We’ve said it before a few times, but in case you missed it: the entrepreneurial economy is booming right now. Never before has it been this easy and this profitable to start your own business, while many are taking advantage of this by turning out a “side gig” while already working at their day job.
If you’re one of those people who has big dreams for your startup, but are unsure when to quit your day job and take the leap into full-time entrepreneurship, it may be time to take the expert advice of Jim Price – a successful entrepreneur and esteemed lecturer at University of Michigan Ross School of Business, and author of “The Launch Lens: 20 Questions Every Entrepreneur Should Ask”.
While the book is well worth a read when it comes to deciding when to quit your job and go into business, Price says it all depends on the answer to a series of questions.
For starters, how much will you sell each of your startup’s products for? What will be the cost of production and overhead for your business? How about the expenses for employee salaries and benefits?
Once you have your answers, simply divide the combined cost of overhead and expenses by the price for each product, and the resulting number will be how many product units you’ll need to sell to break even per month.
According to Price, the moment you hit that number of product sales is when you can feasibly quit your day job – though it should be noted, it’s okay to not have exact calculations.
“Don’t be afraid to make preliminary estimates,” Price reassures. “Model early and model often. Say, ‘OK, so what could we charge for a monthly subscription? What do you think it would cost us to garner each of those customers? OK, that doesn’t look good. Is that a structural problem with this business idea — that it just stinks? Or can we improve the unit economics by either charging more, lowering production costs, or spending less to capture those customers? Is there potential here?’ It’s all very iterative.”
Another last piece of advice from Price? Don’t give up on an idea just because there’s already competition. In fact, no competition can often be a sign your idea may have problems that makes a business unfeasible.
“I keep having to fight that feeling myself,” admits Price. “You start out thinking, ‘Oh shoot. My idea is already taken.’ But then you start looking at the details and you realize they’re only serving a small segment of the market, or a small geographic area. Or perhaps they’re a huge company and they’re just not doing it well. That’s an opportunity for entrepreneurs.”
So, take advantage of it! There’s never been a greater time for acting upon your startup ideas than now!