One of the first decisions you need to make when launching your business is whether to start part-time or full-time. There are pros and cons to each option. Here's a closer look at some of the factors you'll need to consider.
Even if you ultimately plan to run your business full-time, starting on a part-time basis can offer several advantages. It reduces your risk because you can rely on income and benefits from your full-time job. It also allows your business to grow more gradually. According to studies, 37 percent to 58 percent of all startups fail within four years. Having a steady paycheck ensures that you won’t have to worry about paying the bills while growing your business.
Plenty of entrepreneurs toil on nights and weekends–hanging onto their full-time jobs–before devoting themselves completely to their new business. The goal is to save money and prove that the idea has legs before pushing all your chips in. For those of us who aren’t independently wealthy and/or have dependents who rely on us for a steady income, it’s often a necessary period–and one that can take longer than hoped for.
Yet, the part-time path also comes with potential pitfalls. It can leave you with less time to market, strategise and build a clientele. Clients may feel you're not offering adequate customer service. You also run the risk of burning out. Holding down a full-time job while running a part-time business can leave you with little, if any, leisure time and your personal life may suffer as a result.
Whether we’re talking about starting a tech company or a more traditional enterprise like a restaurant, launching a successful business is one of the most difficult things you will ever do in your life. A startup isn’t a side project. It comes with a huge amount of uncertainty, so it’s understandable that you may want to mitigate some of that risk by keeping your day job. But by doing that, you relegate your company and your idea to hobby status. Perhaps you are making some money off of it, and good for you, but a startup will never reach its full potential without the complete commitment of its founder.
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That is not to say a part-time business can't work. You'll need to have excellent time-management skills, strong self-discipline, and support from family and friends.
If you find there is an unmet need for your product or service, no major competition and a ready supply of eager customers, then starting full-time might be the best plan. On the other hand, if you find the market won't support a full-time business, but might someday with proper marketing and development, then it is probably best to start part-time.
Sometimes, circumstances force you to start your business part-time at first. Perhaps you need to keep your day job in order to finance your new business or support your family. Perhaps other commitments prevent you from devoting all your time to your startup. If this is the case, don't feel discouraged: Many successful businesses have started out part-time — it just takes a little longer to get there.
Perhaps your available startup capital isn't adequate to support a full-time startup just yet. Typically, it's wise to have enough money put aside to live on for at least six months to a year before you launch a business full time. If you can only afford to start a business on a smaller scale, a part-time business is a smart choice that won't put undue financial pressure on you.
If you're leaning toward starting part-time, then set financial priorities. How do you know when your business is making enough money that you can quit your day job? A good rule of thumb is to wait until your part-time business is generating income equivalent to at least 30 percent of your current salary from your full-time job.
If you are planning to launch a business you believe can become the next Facebook or Uber, or have a plan to grow aggressively and seek venture capital, you'll need to put all your time and effort behind the launch in order to meet your objectives and satisfy potential investors. However, if you simply want to make some extra money, or start a "lifestyle" business that can eventually replace your income from your job, starting part-time could be a smart move.
Starting a full-time business requires taking a lot of chances — quitting your day job, putting your heart and soul into a new venture and going without a salary until your business takes off. If the idea of doing all this at once makes you nervous, you can ease your worries by starting part-time, which poses less risk.
It sounds obvious, but accountability is harder than usual while you’re building a startup part-time. When you’ve missed the milestone dates you’ve set for yourself, it’s usually been because of a huge workload at your own day job.
You can’t ignore their boss but that’s why you have to commit–as a group–to milestones you think you can hit, then hold each other accountable to keep up morale. Remember, without schedules, your side business will quickly regress into being a mere side project.
The emotional and psychological side of starting a business is just as important in your decision as the financial and market aspects. Do your closest family members support you starting a business? Do they understand the sacrifices both full-time and part-time businesses will require? Make sure they know that they can discuss any objections or worries they have with you.
If you have a significant other and/or children, you must factor them into your startup equation. Do they support your starting a business full time, or would they be more comfortable if you eased in part-time? Your family members will inevitably have concerns about financial security, how much time you'll have available for them, and other practical and emotional issues that you need to take seriously in making the decision whether to go part-time or full-time.
Then work together to develop practical solutions to the problems you foresee. Also, lay ground rules for the part-time business. For instance, agree not to work on Sunday afternoons, or not to discuss business at the dinner table.
If the idea of taking the full-time business plunge keeps you awake at night then perhaps a part-time business is best. On the other hand, if you need to work long hours at your current full-time job, you commute 60 miles round trip and you have 2-year-old triplets, for instance, then piling a part-time business on top of all that could be a recipe for burnout if you're not careful.
Assess the effects of both a part-time and a full-time business on your life. You'll be most likely be working evenings, weekends and lunch hours, if not your holidays, sick days and vacation time, too. This is the kind of commitment you will need to make if you expect your business to succeed.
Do you work well late at night or early in the morning? Is it best for you to get more sleep during the week and dedicate weekends to your startup? Create a lifestyle that works for you. Stress and lack of sleep can do a number on your immune system. Make sure that you are eating well, getting exercise, and reviving yourself every once in a while with a break.
The majority of your time will be spent at your full-time job but that still allows for an extra 20 or so hours to work on your business if you manage your time wisely. Write down a list of all the activities and commitments you have in your life with the amounts of time you devote to each during your week. Take note of the ones you can afford to lessen your involvement with, and let them know you are stepping back a bit to focus on a new project that means a lot to you. The more time you can free up, the quicker you'll be able to start seeing results. Cut out any activities that aren’t helping your business move forward such as playing around on your smartphone or watching Netflix.
