SHOULD I QUIT MY JOB?
If you have dreamed of becoming your own boss, bear in mind that 40 is considered the point of no return, or rather — the point of no departure.
At 40 years of age your income, as an established professional, has probably reached a point where you are highly unlikely to earn better in the next five years, by venturing into your own business — not impossible, but unlikely.
Waiting for 40 to draw closer before you consider a move also indicates that you are naturally risk averse and less likely to be comfortable in a self-employed environment. The freedom of being self-employed, the satisfaction of generating employment and the capacity to grab that next income earning opportunity when it presents itself, is what entrepreneurs thrive on.
Every aspiring entrepreneur who leaves their full time job pay a price for this ‘freedom’, because chances are, that initially at least, they will earn less.
Exactly how much money the business can afford to pay its owner, or if there will even be any cash left for the owner’s salary, is seldom top of mind for most entrepreneurs. If there is such a fear, it would be the tonic that drives a true entrepreneur forward and keeps that ‘capitalistic dream’ alive. Entrepreneurs are improvisers — and that includes making sure all the bills get paid at month end.
The closer you are to 40, when car and household debt is an established part of life and the family has settled into a certain lifestyle-mode, the more difficult it becomes to reduce personal overheads so as to minimise the burden on your business overheads. Reducing overheads is easier if there is no extended family.
40 Remains the number; if you have not made the break for self-employment by then — don't do it. Not in this day and age. A decade or two ago there may have been an opportunity for a late charge, but retail trade in goods and services has become very specialised and competitive. Likewise, experience in general trade and knowledge of the industry you are operating in has become essential and these attributes are seldom developed other than through the passing of time and making mistakes.
Not 40 yet?
For those aspirant entrepreneurs who are not 40 yet and who wish to venture into their own enterprise, the following advice is offered;
- If you want to be your own boss because you want to substantially increase your income — don't do it. Money is a result of being good at what you love, not a desire to be wealthy.
- Be prepared to invest in your mission because it will require investment. You will lose time on your lifestyle calendar and it will feel as if you are backtracking for the sake of improving your lifestyle.
Plan your journey from salaried employee to entrepreneur — navigate your lifestyle and asset base to afford your venture the optimum chance of survival from the day you convert. Having as much cash as possible with the least fixed personal expense will provide you with the best chance of success.
What are the numbers?
How much cash do you need to save up or realise through the sale of assets in relation to what a decent business could afford to pay you? Profiles of individuals differ and a small pizza business will not suit all, but we believe the 2230 principle is a fair rule of thumb. Your initial own cash contribution towards the funding and set-up of the business needs to be 20 to 30 times the after-tax income your lifestyle requires on a monthly basis. If you need R20,000 a month to cover your lifestyle, you will need at least R400,000 unencumbered capital towards a typical retail franchised business to start with.
If the numbers are not working, there are two ways to get there:
- Sell more assets, or
- Reduce your personal overheads
Even if this takes time, it is important that you do everything you can to give your business the best possible chance of success. Once your business is up-and-running and you have survived the start-up phase, you can buy those assets again and afford yourself those luxuries you may have had to forfeit to get the business off the ground.
By now you would have probably gathered that 40 is the number and sooner is better than later — this is not to say that following your entrepreneurial dream is impossible after 40, just that it will be damned uncomfortable.
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