618: 7 Questions to Ask Before You Quit Your Job

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1:14What's up? What's up? Nick Loper here. Welcome to the Side Hustle Show, part of the Entrepreneur Podcast Network, because building your own income streams is the best way to recession-proof your life. So how do you know when it's time to hand in your two weeks notice and become your own boss? That's what this episode is about. Now quitting your job to pursue your business full-time is a dream for a lot of sign hustlers, but there are a few things that I think you should have in place before you make the leap. When I was working my corporate gig, my one and only corporate job out of college, I probably stuck around longer than I needed to because maybe I'm just more risk averse.

1:53I had my little shoe business plugging away nights and weekends on this thing. And the cool part was because it was an online business, it earned money even when I was at work. So I have that in the back of my mind that this could be a full-time thing. It's just waiting for the right time to make the leap. And the truth is timing is never going to be perfect. And the leap is going to be scary, even with a proven side hustle, even once you've answered the questions from this episode. Yes, you can prepare. You can make that cliff a little shorter. You probably heard that line from Reid Hoffman, an entrepreneur, is someone who will jump off the cliff and figure out how to assemble the airplane on the way down.

2:27And in a way, that's what this show is all about. It's about shortening your cliff. It's about building the airplane before you leap. But for me, quitting my job wasn't this spur of the moment decision. It wasn't the triumphant flip everyone off in the office and make a dramatic exit and slam the door on the way out. It was the result of three years of nights and weekends to build it up to where that was even an option that was even on the table. But I've been thinking about it for at least a year and it felt amazing when I finally got up the nerve to tell my boss. We were out to dinner in Eureka, California.

2:59And the next day for the full six hour drive back to the Bay Area, I got to be excited that yes, this is real. This is happening. I'm doing it. And of course, that was really just the beginning of the entrepreneurial roller coaster, but it still felt like an important milestone. So without further ado, seven questions to ask before you quit your job. Number one is, are you quitting to something or from something. Now, even if your job is miserable and the very thought of another day in your cubicle makes you want to gouge out your eyes, quitting purely to escape isn't going to solve all your problems.

3:36And thankfully, this is where your side hustle comes in. Quitting to work on your business is a lot different than quitting just to get away from a dissatisfying work situation without a plan. And it's the same thing for retirement. I think it's something that keeps a lot of people working, a lot of would-be early retirees still punching the clock. Work has become a part of their identity. They're not sure what they would do without it, even if they don't mathematically, statistically need the income anymore. And then you hear about the stories of people dying in the weeks immediately following their retirement.

4:07Their work had become such a deep part of them, they literally couldn't exist without it. But for the case to most side hustlers, you're probably quitting to pursue your own business and hopefully a lifestyle that allows more time freedom and more earning power. In my case, I wasn't quitting a job that I hated. I was quitting instead to pursue a business that I enjoyed more and one importantly that I thought had a lot more upside potential. And maybe it's two birds with one stone. Maybe it's getting out of that toxic work environment and moving toward something better. But if you can't imagine what you're going to be spending your time doing after quitting, other than just not working anymore, you're probably not ready to quit yet.

4:48That's question one. Are you quitting to something or from something or both? Question number two, how much is your side hustle earning? Before you quit, you got to make sure your side hustle is validated with real dollars. This isn't going to come as a surprise to anyone, but the only real validation is in terms of actual sales, people giving you money for your thing. Now, some side hustlers are a lot more aggressive than I am, but I wanted to see several months or even a year of my side business earning enough to cover my expenses before I quit. And that's an important point. You don't need to fully replace your day job salary, provided you're living below your means, but I do think it's nice to have a track record of profit that's at least covering your fixed expenses.

5:32The reason for that is then you're in the same position that I was, where my entire day job salary was gravy. And I remember the first month where that really hit me. And it was this empowering moment of, I don't need this job anymore. I'm not desperate for this paycheck. And it's another point in favor of keeping your expenses low because that means it's a lower hurdle to clear. We're talking about lowering that cliff. Now, some people like Shannon Weinstein built her side hustle up to a multi six figure level before giving her notice at work. I was especially kind. I gave about four weeks notice because I couldn't wait to tell them I was leaving.

