Financial Steps Before Quitting Job

Financial Steps Before Quitting Job

  • There are major differences between working for an employer and working for yourself. 
  • Entrepreneurs who left the corporate world to start businesses told Insider how they made the leap.
  • They shared the financial steps they took, such as paying down debt and building an emergency fund.
  • This article is part of “Starting Up Your Small Business,” a series exploring steps small-business owners can take when starting out, transitioning, or scaling up.

There are major differences between working for an employer and working for yourself ​— and if you’re considering transitioning to the latter, it’s a big decision. 

“It was pretty scary to go from having a salary to having to figure it out,” Wonder City Studio co-founder Phil Thompson, who left a consulting job in 2013 to double down on his art, told Insider. “But I kind of think I needed that. I needed that feeling of a little bit of panic and desperation, and, like, this needs to work.”

Insider spoke with eight entrepreneurs and small-business owners about how they knew it was the right time to jump ship — and how they set themselves up financially to do so. Here’s their top advice.

Start by looking at your personal finances, including how much you spend and save

Before you start managing a company’s finances, it’s important to have a handle on your own money.

Ludomir Wanot, who quit a six-figure job at Amazon to build a real-estate-wholesaling business, took stock of his personal finances as he was preparing to leave corporate America. He started by examining his monthly spending — and was surprised by what he found.

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Ludomir Wanot, a cofounder of Evergreen Housing Network.

Courtesy of Ludomir Wanot



“I was way outside my budget,” he said. “My entertainment column averaged over $8,000 per month — for restaurants, shows, and travels. I was spending my complete Amazon income on entertainment alone.” 

He made some immediate lifestyle changes, including cooking at home and spending less on clothes, and reduced his expenses significantly. This removed some of the pressure he was feeling to earn the same amount as an entrepreneur as he was earning at Amazon.

Wanot said he ended up cutting his monthly spend down to the “absolute necessities,” which totaled about $2,500 a month. Then he focused on generating at least that amount in passive income before he quit.

Steph Gordon and Den Mathu, a couple in Toronto, also considered their personal finances before quitting their corporate jobs to create online content full-time. They committed to paying off Mathu’s student loans and building separate emergency funds that could cover one year’s worth of expenses before giving up their salaries and consistent paychecks.

By the time they quit their jobs in 2021, Gordon had about 50,000 Canadian dollars, or about $36,565, stashed away, Mathu had CA$30,000, and they had about CA$40,000 in their business bank account, they said.

Understand and manage your ‘runway’

Your runway is essentially how long you can survive until you run out of money. You want to allow yourself as long a runway as possible to survive as an entrepreneur because, inevitably, you’re going to make mistakes (and maybe costly ones).

“You need space to change and adapt,” Mike Gardon, a former banker and the founder of The Break Community, told Insider. “Entrepreneurship can’t really be neatly planned; it has to be experienced and it can be humbling. So step one is to really be able to manage your cash flow and runway in a way that allows you the maximum range to make mistakes, learn, and adapt.”

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Katie McCarron, the founder of the family-run business Portland Pet Food Co., and her daughter Maggie.

Courtesy of Portland Pet Food Company



A good way to do this is to start by freelancing or consulting on the side and have a chance to test the waters before making the leap, he added: “I had three kids, a house, and my wife, so I wasn’t about to do anything drastic like quit cold turkey with nothing lined up. My goal was to replace my income through my side hustle, and I wasn’t going to quit my job until I had that lined up with a pretty good idea that the income would continue.”

It’s smart to be conservative with your projections, said Katie McCarron, an entrepreneur who worked in the corporate world before starting and eventually selling her first company, Academic Network.

“Make sure that whatever you think it’s going to cost you, double it,” McCarron, whose latest venture is the Portland Pet Food Co., which she founded in 2014, added. “It’s always going to be more money than you think it’s going to be.”

Create a proof of concept and establish a contingency plan

Katie Lauffenburger, who co-founded Wonder City Studio with Thompson, had been creating ceramic home sculptures for years on the side before deciding to leave corporate America and pursue a more-artistic career.

“It took me landing on something with promise before I finally decided to leave,” she said. “I had been written up in the Chicago magazine, which was pretty exciting, in early 2021, so I started to see some signs that people liked what I was making on a broader scale. Once I got that level of confidence, it was like, ‘OK, maybe I’ll give this a try.'”

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Tyler Wright, the founder of Defining Wealth.

Courtesy of Tyler Wright



Plus, she’d built up a cash cushion from working as a designer for 14 years and had a contingency plan, figuring: “If it doesn’t work out, I could always go back to a full-time job.”

Similarly, Tyler Wright had built a hefty cushion between stock-market and real-estate investments and knew that his side hustle could generate revenue before quitting his day job.

“My business was already bringing in money through courses and different programs at that time,” Wright, who runs a personal-finance brand and coaching business called Defining Wealth, said. “It had been consistently profitable for six to eight months, and I also had an outline of what I wanted the next programs to look like and how I could monetize them.

“For me, it was like, ‘Even if this doesn’t go well, I could live for 15 to 20 years without earning any income.’ I had this defense, and it allowed me to not really worry too much about, ‘What if I fail?'”