Anyone who starts a small, side business probably wonders when they should quit their day job. They might even wonder when they’ll know when to quit a day job. We’ll answer that question by taking a look at Anthony Zambai of Bullet Bouquets, who had to answer just that question as his business took off.
Anthony Zambai created a business, Bullet Bouquets, that would propel him to quit his day job and replace his full time income as an engineer.
One of the biggest decisions Zambai had to make was whether to quit his day job, and if so, when.
How Does a Business Owner Know When to Quit a Day Job?
One good way of knowing when to quit your day job is by setting up metrics in advance. As an example, someone who’s thinking of starting a small business could start by making a commitment to keep the day job until there’s enough money coming in to completely replace their full time income. But even that might not be the best plan ever, because what if the business is a flash in the pan? In some cases a business might provide a nice full time income for a few months and then peter out. Here are some examples of different metrics a small business owner could use to decide when to quit a day job:
- Business income must provide 50% of full time income.
- Business income must provide 75% of full time income.
- Business income must fully replace full time income.
- Business income must fully replace full time income for three months.
- Business income must fully replace full time income for six months.
- Business income must fully replace full time income for one year.
The specific metrics a business owner chooses depends heavily on the type of business they’re starting. As an example, someone who starts a highly labor intensive business might be making only 50% of their day job’s income, but might realize that if they could spend 40 hours a week on their business, they could easily grow the business income three or four times in magnitude. But if they turn out to be wrong about that assumption, they could find themselves making a lot less money than they’d planned on, with no way of going back.
Anthony Zambai of Bullet Bouquets set up a few metrics to help him decide when to quit his day job. In the end, his business grew so rapidly he knew he would have to make a choice. If he stuck by those metrics, his business would crash from inattention. So he took a calculated risk.
Metric #1: Six Months of Decent Income
The first metric Zambai set for his business was, if he could earn six months of steady, decent income, he could quit his day job.
“My wife and I had stayed up late talking about some milestones or things that should be accomplished before I decided to quit my day job. We decided I could wait until I achieved six months of parity. So if my business income was at or above my engineering income for six months then it would be totally safe for me to quit. In that case I could quit without any drop in our standard of living. But that’s probably not the best time to do it. There’s probably a more efficient point at which you make the most amount of money and you put yourself at a more manageable amount of risk by quitting. So you could quit when you’ve sustained a year of strong sales, or six months or three months or whatever. So you set that metric.”
Metric #2: 50% of Regular Income During Down Times
Some businesses that are seasonal or depend on holiday spending may replace someone’s full time income but create heavy boom and bust periods that create uneven cash flow. For those businesses, some kind of metric to set minimum goals for downtime earning levels can be a good idea.
The second metric Zambai set was that he would have to earn at least half of his regular income even during down times before he could quit his business.
“For me, Mother’s Day, Father’s Day, Valentine’s Day, Christmas, those are the big seasons, so if I could weather a storm in between all of those, keeping my income up, then I would feel pretty comfortable that I would be able to quit the day job without a whole lot of risk. If I could maintain sales through a dry spell like that, then what am I doing at my day job? I should go ahead and get out. So if you can prove that sort of thing then go ahead and get out, and get out safely.”
Zambai’s metric for down times was that he would have to continue to make 50% of his regular income during those periods.
Metric #3: Make Sure the Business Can Diversify
Another metric business owners can use to know when to quit a day job is diversification. A business that gets income from only one product or only one outlet, such as online sales, has limitations that can lead to a stoppage of income flow.
Zambai wanted to make sure he could grow his product line and grow his sales outlets beyond the internet alone. The biggest reason for Zambai to diversify his business was that his initial sales came from viral internet success. Eventually he knew that viral interest would go away. He therefore needed some kind of assurance sales would continue once the viral phase had ended.
“I did feel like my business was kind of trendy,” says Zambai, “and if it’s a fad and people just lose interest in it after two years or one year, then indeed I’d better know if it’s going to diversify on its own or if there are some other opportunities out there. You want to feel those opportunities out to a certain extent and verify that there’s a little bit of success in those opportunities before you put time and effort into them.”
One way Zambai realized his business could diversify was through brick and mortar stores.
“I wanted to start selling wholesale to dealerships. I knew customers bought my products from my website just fine, but I wanted to make sure customers would buy them from a brick and mortar store. And also, was it an easy sell for me to pick up new dealerships? That was something I wanted to verify before I quit my day job.”
Zambai also diversified his product line, eventually selling not just Bullet Bouquets in flowerpots but also tie tacks, cufflinks, hair clips, laser-etched bouquets and other items.
When to Ignore the Metrics
Sometimes, it will be obvious to a business owner that their metrics will do more harm than good. It’s a big risk to ignore a set of carefully constructed metrics, but what if a business owner is making a lot of money after the initial launch of a business, but sees that the business will fail without a dedicated full time effort right away?
Although Zambai went to great pains to set up a list of metrics that would allow him to know the right time to quit his day job, he ended up ignoring all of them because he realized he had to make a choice. He could either stick to his metrics or crash his booming business very early on.
“What’s kind of ironic is, I talk about all these metrics, but I quit my job after six weeks,” Zambai says. “I put in my two week notice four weeks after I started my business. So I talk about all these metrics, but in the end, I didn’t really use any of them. I was absolutely swamped. I had two employees working for me the very first week the business opened. You can be scientific about it, but in my case that really wasn’t it. It was, your life is totally insane right now. In order to get some sanity back and also to take advantage of a lot of these opportunities you see in front of you, new product ideas, marketing ideas and so on, you have to get that eight hours a day back.”
Bullet Bouquets got so big, so fast that Zambai realized if he didn’t quit his day job, he would lose control of it.
“I was just solid busy. I had a 40 hour a week job, I was trying to build this business, I had supply chain issues, I had to train employees. I was training employees how to build something that I had only built twelve prototypes of. There’s no way that I was an expert in them at that point. It was just total chaos. So I was working essentially 16 to 20 hour days for at least two weeks, and then once I finally got people trained a little bit and got the supply chain kinks worked out, then I was able to work pretty reliably 16 hour days. But even then my day job was suffering. Because I’d be sitting in a company meeting watching people pat each other on the backs or this or that and my phone was busy emailing me, “Hey, you just made this much money. Hey, somebody just bought this product. Somebody wants to carry your stuff wholesale.” And it was like, what am I doing wasting my time in this day job? It was just such an eye opener. For 15 years I’d been at that day job, not really minding the company meetings and the inefficiencies in working for somebody else. You get used to that sort of, “Oh, I’m just going to go and get a cup of coffee and hang out in somebody’s office for a half hour,” or “I’m going to sit in this company meeting for an hour and watch all this money get burned down the tubes because nobody’s doing anything.” That made me think, man, I’ve got to get out of this. My time is so much more valuable to me than it ever used to be. Two weeks in I was getting probably 10 to 15 emails a day that were, hey, where’s my order? It was pretty stressful.”