Things to do before quitting job to start business

If you are planning to quit your job and thinking of becoming an entrepreneur having a start-up of your own, you need to take some steps to secure yourself financially before you venture into business.

Since quitting your job means loss of monthly income and since there is no guarantee that you would start earning from your new business anytime soon, it is imperative that you have sufficient corpus as your ‘cushion’ money to meet your regular household expenses as well as pay your insurance premiums and debts, if any. Better still, it would be advisable to pay off all your debts such as personal loan, home loan, vehicle loan, credit card loan, etc. before you quit your job and venture into any business.

But how much corpus is ‘sufficient’ enough to take care of your expenses? Ideally, you should have a corpus that will take care of your household expenses for a period of two to three years. This is based on the assumption that your business would stabilise and start making decent profits within a period of 2-3 years. So, if your average monthly expenses are Rs 50,000, your ‘cushion’ money should be in the range of Rs 12 lakh to Rs 18 lakh. In the absence of any income, the cushion money will see you through your entrepreneurship stint.

Also, since your business may not generate any profit initially, it is better to avoid borrowing money for setting up the business as servicing the loan may eat up into your cushion money, thereby jeopardising your financial health.

Since quitting a job to establish a start-up involves financial risk, it is absolutely necessary to protect yourself and your family from financial vagaries by having sufficient amount of corpus that will take care of all your household expenses.