Hello 👋

Martin here. Welcome to another edition of Founders’ Hustle!

I write bitesize newsletters containing actionable insights and insider knowledge across the full spectrum of company building from inception to exit.

Today’s newsletter is for subscribers who currently have a 9-5 job and have founded a business on the side. Specifically, those who want to take their side business full-time. Deciding when to quit a 9-5 in this context is not straightforward.

I did this myself some years ago so I know firsthand what it’s like to go through this process. I also nearly made a big mistake and quit too early, a path that would have rendered me broke and absent of a sustainable business.

Consequently, I developed a framework to pinpoint the moment I should quit, which worked.

All of the above I go into detail below. Let’s get started…

Since you’re reading this I’m going to assume two things.

First, you have a “9–5 job” (full-time occupation) that takes up most hours of the working day.

Second, you have a side hustle business you want to take full-time. It has some traction, but not enough to support you financially to survive.

This is a frustrating situation to be in. As you’ve likely come to realize, deciding when to quit your 9–5 job isn’t clear cut.

It’s not like one day you launched a side hustle and the next you’re making enough to pay yourself a living wage. There’s a long in-between “finding your feet” period that’s super tough to get through.

Once you’ve achieved even a little bit of traction your side project starts to become real in your mind. It feels like it’s been validated.

Then, you put pressure on yourself to take it full-time. This starts long before it generates meaningful revenue and amplifies over time as growth continues.

From then on it always feels like your side hustle is perpetually “close” to taking off. If only you could pursue it with all of your effort and attention now it would be a successful endeavor quickly.

But, the main reason you have not quit already is due to money, which is totally rational. The thought of not being able to pay your rent or buy food keeps even the most placid of people awake at night.

It’s providing you with income. Effectively, paying you a salary to build your own business.

But, at some point, you realize every hour you spend on your full-time occupation is a material amount of time your side hustle isn’t advancing. This reduces your execution speed and makes you less competitive as a business. Pressure builds more.

Plus, there are other obstacles. Ordinary things like scheduling meetings, attending events, responding to customers, and putting out fires are difficult to manage around a full-time job. Your 9–5 feels like handcuffs.

Splitting your cognitive energy between two different projects means your side hustle doesn’t get the full amount of creative juice it deserves.

Your brain can only be intensely creative for a few hours per day, so you start to wonder if it's even possible to make your side hustle financially viable before you quit your 9–5.

So, what you’re left with is a difficult situation. Your side hustle needs more of your time and energy to thrive, but, you need money from your 9–5 in the near term to pursue it.

At some point, that temporary basis has to come to an end for you to properly realize your goals and aspirations.

This leads to a key question you’ve probably wrestled with numerous times.

Timing this well is absolutely critical. You need to be able to transition to your side hustle full-time and have money to support yourself.

If you do it too early you’ll run out of money and find yourself job searching.

If you put it off for too long your side hustle may never achieve as much as it could of.

To make matters difficult, if this decision is made under an intense mixture of pressure and anxiety, it can lead to bad choices and outcomes.

I had a full-time job, built a startup on the side, quit my job, and went full-time with my startup.

I wrestled with myself for many months over the question of when to quit my job.

In the end, after mapping out my decision logic for resigning thoroughly, I timed my resignation exactly right.

But, I nearly made a big mistake and quit six months earlier when my judgment was clouded with pressure and anxiety. This is not a decision you want to rush.

Next, I’ll walk you through my journey, which we’ll use as a case study.

A close mistake

After leaving university I secured a full-time position in corporate banking.

Despite the fact it was secure and well-paying, I had an irresistible urge to found a startup “on the side”. So, I did.

Shortly after launching my first website it received a ton of traffic. This was a validating event both in terms of the product concept and my abilities as an entrepreneur.

Super exciting, I thought. Surely it’s only a short amount of time before it’s at a stage where I can commit to it full-time.

But, as the months went on growth slowed right down. The time investment needed to achieve similar results kept going up and up. In a nutshell, the website didn’t have “pull” from the market.

I got frustrated and started to convince myself it’s only going to work out if I put all of my energy into it. So, around five months after launch, I seriously considered quitting my job.

This is a subject I toiled with day after day for weeks. Only after sitting down and talking with my girlfriend (now wife) did I reject the idea and come up with a new plan.

In hindsight, this was a great call because at that point my website was generating no revenue and I only had three months runway in savings. Put that way, in hindsight, the idea of quitting my job seems absurd!

Meaningful revenue did not materialize until six months later so I would’ve gone broke and had to look for a new job well before that. This would’ve been stressful and very distracting from my startup.

You could make the argument by working full-time revenue would materialize sooner.

True, but will there be enough profit to support you when your savings run out? And, will it be sustainable?

Until you have product-market fit and a proven revenue stream it’s impossible to make that call.

With my startup, the first website failed. This is the website I was thinking about quitting my job to work on full-time. It’s empowering to learn that lesson with a sustainable income from a 9-5.

It never reached product-market fit. There was just no real demand for it. Simple. Fortunately, I learned this lesson while still employed and in a comfortable position to take another shot.

The second website my startup launched was the one that hit product-market fit — and, quickly. Revenue, although small to start, was generated from day one. This was left to accumulate on the company balance sheet.

Three months later the company had a solid base of (seemingly) repeat customers and a ton of prospects. Although revenue was not spectacular it was up and to the right, with a steady and predictable trend.