Consider moving closer to your job for a shorter commute or ask your employer if you can telecommute or work from home a few days a week. Making the most out of your time may mean waking up earlier in order to get things done. Use a time management tool in order to prioritize what needs to be done on a daily basis.
Know which time of day you're mentally at your best and make that the time you spend on starting your business. Be selfish and give your passion project the best part of your day.
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Your time is worth money and grunt work should be outsourced as soon as you can afford it. It’s key for startups to develop and document efficient processes and delegate them to someone best suited for the task. It’s normal to want to handle everything at first when your company is brand-new, but scaling is imperative if you want to grow. Sites like Upwork and Peopleperhour make it easy to find the most suitable professionals for design, development, copy writing and other jobs.
If your thinking of starting add part-time but want to look like a fully operational business you might want to consider business incubators. A business incubator is a company that helps new and startup companies to develop by providing services such as management training or office space.
Business incubators differ from research and technology parks in their dedication to startup and early-stage companies. Since startup companies lack many resources, experience and networks, incubators provide services which helps them get through initial hurdles in starting up a business. These hurdles include space, funding, legal, accounting, computer services and other prerequisites to running the business.
Among the most common incubator services are:
Help with business basics
High-speed Internet access
Help with accounting/financial management
Access to bank loans, loan funds and guarantee programs
Help with presentation skills
Links to higher education resources
Links to strategic partners
Access to angel investors or venture capital
Comprehensive business training programs
Advisory boards and mentors
Management team identification
Help with business etiquette
Technology commercialization assistance
Help with regulatory compliance
Intellectual property management
In a part-time effort, a co-founder is essential to keeping you on-track and working. At some point, you’ll hit a motivation wall… but if you have a partner who is depending on you, you will find a way past that. If you don’t have a partner, you’ll often lose interest and find something else to entertain you. Pick a day or two per week where you always work, ideally in the same room as your co-founders. Always, no exceptions. That doesn’t mean you aren’t working other days, but keeping a fixed schedule helps you through the phases of the project that might not be so fun.
Make sure there is very clear ownership of “after hours” work. If ownership of your personal intellectual property is not clear, do not rely on the good will of your employer. Greed can do funny things to people, even if they were initially big supporters of your startup.
Before you start your start-up, talk to your HR department and the legal department at your employer’s company. Make sure that you are allowed to work on a side project while you are there.
If you’re considering working on a startup while keeping your day job, we would highly suggest that you at least review the contract you signed upon being hired to make sure they can’t claim ownership of your startup down the road.
If you're under any non-compete clauses, assignment of invention clauses, or non-disclosure agreements, then it's best to consult your attorney for personalized advice on this matter.
Print out every contract you've signed and take it in to have it reviewed, it's definitely worth your time and resources. Fully disclose your proposed business idea, and your attorney will give you their opinion on if you're violating any of your agreements. Ask for guidance on how to stay safe moving forward.
They’re paying you to do a job, so you owe it to them to give it your all. Make it your goal to be their best employee, the kind you’d want to hire. And never use work resources. Don't make photocopies with the work copiers. Don't use work emails. Be respectful of the fact that you're doing something for yourself. Above all, don’t let your startup overshadow or hamper the work that you're doing. Remember, this is your reputation, so think longterm. You want your current employer to be a strong ally of yours in the future.
Think of your job as a blessing since it’s providing you with a steady source of income as you launch your startup on the side. Money from your job can be used to invest in your startup. Your job can also be used for networking purposes. Some startups have been able to count former employers as clients.
The things you’re doing at your day job can benefit your startup. Observe the way your current employer operates. Watch the processes. Pay attention to everything that’s going on in the company including how the work is delegated, where the sales people are getting their customers and how management is interacting with their staff. Having a close view on your company’s internal processes lets you see what’s working or not and apply the lessons when launching a startup. Network. Meet smart people. Ask tons of questions. Learn, learn, learn! And enjoy the time while you're there.
If you’re going to screw off at work (everyone does), spend it getting smarter about the stuff you don’t know. If you’re a coder, read a few design or usability blogs. Read up on what motivates angel investors. Research competitors and write down what they do well. Get brilliant at SEO (it’s not hard). Write a lot more (blogging helps). Think about virality and research the heck out of it. That said, be aware of the fuzzy line between using your cool-down time at work for your startup and stealing time or resources from your employer. If you’re paid to do a job, you need to do it.
The switch from a full-time job to no steady paycheck overnight can be daunting to say the least. Ease the transition by asking your employer if you can switch to part-time or perhaps even telecommute. This will enable you to still earn money while having more time to focus on your startup. Another option is to work from home as a freelancer.
Whether to start part-time or full-time is a decision only you can make. Whichever route you take, the secret to success is an honest assessment of your resources, your commitment level and the support systems you have in place. With those factors firmly in mind, you will be able to make the right choice.
If you do decide to start your business part-time, here are some tips that can help boost your chances of success:
Consider taking on a partner or outsourcing some of the work so you can get more done in less time.
Create financial projections and decide at what point you will be making enough money to switch over to running your business full-time.
If you're starting a business while keeping your job, make sure that your new business does not conflict with, compete with or put your job in jeopardy.
Thinking of taking your business to the next level and need some finance advise, give us a call.
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