Do this before quitting your job to start a business
PHOENIX, AZ – OCTOBER 19: Dallas Mavericks owner Mark Cuban looks on during the first half of an NBA game at Footprint Center on October 19, 2022 in Phoenix, Arizona. The Suns defeated the Mavericks 107-105. NOTE TO USER: User expressly acknowledges and agrees that by downloading or using this image, user agrees to the terms and conditions of the Getty Images License Agreement. (Photo by Christian Petersen/Getty Images)
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Quitting your job to start a business can be both tempting and very risky. Make sure you have a safety net before making the move, says billionaire entrepreneur and investor Mark Cuban.
“Save your money first. Don’t quit (your job) unless you know what the hell you’re doing,” Cuban told Wired last month in a Q&A video. His rationale: Despite many inspiring success stories, most people who leave corporate America to pursue their own idea either struggle or fail completely.
“We hear all these stories about all these people who quit their jobs, started a company and made all this money,” Cuban said. “What you don’t hear are the stories of people who quit their jobs, started a company, failed miserably, and are now working at a job they hate.”
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Nearly half of Gen Z workers aspire to start their own business, according to a recent survey by Samsung and Morning Consult. Not all of them will succeed — nearly 20% of new businesses fail within their first year, and more than half don’t make it after five years, according to data from the U.S. Bureau of Labor Statistics.
Experts insist that you do some thorough research before quitting your job. Write a detailed business plan and determine how much savings you will need to survive if the business does not take off immediately.
Some financial planners recommend saving enough money to cover 12 months of living and work expenses. At a minimum, Cuban said, you need enough to cover your living costs for “at least six months.”
Cuban is one of the success stories: After being fired from a sales job in his 20s, he started the software company MicroSolutions and then sold it for $6 million in 1990. Five years later, he joined the company that later became Broadcast.com as business manager. One of its founders, he later sold it to Yahoo for $5.7 billion in 1999.
But even Cuban’s path came with major bumps in the road, such as his near-bankruptcy after his former secretary stole $82,000 from MicroSolutions and nearly wiped out the company’s account balance. Every new business faces challenges, and you need these savings to ensure you can survive the inevitable tough patches.
Even then, your success is still not guaranteed, Cuban said. Aspiring entrepreneurs are often advised to start a company only if “your heart is in it” and if you “know better than anyone else in the room.”
“Before you quit, be prepared, know what you’re doing, save your money, and have at least six months to live, if you can,” Cuban told Wired. “And then, maybe “You’re ready to get to work.”
Disclosure: CNBC has exclusive off-network cable rights to “Shark Tank,” which features Mark Cuban as a panelist.
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(Tags for translation)Entrepreneurship