Here’s what you need to know before you quit your job to start your own business
June 20, 2019
For some, they love what they do and wouldn’t trade it for anything.
But for most people, there comes a time in your career when the idea of leaving seems better than staying in a job you hate.
It could be that the boss was overbearing; maybe the colleagues were unfriendly; or perhaps the entire industry felt like the wrong fit, despite spending years training or studying to work in that sector.
The pressure to stay in an unsatisfying, but permanent full-time job to make the most of a steady income, paid leave and other benefits can feel enormous — especially as a growing number of employers are favouring contract-based roles or casual jobs.
But what if quitting that job and taking a risk on making money from a passion project actually paid off?
As part of the ABC’s personal finance project, we asked two women to tell us what it was like to start their own businesses.
What does it take to be your own boss?
In 2010, aspiring photographer Zoe McMahon started working as a studio assistant in Sydney, taking pictures of grocery products for supermarket catalogues.
“I was the battery hen of the photography world, earning $37,000 a year, including super,” she said.
“I left that job because the way they treated people was appalling.
“There was one woman who was in her early 40s, with kids at school, and if she got in at 7:30am and finished at 4:30pm, they would say to her, ‘Oh doing a half-day are you?’ when she was leaving.”
Ms McMahon moved on to a higher-paying job, photographing artefacts at a museum. She said while her former role was more enjoyable, she did not see any chance of career progression.
“I was also on one of those annual contracts that had to be reviewed every year for funding,” she said.
“So I had to jump through the hoops of reapplying for my job all the time and, to be honest, after four years I found that quite offensive.”
In addition to working full-time, Ms McMahon was spending her weekends photographing weddings and taking publicity shots for bands and entertainers — work she felt truly passionate about.
By 2016, the wedding photography business was generating enough income for her to quit her full-time job.
But as a financial buffer, she took on three days of casual work a week as a personal assistant.
“I doubled my annual income fairly quickly and by solely working in my business now, I’m earning substantially more money than I was when I started out in this industry,” she said.
Starting your own business is ‘not for everyone’
While Ms McMahon found success in setting up her own business, career coach and principal consultant of Career Vitality Donna Thistlethwaite said a big leap was not always the right answer.
“If security and stability are strong values to a person, then it might not be a good fit,” she said.
“Before leaving a job, I would suggest a person tries to change their perspective on the situation.
“By questioning what’s good about the job, we often find elements of it that we do enjoy, and an understanding of the full picture can help us see how we might make the most of the situation we are in.”
More often than not, a big career change also means preparing for financial hardship.
In some cases, what you earn might never meet the same salary level as your previous permanent job.
Lisa set a deadline (and stuck to it) to open her business
Brisbane-based graphic designer and fine artist Lisa Schroder left a lucrative role in the corporate sector nine years ago to start her own freelance design business.
She said she wanted to have a more flexible working arrangement so she could start a family.
“I knew my baby years were coming up, and even though I was exceptionally good at what I did and was being paid very well, that job wasn’t going to fit with what I wanted for my family.”
She allowed herself 18 months after resigning from her corporate position to set up her business before having children.
“It’s probably a bit crazy, but when I left work I didn’t have a single contract in place, and amazingly I landed on my feet and picked up some really good national accounts that I freelanced from home,” she said.
Mrs Schroder said her previous employer did not offer paid maternity leave, so she did not feel she was walking away from significant employee benefits to start her business.
Her income, however, took a large hit.
“In my first year, I dropped about $30,000 and then with babies, your available time becomes so limited, so my earning capacity dropped,” she said.
“And while you do factor that in, I’m looking forward to when all my three kids are at school and I know my earning capacity is going to go up again.”
Be aware of the financial challenges of being your own boss
Mrs Schroder also acknowledged that her husband’s full-time income was crucial in enabling her to start freelancing.
“You do rely on that other salary because I have had things like major clients just stop using me overnight and I’d miss out on about $2,000 worth of income within the space of one phone call,” she said.
“That’s the nature of the business and it may just be a case of a new manager, or the company is sold to someone else and they fire the existing team, meaning you’ve lost your relationship with the people, so you lose the client.”
She and her husband are renting their home and although their goal is to one day buy a house, Mrs Schroder conceded that would not be easy.
“Banks don’t like you as much when you have your own business, so you’ve got to save triple hard,” she said.
“Having that one person in the partnership who’s got a secure income means the banks are going to be more favourable with home loans, car loans and that kind of stuff.”
On the other hand, Ms McMahon and her fiance bought a home in rural Victoria when she was still working as an artefacts photographer.
She said a purchase like that would be almost impossible now, despite how well her business is doing.
“My partner has his own freelance photography business and as small business owners, we would struggle to get a bank loan together, especially now when borrowing money has become a lot harder in the space of just a few years,” she said.
Ms Thistlethwaite said it was important to consider the broader financial impacts before leaving a secure job.