All of this was achieved whilst still working at my full-time bank job. Having product-market fit, not your full-time, is key to side hustle success.

When things aren’t going well for your side hustle its easy to assign blame to the fact you’re not doing it full-time. It’s a simple trap to fall into that can lead to you drawing the wrong conclusion and quitting too early, like I nearly did.

Genuine problems that are caused by you not being full-time on your side hustle are usually caused by the success of your side-hustle, not by an absence of success.

For example, not having ample time to jump on a ton of inbound press and sales calls probably means your side hustle is on the right track.

Whereas, not having enough time to be able to make the umpteenth change to your website or app (that’s going to make no material difference) probably means your side hustle doesn’t need you full-time. It also probably means you need a new project.

Job quitting framework

After having a close call with a big mistake, I developed a new approach to quitting my job. One that was pre-mediated, based on financials and data, and wouldn’t be as vulnerable to snap emotional judgment.

Note: It’s a job quitting framework based on bootstrapping a side hustle and continuing to do so full-time with no outside investment.

The framework was a mixture of:

• Personal savings

• Personal income

• Company P&L/balance sheet

• Company sales metrics

• Company sales funnel

First of all, I upgraded my personal savings situation to six months runway, up from three. For the record, this was not six months of “normal lifestyle living” but instead “lean living” (a topic I’ll discuss in the future).

As you’ll see in the next part of my framework, the idea behind this personal savings pot is that it won’t be used. It’s a backup.

Second, I determined that I needed to receive a personal income stream from my side hustle from the day I quit my job. This was not a personal income stream that had to fund my regular lifestyle, but instead the absolute basics like rent and food.

The reason for this is six months runway goes by quickly. These savings are not enough to rely upon alone. I thought of it more as an emergency fund.

Meanwhile, the opposite option, saving up for a lengthier duration, say two years' worth of “runway savings”, takes too long if your side hustle needs you to go full-time right then and there (which mine did).

My goal was to be able to work full-time for as long as my startup needed, and, avoid the extremely stressful scenario of building a company with unsustainable revenue and only a few months' worth of personal savings runway left at any one time. Building a sustainable company nearly always takes longer than you think.

Before quitting and taking an income from my business I also considered whether or not that was the best use of funds. If that money is better applied elsewhere (product, marketing) whilst I carry on working at my day job full-time I’d stick with that until things changed.

Third in my framework was assessing the company P&L and balance sheet and setting criteria based upon them.

I decided we should be, at a minimum, breakeven. This makes taking a personal income sustainable so I’m not sucking the balance sheet dry. A theoretical indefinite runway.

I also decided there should be at least twelve months' worth of company runway capital in the bank account if all revenue disappeared tomorrow.

There are a couple of reasons for this. Accumulating that kind of money from paying customers (not depositing it yourself) is an indicator the company business model has intrinsic merit and sustainability.

Plus, when you’re working full-time on your business you’ll likely need capital for product, marketing, legal, accounting, etc. You don’t want to tuck into your monthly income stream or personal savings to pay these bills if your monthly P&L dips below breakeven.

That would break the model and your personal runway starts to reduce quickly and fast. Having capital on the balance sheet enables you to leave your personal income stream alone whilst you get through any tough periods that manifest.

Of course, the idea is that future earnings will offset this expenditure and replenish your balance sheet (and more) accordingly.

Twelve months runway may seem like a lot, but if you’re adhering to a super lean philosophy it can be a relatively modest amount.

Forth in my framework is company sales figures. How many paying customers are there? How many repeat paying customers are there? How much are they spending monthly? How much less does it cost to acquire a customer than is generated in revenue from them? How quickly is money recovered from customer acquisition cost? Unless these figures are trending in the right direction I would not quit my job.

Fifth, and last, in my framework, is the company sales funnel. Are the number of potential customers in my sales funnel similar to or better than in previous months or quarters? Is the distribution in the sales funnel similar to previous months or quarters? If the quality of the leads in my sales funnel similar too or better than in previous months? If not, why? Get to the bottom of it. It’s good practice regardless.

Don’t underestimate this. Everything up until now in my framework has been backward-looking. Reviewing the sales funnel gives visibility on future performance. You want to have confidence when you quit your job that there’s a tangible sales pipeline to continue with.

My numbers

For transparency, when I quit my job I had $8,000 in savings and took $1,300 in monthly income. The company account had around $20,000 in it. These figures met the bare minimum requirements of the framework I laid out above.

Looking back, this seems super risky on the numbers alone. But, it wasn’t as crazy as you might think because the last two parts of my framework — company sales metrics and sales funnel — were really strong.

It was imperative for me to commit to my side hustle full-time at that point. To seize the opportunity amongst a temporarily weak competitive environment and grow as fast as possible.

A few months after quitting my job all of those financial numbers increased by several magnitudes from strong sales and growth momentum.

The key takeaways here are:

1. Don’t quit your job too early on the belief your side business isn’t progressing due to the fact you’re not working on it full time. Instead, it’s probably an absence of product-market fit.

2. Use a pre-meditated framework like the one I shared to decide when you should quit your job. This reduces the risk you will act emotionally and make bad decisions. It also helps you understand what leaving your 9–5 looks like, in numbers and cents. It ceases to be an abstract thought and an undefinable objective.

3. Quit your 9-5 when you have a proven business model to grow, not a business model to figure out.

Until next time,

- Martin

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Thanks to Will Truettner | Unsplash for the image.