much will your business idea cost before it can break even? From which source will you meet this cost? Mr. Peck says that you should not quit your job thinking that you will pitch and raise start-up money from angel investors. “Before you can even start considering where you’ll pitch for funding, you must have your own personal finances in check. This goes over and above your monthly utilities budget,” he says.

The arrogant quitter

Even though you have laid down articulate start-up plans, never leave your day job on a sour note. Don’t ruin the relationships you have had at work, or leave your duties unaccomplished. “You are leaving for unchartered waters. You don’t know what lies ahead, and how your current employer and workmates can be of benefit to you in your upcoming entrepreneurial endeavours,” says Peck.

You don’t always have to quit

Don’t think about quitting your day job to start a business if your business idea is not premised on providing solutions and making a difference in people’s lives. “Every step of the way, ask yourself why you are really going into business. Don’t start a business out of convenience or to copy someone else who has made a lot of money in entrepreneurship,” says Tonnie Mello, a Nairobi-based entrepreneur and certified business coach.