6:09I broke the news to my team. They said, what are you going to do? That's the first question they always ask you, right? Like, so what are you going to do? As though this is the undall be all of careers that you could choose. Like, what are you going to do other than this? And I was like, well, almost literally anything else would make me happier. But, and if you're there, I feel you. So what happened was I told them, by the way, I'm starting my own business or I'm going to go do my own business full time. And they're like, what type of business are you going to start? Well, I was like, well, I actually have a multi six figure CFO practice and a top 100 entrepreneurship podcast already.

6:42And they were like, wait a second, what are you talking about? And I said, none of y 'all have Googled me over the last two years, luckily, but if you Google me, that is what will come up. On LinkedIn, on Facebook, I was super quiet, but on Instagram and on other platforms, I was building. So I knew my coworkers were not on these platforms. So I was freely able to build these types of things. And I was able to show up and deliver value and teach. Here's the brilliant part though about that is I was showing up and I wasn't like selling a ton on Instagram. I wasn't showing up and selling. I was delivering value over the course of two years.

7:16I was not starving to sell people something. I just showed up and tried to build an audience. So then when I finally quit the job and I was able to openly talk about my business and to promote it on all platforms, I was like, and by the way, now I got something to sell you guys. So it was super exciting to be able to kind of be open and be out there as a business owner and be proud of it. I don't think you need to wait that long or see that level of income before you take the leap. But on the other side of it, you've got people like Kellen Klein, who quit his job after the side business had earned just 50 bucks.

7:51We made 50 bucks. And I was at this point where I was depressed and hated every job I ever had and knew that if I stayed there, I would just be miserable the rest of my life. Our marriage was struggling because of it. And Brittany was sick and tired of me complaining. So I said, hey, we didn't just jump without having our finances ordered. We still had a lot of student loan debt, but we had at least six months of nest egg where we could live off of that and Brittany's salary. So I'm not having to make horrible decisions based on where's the income coming from and trying to make money quick. So that was a huge blessing to have that income saved up.

8:21And then I just had confidence in myself. I've had a bunch of businesses. I did drop shipping in college. And so I've made money online, but that$50 was like, uh, it's just a signal of like, go all in and you can find freelance work with digital marketing. Cause you've been doing it. And within two months I replaced my income with freelancing in our blog. You can check out those full episodes with Shannon and Kellen for more. Those are number five, 53 and 605 in your archives. You want to scroll back in your app to find those in Shannon's case. we talked about her using Instagram and her podcast to build an audience, build relationships with potential customers.

8:58And with Kellen, it was how an online business can thrive in a post HCU world, a post helpful content update world. Now, if your business is seasonal, another consideration is, well, I want to make it through a whole cycle so I can kind of get a full picture of what this is going to look like, hopefully for the next 12 months. But still, it's a big responsibility to write your own paycheck every month and having a track record of doing that before you leave your job, I think will ease that anxiety in a big way. We have more questions to ask before you quit your job right after this. As a business owner, you worked hard to make that phone ring, but missing a business call, it's like watching money fly right out the window.

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11:31This Black Friday, join the thousands of new entrepreneurs hearing for the first time with Shopify. Sign up for your free trial today at shopify.com slash side hustle. That's shopify.com slash side hustle. Go to shopify.com slash side hustle and make this Black Friday one to remember. So question two is how much is your side hustle earning? Question three is what's your runway? And Kellen alluded to this just a moment ago, like, well, we had a little bit of savings cushion. And I think it's really, really important to have that. So your runway or your cash cushion, this is the amount of cash you have socked away to be able to cover your living expenses while you're working on building up your business.

12:13And it's usually measured in the number of months, right? So some people will say, oh, you need at least three months of living expenses saved up in your emergency fund or six months. I'm more conservative. Income can be unpredictable. I like to have 12 months of living expenses. Other people think that's insane. You don't need that much, but in a moment of high cash yields, like we're recording it right now, it's like, well, that's totally fine. But the way you can calculate that is to add up all your monthly expenses and multiply by however many months of a runway or cushion would feel comfortable.

