CNBC.COM
Quitting your day job to turn a side hustle into your full-time focus requires a leap of faith. You shouldn't take that risk without first asking yourself a couple of key questions, according to Niraj Shah.
Shah, who co-founded home goods e-commerce company Wayfair in 2002 and serves as its CEO, believes budding entrepreneurs should be cautious when considering leaving the relative security of a full-time job for the uncertainty of running a business, he said on a recent episode of the "How I Built This" podcast.
"Often, if you don't pursue something you want, you'll have regrets," Shah said. "But obviously if you do something reckless you could have different regrets."
The idea of becoming your own boss and potentially building a successful, sustainable business can be tempting. It's also a major commitment with no guarantee of success. Shah's advice: Create a path to what he calls a "no-regret decision," where "even if it doesn't work, you'll be happy you tried it."
To do that, ask yourself two key questions to determine your level of conviction and financial readiness, Shah recommended.
DON'T MISS: The ultimate guide to starting a business—everything you need to know to be your own boss
The first question: "Have you been able to progress [your business] to a point where you feel like it's worth the risk and the effort of making it your full-time vocation?"
Think about your current level of confidence in the business itself — not just what you believe it can become, but where it actually stands now. Consider the specific goals of your business — from revenue targets to the number of customers or clients you want to be able to serve — and be realistic about how close you are to achieving them.
If you know what the business needs to do to survive and thrive, and you're confident that "the odds of it working is high enough" to hit those goals with your full-time focus, then that's an important first step toward taking the leap, Shah said.
Producing "recurring revenue" and a growing customer base are potential "green light" metrics that might suggest that your business could grow further with the right strategy and your full-time attention, podcast host Guy Raz suggested.
The second question is more personal and pragmatic, Shah said: "Are you in a position financially where you can afford to take that risk?" Billionaire serial entrepreneur Mark Cuban has worded a similar concept even more bluntly. "Save your money first. Don't just leave [your job] unless you know what the hell you're doing," Cuban told Wired in October 2023.
"We hear all of these stories about all of these people who quit their jobs, started a company and made all of this money," Cuban said. "What you don't hear are the stories of the people who quit their jobs, started a company and failed miserably, and are now working at a job they hate."
Some financial planners recommend putting aside enough money to cover your personal and business expenses for up to 12 months before quitting your job to run your own business full-time. Cuban suggested saving "at least six months" of living costs.
If you can't ensure that you and your family would survive your business' worst rough patch, you probably aren't ready to quit your job yet, said Shah. You could, however, find alternative forms of financial preparedness beyond your personal savings — like asking friends and family for a loan or investment to give yourself more financial flexibility, he said.
"If you say you're very convicted, then I would try to think through the money piece and figure out if there's a path that makes it [worthwhile]," Shah said.
Alternatively, consider finding a creative "in between" option: If your employer doesn't want to lose you, for example, you could negotiate reduced hours at your day job so you have more time for your side hustle, said Shah. Or, Raz suggested, hire a part-time employee to help you grow the side business.
Just be careful, Shah noted: Such arrangements could reduce your pay or cost you money, and damage your ability to financially protect yourself and your future business.
"I wouldn't give up the job too quickly, for sure," Shah said, adding: "[But] is there something different than an all or nothing?"
Want to be your own boss? Sign up for CNBC's new online course, How To Start A Business: For First-Time Founders. Find step-by-step guidance for launching your first business, from testing your idea to growing your revenue.
Plus, sign up for CNBC Make It's newsletter to get tips and tricks for success at work, with money and in life, and request to join our exclusive community on LinkedIn to connect with experts and peers.