“Small business owners often don’t look great on paper because their business expenses will bring down net income and because their income is often variable,” she said.
“This can often be an issue, especially in the early days of business, so do take it into account.
“You need to make sure that you’ve got a good accountant and that they understand your business and personal goals.”
There’s also admin and accounting to consider
Both business owners agreed that managing their own tax and superannuation affairs had been a challenge.
“My business is three years old and yet I only amalgamated my superannuation last week,” Ms McMahon said.
“I do pay myself super quarterly though and I manage my money so that in the off-season, I am fine.”
It has been a bumpy ride for Mrs Schroder as well, given the erratic earnings.
“I didn’t understand early on how to budget forward by 13, 15 or 18 weeks, to make sure I’ve got enough income, so that was a tough lesson,” she said.
“I ended up doing a course that was offered through the Queensland Government — a Certificate IV in Business — and that was my absolute life-saver.
“I followed it up with some business coaching, but there was a whole side of it I had to learn, like operating the book-keeping software and how to put your BAS (Business Activity Statement) in.”
And the demands of starting a business and having kids
Like Mrs Schroder, Ms McMahon has had children since starting her own business.
She found out she was pregnant with her first child just two weeks after resigning from the museum.
“That pregnancy, I shot nine interstate weddings, because it was already on the radar that we might buy a house and move to Victoria, so that’s where I sourced my clients,” she said.
She worked until she was 8.5 months’ pregnant, accessed the Federal Government’s 16-week paid maternity leave scheme, and returned to work when her baby was 4.5 months old.
“I had to take her on the road with me so I could shoot weddings while I was breastfeeding,” she said.
“You’re always offering strangers too much information when you go into venues and say, ‘Hi, I’ve just met you but I’m wondering where I can go to set up for half an hour to pump breast milk and then can I bring my tiny esky with ice bricks and store my breast milk in your freezer?’.”
While some organisations allow women to take a year or more as part of their maternity leave entitlements, Ms McMahon said a much faster return to work was necessary.
“The flipside of working for myself is I did go back to work way earlier than I’d have liked and it’s meant for my second child, I haven’t breastfed her for as long as I’d have liked to,” she said.
It is a situation Mrs Schroder can relate to.
“I didn’t take maternity leave at all for the first two babies,” she said.
“So with my first, I had 10 days off and my second, I had one month off, and my youngest — I did a trade show when she was 10 weeks old.
“Of course, I wasn’t back working in a full-time capacity, but I was answering emails and sending quotes and doing small jobs because you just can’t ever afford to let your business stagnate for weeks on end.”
Some things to consider before you leap
Ms Thistlethwaite said it was vital to make a checklist before making such a major change in your working life.
She said a person should consider the following points ahead of any decision:
- How reliant are they on income?
- What are their values?
- Where is their mindset at?
- Are they prepared for the long haul?
- What do they know about running a business?
- What are they trying to achieve in having a business?
- Do they have a budget for professional development?
- If the business is home-based, how do you avoid feeling really isolated and alone?
The last point is one Ms McMahon has addressed through social media, joining a Facebook group with 800 other female wedding photographers.
“We talk multiple times a day [about] everything from copyright law to which insurance company to use for all of your equipment, to the best breast pump to take when you’re travelling,” she said.
“I’m actually organising a Christmas party in July for us all because a lot of us haven’t even met in person and when you work for yourself you can’t exactly have a one-person Christmas party.
“So it’ll be great to get this fantastic, empowering support network together.”
According to the Australian Bureau of Statistics, there were 715,300 women business operators in Australia in January 2019 (or 34.9 percent share of all business operators), compared with 1.3 million (65.1 per cent) men business operators.
This is an increase of 46,600 (or 2 per cent) over the past year.
Learn as much as you can about your industry ahead of time
Mrs Schroder agreed with Ms Thistlethwaite that anyone considering a big change to their work situation should really do their research.
“Learn as much as you can about business and read as many good business and marketing books as you can,” she said.
“Save up and make sure you don’t have debts hanging over your head like massive mortgages, car repayments or credit cards.
“And then back yourself 100 percent and push yourself forward — just go for it.”
Ms McMahon said she encouraged people to intern or shadow people in the industry they are hoping to work in, to make sure it is the right move.
“I probably should have tried to work with someone who is doing the job I wanted to do or someone who’s really good in the field that I’m wanting to work in,” she said.
“And the other thing would’ve been finding a casual job or going part-time in the industry, so I had the flexibility to have one foot in and one foot out instead of having any sort of panic about needing to make a certain amount of money each month.”
She said even if her business had failed, the lessons she has learned and the person she has become would have made the experience worthwhile.
“When you’re young and early into your career, you’re often really polite and you fetch coffees and laugh at jokes that aren’t funny, and it’s just such a relief to discover that you really don’t have to work in that capacity.”
Original article can be found HERE.