12:43If income for whatever reason went to zero, which was pretty much what happened to me right after I quit my job. This was when Google decided they didn't like my little shoe site very much anymore and they wouldn't take my advertising dollars for three months. With that ad account shutdown, the traffic, the income took probably an 80 % hit in an instant. And it took three months of literally pulling out my hair. Like I had hair at this point to come back. And eventually they came back three months later, they said, look, we made an error. You're good to go. And while that was a stressful time, it would have been way more stressful if I didn't have that financial runway or cash cushion.

13:21Now, if you're not sure where you're at in terms of runway, have a listen to the 30 day money cleanse episode that we did with Rachel Jimenez earlier this year on just kind of a step-by-step checklist or playbook to kind of get your personal finances in order there. That's question number three. Have a look at your cash runway. What kind of living expenses or emergency fund have you got there? And another call to keep your expenses low because that means that's less you're going to have to save up for that runway. But question four is what does your sales pipeline look like? and this could be for service providers this could be for online business owners website owners like do you have clients and sales in the pipeline and maybe they're not closed yet maybe they're not fully like in that receivables column yet but do you have a process to acquire the next customer we've seen people i started a consulting business i landed one client and then that gave me the confidence to quit my job but then the next month it's kind of this feast or famine oh well now i shoot, that job dried up and now I got to go find another client, right?

14:22So what does the sales pipeline look like? And I think that's essential to get a pulse on before you take the leap. This is the only way to secure that you have a viable business and that you didn't just get lucky with a referral client or two, right? What's the repeatable system here? In my case, I had a system for building out advertising campaigns for the shoe site. And I could see how if I just had more time to dedicate to it, the business would grow. It was proven. It was repeatable. It just needed more time and attention. So that's question four. What does your sales pipeline look like? Number five is, is your full-time job preventing you from growing your side hustle?

15:00Which in my case, it absolutely was. It's easy to sit back and imagine all the great stuff you could do if you just freed up an extra 40, 50 hours a week that you're pouring into your day job or more if you count commute time. And that's what it was in my case, where there was a clear and direct path of the day job is preventing the side hustle from going. Nate Jackson put it this way in episode 399. When I was running the numbers for myself, it was costing me money to go to my job. Because like, if I'm not working on my business, if I'm not sourcing, I'm not packing things, I know what my hourly wage is for my business based on my numbers.

15:37So then I was going to work like, okay, well, I'm making like 25 bucks an hour at work. I'm making a hundred bucks an hour working on my business with 200 bucks an hour like I need to stop going to work because this is costing me a lot of money. Yeah, yeah, that's awesome to get to that point Isn't that an interesting way to frame it? My day job is costing me money because there's always an opportunity cost on where we spend our time Now the flip side of that is have you exhausted all the side hustle growth potential? You can't in the limited hours that you have is time really the bottleneck is the day job Really the thing that's preventing you from growing it or with a little creativity Could you get more leverage out of the hours you do have?

16:13I think it's probably worth the thought exercise to ask yourself that question as well. That's number five. Is your full-time job preventing you from growing your side hustle? Number six is how are your costs going to increase or decrease after you quit? Because becoming a full-time entrepreneur is going to impact your budget, probably both positively and negatively. For example, if you plan to work from home, your commuting costs might go down, but your energy bill might go up. when I turned in the keys to my company car, which was seriously one of the best perks of my old job, it was for a car company.

16:46So it made sense. They're giving people company cars. So I had to go get a new set of wheels. I had to start paying for car insurance, the vehicle purchase. Okay. That's a one-time expense, but the insurance, that was a new recurring expense. Now, if your business is location independent, you might actually be able to recognize a huge cost savings by relocating to a lower cost of living area or an area with lower taxes, which was one of the side benefits of us moving back to Washington, a no income tax state from California, a notoriously high income tax state. But it could also mean an opportunity to explore other parts of the world, run your business from the road, play that digital nomad lifestyle for a little bit, keep those expenses low, which may be one way that your costs increase or decrease after you quit.

17:29I think the biggest wildcard expense for the newly self-employed in the U.S. at least is health insurance. This is significant. This is potential put a kink in your plans to quit your job because this expense can be so big and someone that you definitely have to account for before you make the leap. You can shop around on your local state exchange, but unfortunately the options aren't going to be great no matter where you live. Robert Farrington described it in this way on our episode on 10 rules to build wealth? That was one of the scariest questions before making the leap to first like being self-employed.

