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Many startups are ventures that founders pursue in their spare time while still working full-time jobs. If your dream is to turn a side hustle like this into your livelihood, how do you know when it’s time to make that leap?
My latest book provides the answer to this question, along with 19 other key factors that any potential entrepreneur needs to consider. I have been directly involved in multiple startups, taught entrepreneurship at Michigan Ross for 16 years, and was an Entrepreneur in Residence at Zell Lurie College. Now, I have summarized the lessons I learned along the way into a book, Launch Shot: 20 Questions Every Entrepreneur Should Askpublished by the University of Michigan Press.
Of course, not everyone with a startup wants to work full-time. However, I’ve noticed more and more people starting side hustles thinking that maybe one day it could become their main source of income – largely because now is a great time to start a business.
For people who were once just part-time, it’s more common to say, “Wow, I might be able to quit my day job eventually.” People who had never considered starting a business before are now actively considering it. Starting a business is faster and cheaper.
Related: Making the Leap: Three Tips for Transitioning from Employee to Entrepreneur
I’ve taught more than 2,000 potential entrepreneurs in Michigan Ross’ new business creation courses, and I’ve been through the entrepreneurial process myself on more than one occasion.My experience as an entrepreneur and teacher inspires me launch shot, which asks 20 key questions to assess the potential of any entrepreneurial idea. The questions are focused and the answers are enlightening, such as:
– What are the unmet needs of your customers?
– How big is your market?
– How will you price your product?
My book helps readers answer each question with practical tools and advice, with the goal of deciding whether your entrepreneurial idea is worth pursuing.
One of the tougher questions: When can you quit your day job? To answer this question, I’ll walk the reader through creating a reverse income statement, which isn’t as daunting as it sounds. Basically, it’s taking a realistic estimate of how much you’ll need for payroll, benefits, and overhead each month and dividing that by your expected profit per unit. This tells you how many units you need to sell each month to break even.
Your calculations don’t have to be very precise early in the startup process; in fact, they shouldn’t be. This is the roughing stage where you are trying to understand if your idea is feasible. You don’t have to figure things out down to a penny.
Don’t be afraid to make initial estimates. Model early and model often. Say, “Okay, so how much can we charge for a monthly subscription? How much do you think it’s going to cost us to acquire every customer? Well, that doesn’t look good. Is this a structural problem with this business idea?” ? “Is it just bad? Or can we improve unit economics by charging more, lowering production costs, or spending less to attract these customers? Is there potential here? ” It’s all very iterative.
from beginning to end launch shot, one piece of advice to would-be entrepreneurs became a theme: Don’t be afraid of competition. In fact, if absolutely no one thinks of your idea, it’s probably because there’s something wrong with it. At the same time, if other companies are already pursuing your idea, that’s not necessarily a bad thing.
I myself have always had to battle with this feeling. You start thinking, “Oh, okay. My idea has been taken.” But when you start looking at the details, you realize they only serve a small portion of the market or a small geographic area. Or maybe they’re a big company and they just don’t do a good job. This is an opportunity for entrepreneurs.
Related: Side hustle: Full-time employees in the UAE can also work part-time at other companies
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