18:05It's like, what are we going to do for health insurance? And it's like a common one. And honestly, we just went to the Covered California ACA exchange and bought a health insurance policy. My wife and I joke that it is not health insurance, it's bankruptcy insurance because we have the privilege of paying$1 ,500 a month for our family of four. and that is for a high deductible plan. So every time we go to the doctor, we pay out of pocket until like, I think$12 ,000 too. Yeah, so you pay your premium every month. So$18 ,000 a year. And then you're gonna pay another 12 grand before you see any benefit from this plan.

18:40Yeah, and granted, the benefit is that my cash pay price is a negotiated cash pay. That's so nice of them. It's so nice of them. But on the flip side, it does protect you if you are in like a catastrophic, Like where you're really getting the benefit of this insurance is theoretically if you had a really bad medical problem, right? And then like millions of dollars in bills. But it really sucks on the day-to-day. We're a healthy family. Knock on wood. And like we pay a lot for not much. That's question six. Get an understanding of how your costs are going to increase or decrease after you quit your job.

19:13Number seven is what is your realistic worst-case scenario? if everything suddenly comes crashing down around you, what happens? How does that impact your life, your business, your livelihood? I know this is kind of scary to think about. Tim Ferriss calls it fear setting, but it's an empowering question because when we really dig into it, the realistic worst case scenario probably isn't life-threatening. I mean, we tend to make things a bigger deal than they are. People quit their jobs all the time. The world keeps spinning. People do it who are far or less prepared than you are. So you got to be honest.

19:48What's your worst case scenario? You're going to have to change your business model. You're going to have to swallow your pride, go find another job. It's not the end of the world. You're going to have to crash in mom's basement for a little bit. It's not the end of the world. This bruise to the ego for sure, but it's all temporary. And same with success. It's all temporary, right? You never know where it's going to last. My guess is you're going to be happier having taken the chance than to stay the course and wonder, what if? Remember, this is one of the top five regrets of people on their deathbeds.

20:17There was a whole book on this topic. It was, I wish I'd had the courage to live a life true to myself, not the life others expected of me. And so that is question number seven, kind of itemizing out, well, what's your realistic worst case scenario? If this goes to zero, what am I going to do? And kind of having that back in case of emergency, break glass, kind of a plan there will help you be more comfortable and confident quitting your job. So to summarize in this episode, number one, are you quitting to something or from something? I advise having something to quit to. And obviously, if you're listening to the side hustle show, my guess is that it's a profitable side hustle.

20:57Number two is how much is your side hustle earning? Got to validate that with real dollars before you make the leap. And hopefully you have a track record where it is at least covering your fixed expenses. And of course, we've seen some exceptions to that rule. Some people quitting their job very early on that spectrum and other people waiting until, hey, it was already a super, super profitable business more than even sometimes my day job was making. But that's question two, how much is your side hustle earning? Three, what's your runway? How many months of living expenses do you have saved up?

21:28Other people would call this, what's your emergency fund, but have that on lockdown. Make sure you know what that number is. And if you have to tap into that emergency fund that you're going to be okay. Number four is what is your sales pipeline look like? Sure, you had sales coming in today. Sure, you had customers today. What's next? Two, three, four months down the road. Do you have a prediction of what revenue is going to be like there? Number five is, is your full-time job preventing you from growing your side hustle? Or with a little creativity, is there a way you can get more leverage out of the hours that you do have, the limited hours that you do have.

22:02Number six is understand how your costs are going to increase or decrease. Remember, some may go up, some may go down. You may recognize a huge savings if you change locations to a lower cost of living area, but you may have to go plunk down for health insurance that you didn't used to have if that was covered by your employer. And finally, number seven is what's your realistic worst case scenario? Being honest with yourself about what's the worst thing that could happen. And hopefully, will give you a little bit more freedom and confidence to take that leap. Because remember, you're more likely to regret the chances that you didn't take than playing the conservative route the whole time.

22:37So that is it for me. Thank you so much for tuning in. Until next time, let's go out there and make something happen. And I'll catch you in the next edition of the Side Hustle Show. Hustle on.